Paul Volcker had it easy

By all accounts, Volcker was very public spirited, clever and humble.  But this last of the greats stuff is a bit unbearable. In fact, Volcker had it easy, particularly by the standards of those who claim in retrospect to hold him in such awe.

Volcker’s job was to crush inflation with contractionary monetary policy. And the framework required to do that was actually pretty well established by the time he was given the reins to policy.  In contrast, poor Jay Powell hasn’t a clue. But he does have 330 million experts providing free advice.

Some might say that the Volcker disinflation was established with much less unemployment than  “the left” had expected and that this redounded to Volcker’s credit in two ways.  First, Volcker reduced the cost of disinflation by being clear that he was committed to it.   And second, Volcker took a risk and showed some backbone in being able to take (or really impose) whatever pain was required.  Fair points.

But an excessive emphasis on that narrative promotes a dangerous idea: that all that is required to get monetary policy right is a willingness to take pain and impose austerity.  The current environment is much different from what Volcker inherited and requires cleverness much more than “bravery” – particularly as defined by the Austerians.

In fact, standing up to the Austerians is at least as tough as what Volcker pulled off, in part because it requires resisting the public’s homely commitment to the idea that there can be no gain without pain – invariably borne by somebody else.

It reminds me a lot of those many who support the troops by putting a bumper sticker on the back of their German SUV congratulating themselves for having done so.  To his credit, Volcker would barf at such faketriotism.