Paul Volcker Slams The Fed: "The Kind Of Stuff That You’re Being Taught At Princeton Disturbs Me"

Tyler Durden's picture




 

There is a reason that of all Fed Chairmen since the Fed lost its independence at the Fed-Treasury accord on March 3, 1951 (contrary to the widely, and erroneously, accepted conventional wisdom that the accord gave the Fed its freedom as we explained two years ago), Paul Volcker is by far our favorite (and yes, this is most certainly picking the least of countless bubble-inflating evils).

One such reason is that he still gives interview such as the following with the Daily Princetonian (he himself is a Princeton grad, class of 1949), in which he tells the unabashed truth "The responsibility of the government is to have a stable currency. This kind of stuff that you’re being taught at Princeton disturbs me." Aka common sense 101, sadly precisely the one commodity that the Federal Reserve in its scramble to delay the moment of total collapse is unable to print.

We wonder what that other infamous Princeton graduate, Ben Bernanke, would have to say about Volcker's statement at one of his $250,000/plate dinners with the people he made from millionaires into billionaires.

The Daily Princetonian spoke to former chairman of the Federal Reserve Paul Volcker ’49 following a panel discussion in which he participated, titled “Are financial institutions too big or too big to fail?” At the panel, Volcker criticized universities like Princeton for allegedly teaching students how to cheat the financial system. Here is the interview.

The Daily Princetonian: Do you think the Federal Reserve went far enough in stabilizing the banking system?

Paul Volcker ’49: No, I’m not going to answer a question like that.

DP: Pretty recently, some economists have suggested that the central bankers took [the threat of] inflation too seriously.

PV: I’ll give you a simple answer. The responsibility of any central bank is price stability. I was at the helm at that time. Price stability is two percent inflation, which we can’t closely control anyway. They ought to make sure that they are making policies that are convincing to the public and to the markets that they’re not going to tolerate inflation.

DP: And does high inflation matter as long as it’s expected?

PV: It sure does, if the market’s stable. And if it is expected, then everyone adjusts, and it doesn’t do you any good. The responsibility of the government is to have a stable currency. This kind of stuff that you’re being taught at Princeton disturbs me. Your teachers must be telling you that if you’ve got expected inflation, then everybody adjusts and then it’s OK. Is that what they’re telling you? Where did the question come from?

DP: Okay. Could you talk a little bit about the justification behind the Volcker Rule and the effect you think it’s had on the market?

PV: The rule is that institutions that are protected by the government, implicitly or explicitly, should not be engaged in speculative activities that bear no real relationship to the purposes for which banks are protected. Banks are protected to make loans, they’re protected to keep the payments system stable. They’re protected so you have a stable place to put your money. That’s why banks are protected. They’re not protected to engage in speculative activities which led to risk and jeopardized the banking system. That’s the basic philosophy. I think it’s pretty well-accepted.

DP: And do you think there’s still a lot of work to be done?

PV: Not that I know of. You have a regulation environment standing in. It’s a pretty tough regulation. Like every regulation, it’s dependent on the ability and willingness of the supervisor to enforce it. And they have all the power and authority they need, if they’re willing to do it.

DP: Okay. And to get back to the central banking a little bit, given the trade-off between inflation and unemployment –

PV: I don’t believe that. That’s my answer to that question. That is a scenario and a delusion, which economists have gotten Nobel Prizes twenty years ago to disprove.

DP: And as far as moral hazard goes, do you think that in practice banks are going to recklessly avoid taking into account risk?

PV: That depends upon the regulatory system. And that goes back to compensation structures and so forth. So, I do think that it is a danger when big banks that are perceived as too-big-to-fail are taking advantage of the banks that are small ones.

DP: What are the most important things left to be done or to think about?

PV: In the area of financial regulation?

DP: Yes.

PV: A lot’s been done. What needs to be done is to enforce it. This business of the resolution process [of resolving the affairs of insolvent banks in an orderly fashion], whether you’re talking about the FDIC or the Federal Reserve, there’s a lot of work being done, and it’s not complete, but then again, otherwise, we’ve got to reorganize the supervisory system. There are too many holes, too many overlaps, too many opportunities for regulatory capture from the affected industries. That should be reformed.

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Thu, 06/12/2014 - 12:12 | 4848800 Duffy Duck
Duffy Duck's picture

fuckin' pseudoscience.

Thu, 06/12/2014 - 12:18 | 4848834 nope-1004
nope-1004's picture

dart sucking banker.  I don't believe what any of them say, Volcker included.  He was there when Nixon turned the USD into  petro currency, so Volcker is part of the problem, AFAIC.

 

Thu, 06/12/2014 - 12:20 | 4848843 Bay of Pigs
Bay of Pigs's picture

+1

FUCK YOU Volcker.

Thu, 06/12/2014 - 12:22 | 4848855 pods
pods's picture

Anyone equivocating 2% inflation to price stability is in dire need of a neck stretcher.

pods

Thu, 06/12/2014 - 12:25 | 4848864 chumbawamba
chumbawamba's picture

2% OF 20 TRILLION IS STILL 200 BILLION DOLLARS IN INTEREST CHARGES YOU FUCKING CLOWN.

I am Chumbawamba.

Thu, 06/12/2014 - 12:28 | 4848881 nope-1004
nope-1004's picture

You're out by 100%, but point noted.

Thu, 06/12/2014 - 12:35 | 4848913 So What
So What's picture

The Fed needs to be done away with. No discussion.
Having people like Volker voicing opposition to Fed's action is providing cover for Fed's legitimacy. A type of false flag operation, psych op.
Though Volker is not a Jew, he must be viewed with suspicion as well. He is part of system that needs to be destroyed. No discussion.

Thu, 06/12/2014 - 12:42 | 4848949 outamyeffinway
outamyeffinway's picture

Too late Volcker. Where the fuck were you with your attitude towards Princeton 20+ FUCKING years ago. Douche bag. You and your Alliance. Give me a break. You're just as guilty.

Thu, 06/12/2014 - 12:45 | 4848965 outamyeffinway
outamyeffinway's picture

"2% OF 20 TRILLION IS STILL 200 BILLION DOLLARS IN INTEREST CHARGES YOU FUCKING CLOWN."

 

Listen here clown, everyone knows that 2% is a COMPOUNDED RATE. Go get your asshat.

Thu, 06/12/2014 - 13:59 | 4849379 outamyeffinway
outamyeffinway's picture

Hey where'd my list go? Fuck you Tyler.

Thu, 06/12/2014 - 15:48 | 4849845 Pinto Currency
Pinto Currency's picture

 

Volcker is joking.

He was one of the key lobbyists for the US to default on its gold obligations and take gold out of the US monetary system:

"...The gold exodus continued and, to make matters worse, the U.S. began running a substantial trade deficit, a politically charged issue given that unemployment remained at 6 percent. Nixon had to act, but his advisers were split. Volcker, as well as Shultz, wanted to close the gold window. Burns was vehemently opposed. Severing the gold link would turn money into … paper. If the government no longer had to preserve the dollar’s value in metal, how could the Administration claim, with any credibility, to be countering inflation? ..."

http://www.businessweek.com/magazine/the-nixon-shock-08042011.html#p3

Now this clown Volcker is protesting about what Princeton teaches?

Right.

Thu, 06/12/2014 - 12:44 | 4848959 DavidC
DavidC's picture

nope-1004,
Actually, it's either 900% or 1000% depending on how you calculate it but point noted!

DavidC

Thu, 06/12/2014 - 12:48 | 4848985 nope-1004
nope-1004's picture

lmao.  2% of 20 trillion is 400 billion.  200 to 400 is a 100% difference.  C'mon David!

Thu, 06/12/2014 - 13:18 | 4849143 chumbawamba
chumbawamba's picture

David didn't have his calculator this morning either.

-Chumbz.

Thu, 06/12/2014 - 13:48 | 4849296 Miles Ahead
Miles Ahead's picture

I doubt whether a couple of caculators could have helped to forestall this little Laurel and Hardy moment...  just sayin'.

Thu, 06/12/2014 - 13:56 | 4849355 NoDebt
NoDebt's picture

That whole interaction was funny as hell.  Classic.  Should be required reading for everyone in all 57 states.

Thu, 06/12/2014 - 15:17 | 4849744 dontgoforit
dontgoforit's picture

And it's not even Friday yet.

It's not that I think you're stupid.  You just have bad luck when thinking.

Ok, guys.  Have a great night!

Thu, 06/12/2014 - 17:39 | 4850296 TheReplacement
TheReplacement's picture

Don't forget Hawaii.

Thu, 06/12/2014 - 13:14 | 4849113 Libertarian777
Libertarian777's picture

I wish more people would understand this.

Ron Paul said it best, even if its 'just' 2%, what gives them the moral authority to steal 2% from you?

If I ran around with a gun and demanded 2% of everything that person earns, wouldn't that be considered extortion?

 

I also wish they'd say what they mean by '2%'. Now that they including blow and hookers in GDP, what happens when you have an economic depression like in Greece and hookers come down in price! OMG deflation! we need to print more. hookers should be charing 50 EUR not 20 EUR.

 

Thu, 06/12/2014 - 12:25 | 4848869 OC Sure
OC Sure's picture

2% inflation is 2% theft

Thu, 06/12/2014 - 12:37 | 4848923 rubiconsolutions
rubiconsolutions's picture

"2% inflation is 2% theft"

Except when it isn't 2% inflation but actually 10%


Thu, 06/12/2014 - 12:54 | 4849009 ParkAveFlasher
ParkAveFlasher's picture

2% Y-o-Y is 61% devaluation in just 25 years.  I can't believe that Volcker is so stupid as to not see the devastingly complex derivative architecture required to keep prices within the realm of practical sanity which, failing, overbuilds a free-exchanging culture with an impenetrable, ever-changing labryrinth of institutionalized theft.  Volcker understands physics enough to insert one leg into his pants at a time, so, he should understand the history and the physics of fiat currency. 

And all the king's quantum processors and all the king's algos can't seem to put humpty back together again!

Thu, 06/12/2014 - 13:49 | 4849320 Miles Ahead
Miles Ahead's picture

Yeah, I was thinking the same thing...  guess that's why we's on Park Ave. and he's not...

Thu, 06/12/2014 - 14:04 | 4849420 ParkAveFlasher
ParkAveFlasher's picture

Truthfully, I've moved on to Fifth Avenue.  Too many security cameras on Park Ave nowadays, and besides, once you've flashed a bunch of middle-aged German tourists ready to ascend the ESB for night session of picture taking, I mean, it's like being born again!

Thu, 06/12/2014 - 15:16 | 4849743 notquantumdum
notquantumdum's picture

Actually, if you think of inflation as a loss, isn't it more like multiplying 98% times itself 25 times in a row?  (0.98)^25 = 0.603 or so remaining.  Isn't that more like a 40% loss in 25 years?

But, point taken otherwise.  Who wants to lose 61% or 40%?

Thu, 06/12/2014 - 17:43 | 4850311 TheReplacement
TheReplacement's picture

Try compounding that.  2% lost this year means next years number will start from a smaller base and so on and so forth.

Thu, 06/12/2014 - 18:47 | 4850604 notquantumdum
notquantumdum's picture

I did compound it.  98% x 98% = 96.04% . . . 96.04% x 98% = 94.1192% . . . etc.

That's why it is (98%)^25 = approx. 60.35% remaining.

[Unless you are a bankster earning the 2% instead of losing it . . . then it is (1.02)^25 = 1.6406 or so, which would be a 64% profit in 25 years.]

Thu, 06/12/2014 - 12:27 | 4848875 LawsofPhysics
LawsofPhysics's picture

Inflation is theft, period.

I'd also ask why does the definition of inflation keep fucking changing motherfuckers.  No reason other than to mask the true extent of the theft was has gotten out of control!!!

Thu, 06/12/2014 - 12:34 | 4848891 OC Sure
OC Sure's picture

I clearly define inflation here. This is ironclad and uncontested. I explain it like you're five.

http://ocsure.blogspot.com/2014/05/inflation-or-deflation-of-currency.html

But beware, those with long acronyms and capital letters after their names may not understand.

 

 

Thu, 06/12/2014 - 12:36 | 4848912 LawsofPhysics
LawsofPhysics's picture

That's some fine mental masterbation you have there.  Did I mention that the laws of Nature and physics really don't give a shit?

Allow me to "explain it like you are five".  People who know the real value of their labor are simply tired of being compensated with paper fucking promises of increasing no value and are making alternative arrangements and alliances.

Hedge accordingly.

Thu, 06/12/2014 - 12:56 | 4849021 OC Sure
OC Sure's picture

I think you may have taken offense to my reference to the Reddit group named Explain It Like Your Five. This was not directed at you.

 

Thu, 06/12/2014 - 13:20 | 4849154 Tinky
Tinky's picture

The fact that it was a Reddit reference made it more insulting.

Thu, 06/12/2014 - 13:54 | 4849352 OC Sure
OC Sure's picture

I see that now. No insult was intended.

Can't do much about it now but get over it and move on.

Farewell, all.

Thu, 06/12/2014 - 15:22 | 4849767 dontgoforit
dontgoforit's picture

Ah, don't worry about it.  She's a grumpy old girl.

Thu, 06/12/2014 - 12:38 | 4848924 Duffy Duck
Duffy Duck's picture

as a civilian, as it were, that's pretty good, actually.

Once I, however technically inaccurate, began understanding "inflation" as erosion in purchasing power, things made a lot more sense.

It's not the Illuminnati or the Space Lizards or the Jesuits or the Judeans:  it is, above all, the fiat money system....the bankers....

 

Pretty amazing how ignorant most Americans are of the sort of basics of how dollars are created.  In a way, it is so simple, and so absurd, the mind of even relatively smart people has trouble grasping the scam...

 

 

 

Thu, 06/12/2014 - 14:05 | 4849426 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

do you know anything about the jesuits or did you just feel the need to lump them in as fairy tales even though one of their own sits as pope?

Thu, 06/12/2014 - 14:06 | 4849427 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

(duplicate)

 

 

isn't the second duplicate post suppose to be transferred directly to the nsa?

Thu, 06/12/2014 - 15:41 | 4849843 layman_please
layman_please's picture

duplicate of the duplicate is safe and secure. not to worry!

Thu, 06/12/2014 - 12:49 | 4848993 rubiconsolutions
rubiconsolutions's picture

Volcker - "If a woman is only raped 2% of the time we think that is acceptable. And if they are teaching you folks at Princeton otherwise, well, that's just disturbing."

Thu, 06/12/2014 - 15:02 | 4849683 post turtle saver
post turtle saver's picture

it's even worse when happy fun rape time is accumulating at 2% year over year... after 36 years you spend half your time picking up the soap

Thu, 06/12/2014 - 17:42 | 4850309 kurt
kurt's picture

kchrisc?

Thu, 06/12/2014 - 12:22 | 4848857 MeMongo
MeMongo's picture

Volcker= tribe member!

Nuff said!

Thu, 06/12/2014 - 12:36 | 4848918 Captain Willard
Captain Willard's picture

The only thing worse than an Anti-Semite is an uninformed, ignorant anti-Semite. Put down your copy of Mein Kampf and read some economic history.

Volcker was raised a Lutheran in suburban New Jersey, according to several biographies. 

Thu, 06/12/2014 - 13:02 | 4849070 BigJim
BigJim's picture

Maybe Volker has been made an honorary member of the Tribe? He's certainly served them well enough.

Thu, 06/12/2014 - 14:03 | 4849412 Slave
Slave's picture

Like Gaynes, uh.... excuse me, I mean Keynes.

Thu, 06/12/2014 - 14:29 | 4849545 MeMongo
MeMongo's picture

Yeah sure and I suppose george soros is Irish:-)

Thu, 06/12/2014 - 16:09 | 4849948 Colonel Klink
Colonel Klink's picture

Hey dipshit, raised Lutheran doesn't mean not of a certain family decent.  There's some debate that me may actually be.

From Ynet no less: http://www.ynetnews.com/articles/0,7340,L-3619625,00.html

"Born to a Jewish family in New Jersey in 1927, Volcker attended Princeton University, Harvard and the London School of Economics. In January of 2008, he endorsed Barack Obama's presidency bid and was his closest financial adviser."

History has shown that jews have been well known to change their names and "religion" to avoid persecution.  He sure does have the male pattern baldness and career of one (Fed chairman).

Thu, 06/12/2014 - 12:21 | 4848846 Grande Tetons
Grande Tetons's picture

Indeed...all corrupt...no exceptions. 

Thu, 06/12/2014 - 12:27 | 4848874 kchrisc
kchrisc's picture

Exactly. Once a lying piece of shit shill for the pols and banksters, always a lying piece of shit shill for the pols and banksters.

"Like a fart in an elevator, no one takes the blame."

Thu, 06/12/2014 - 14:53 | 4849647 narnia
narnia's picture

It's worse than that.  Per Richard Koo (who was at the NY Fed at the time), Volker was demanding that the TBTF extend ponzi into the Latin American debt crisis.  That was the first leg in the bubble-burst-bubble rollercoaster currently in play.  Scumbags like this should just shut the hell up.  

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