Volcker On Bernanke's Grand Monetary Experiment: "Good Luck In That"

Tyler Durden's picture

A week ago, in a very comic interlude, the hawkish head of the only G-7 country to have experienced hyperinflation in the recent past - Bundesbank's Jens Weidmann - had some sobering words of encouragement for his Japanese colleague Kuroda: "I wish them luck in their experiments."

Now, another former central bank head, the most famous one of the 1980s, and the man thanks to whom America did not implode in a depressionary puff of runaway inflation, Greenspan's predecessor Paul Volcker, has taken the podium and made a mockery of the entire fallback premise on which Bernanke's house of manipulated, centrally-planned cards is built: his assumption that no matter how much deferred inflation is injected, that Bernanke needs just "15 minutes" to take it away. Better yet, and as Japan has recently seen: the fact that central bank credibility is slowly but surely starting to slip away - first visible in rapid rises in bond yields, then in a surge in bond volatility, and finally: an all out inflationary conflagration.

Quote Volcker:

The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers,” Volcker said. He said a central bank’s basic responsibility is for a “stable currency.”

 

“Credibility is an enormous asset,” Volcker said. “Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment.”

 

“The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives,” according to Volcker. “Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.

Hopefully Volcker can be cryogenically frozen because when the Chairsatan eventually - and it is only a matter of time - loses control and all hell breaks lose, none of the muppets in the Marriner Eccles building, no click-baiting Nobel-winning trolling Op-Ed writer with socialist delusions of grandure, will have any idea what to do, and it will be someone like Paul who will be needed to unleash his magic once more. Sadly, we have the sinking suspiction that not even thawed out of carbonite, will Volcker have any success when faced with the Frankenstein monster that the MIT central-banking braintrust have managed to unleash.