An Angry Paul Volcker Responds To Accusations He Caused The Bond Liquidity Crunch

Tyler Durden's picture

Paraphrasing Jean-Claude Juncker, "when it gets serious, you have to lie (or deny)" and sure enough in just 30 seconds, the vehement anger Volcker shows in the following clip when 'accused' of creating illiquidity in markets due to his rule suggests the former Fed head is more than a little 'fed' up... and he should be, as we have pointed out previously - while Fink et al. are happy to blame his rule, it is HFT and Central Bank distortions that have created the illiquid disaster that so many call 'markets' today.


"look, I've told you... why do we keep repeating ourselves... I am not worried about the lac of liquidity in markets.. period!"



As we noted previously,

Central bank distortions have forced investors into positions they would not have held otherwise, and forced them to be the ‘same way round’ to a much greater extent than previously. The post-crisis increase in correlations, which has been visible both within credit and equities and across asset classes (Figure 35), stems directly from the fact that investors now increasingly find themselves focused on the same thing: central bank liquidity. Every so often, when they start to doubt their convictions, they find that the clearing price for risk as they try to reverse positions is nowhere near where they’d expected.


This explains why the air pockets have not just been in markets where the street acts as a warehouser of risk. It explains why they have occurred not only in the form of sell-offs which could have caused multiple market participants to suffer from procyclical capital squeezes. It also explains why the catalysts have often, while often trivially small, have nevertheless been macro in nature, since they have boosted expectations of a change in central banks’ support for markets.


Unfortunately, it leads to a rather ominous conclusion. The bouts of illiquidity will continue until central banks stop distorting markets. If anything, they seem likely to intensify: unless fundamentals move so as to justify current valuations, when central banks move towards the exit, investors will too.


To sum up, we are left with a paradox. Markets are liquid when they work both ways. Market participants, though, find themselves increasingly needing to move the same way. This is not only because of procyclical regulation; it is also because central banks have become a far larger driver of markets than was true in the past. The more liquidity the central banks add, the more they disrupt the natural heterogeneity of the market. On the way in, it has mostly proved possible to accommodate this, as investors have moved gradually, and their purchases have been offset by new issuance. The way out may not prove so easy; indeed, we are not sure there is any way out at all.

* * *

To which all we can add is: Good luck with the "exit"


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Chuck Knoblauch's picture

Bill Clinton killed Glass Steagall, not Paul Volcker.

keremetski's picture

Accountability * Ruling Class = 0.0000

3.7.77's picture

How dare you question a former fed reserve chairman...

keremetski's picture

i have nothing to lose.

eatthebanksters's picture

So let me get this straight, Volker by way of the Volker Rule cleans up corruption and criminal activity at banks and so is blamed for changing market conditions in such a way that the rule hurts banks?  These bankers must be outta their fucking minds!!  They want their cake and to be able to eat it too.  Let's see, why don't we just tell the banks to go fuck themselves and learn how to make an honest buck...oh that's right, that would mean the multi-million dollar paychecks would shrink...hmmmmm.  EAT THE FUCKING BANKSTERS!!!

Augustus's picture

Glass Steagall needed to be killed.  Killing it added liquidity.

It is funny to hear the pols ask if a financial institution has violated the Volker Rule.  Where are the details and legislation describing what the Volker Rule is?

A financial institution making a direct loan is speculating that they will get repaid.  Buying bonds in bond markets is no different in that regard.  However the listed and traded bonds can be valued daily.  Who is capable of doing daily repricing of value of those direct loans?

knukles's picture

Loans are traded in a very active secondary market.  Have been for eons. 
(Personal experience.)

Chuck Knoblauch's picture

What is being used as liquidity today, stupid?

El Vaquero's picture

So, what you're saying is that the ponzi scheme that is modern banking was reaching a rule based limit to growth, and would collapse if that rule wasn't removed, so instead of actual growth, we got fraudulent growth since the repeal of Glass Stegall, and that was good?  Because that's pretty much what happened. 

Panafrican Funktron Robot's picture

"Who is capable of doing daily repricing of value of those direct loans?"

I'd be happy with an annual repricing of the value of the direct loans, by a third party independent auditor selected and overseen by the member base of Zero Hedge.  Just think what those banks loan books would be actually worth by any reasonable/normal accounting standard?


orez65's picture

"Glass Steagall needed to be killed.  Killing it added liquidity"


Accomplished by adding FAKE CAPITAL which was and is being counterfeited by the Federal Reserve.

Kill the Federal Reserve System and you kill the financial monster that we have in the US.

Bastiat's picture

Glass Steagall was created to insulate depositors from banks speculative market activities.  It's repeal opened the way to the LTCM triggered meltdown and the $trillions of fed bailouts to the busted banks in 2008-9.

To Clinton's name add:  Rubin & Summers. 

On the other side, Brooksley Born; the loan official voice in the wilderness back then:


You don't happen to be a dentist that likes torturing & killing & decapitating lions in Africa named Cecil do you?


wtf, where did this dude come from, Z/H?

knukles's picture

Exacamento.  Billy Clinton and Bob Rubin, so that Citi could buy Salomon, etc.  Then Rubin got an exec office on 399 Park's 4th floor for some bullshit non-advisory services for about a $ Bazillion a year.
Revolving door Big Time Charley.


BTW, talk about extra-legal activities, Citi bought and closed on Salomon before Glass-Stegal was finally repealed by the passage of the Gramm Leach Bliley Financial Service Modernization Act of 1999.
Talk about Wall Street Money and Influence aka Campaign Contributions and Revolving Doors!

KnuckleDragger-X's picture

A small bond panic will turn into a big one, there is no liquidity, but there never has been and blaming Volcker for the mega-bank and Wall St. greed and stupidity wont make it better, nothing will. The bond market is about to have a bad Autumn and once you add in derivatives we'll have a new (old) theme song...

doctor10's picture

He better get used to it.  The questions are just now beginning to be asked.  And they're not going to get easier or nicer.  Regardles sof what they decide to do to the questioners.


After all, who coulda forseen the need to have a "FLOATING"  house of cards?!!  The specs diddn't call for a houseboat!!!

jcdenton's picture

Glass Steagall was a red herring from the start. The problem is central banks. Not the regulation and/or lack of regulating the lower banks. Does anyone here understand history?


We are beginning to understand catharsis. It will start at the top, and flow downhill ..

BandGap's picture

I like that word, heterogeneity.

I am anisotropic, at least I think so.

Crash N. Burn's picture

"Bill Clinton killed Glass Steagall, not Paul Volcker."


No, Volcker did something much worse:

"Paul Volcker was a monetary berserker. The task assigned to him by his Masters (the Old World Order) was not to “save” our economies – but to destroy them. In a recent commentary; Darryl Schoon identifies what Paul Volcker really represented:

In August 1971, at the urging of Paul Volcker, then Under-Secretary of the Treasury, President Nixon ended the convertibility of the dollar to gold; and for the first time in history gold was no longer money...

Paul Volcker took full responsibility for triggering capitalism’s end game. In a 2013 interview, Volcker explained his role in that consequential act with more than a modicum of pride: “I certainly was a major proponent of suspending gold convertibility, in fact the principal planner.”"


Paul Volcker: Ultimate Villain


moneybots's picture

"Bill Clinton killed Glass Steagall, not Paul Volcker."


Shelby was the only republican senator who voted against dismantling Glass-Steagall.

pods's picture

The only liquidity that Volker is worried about is what makes it through his depends.

This guy should be face down in the oatmeal by now. Why won't they just go away?


ShorTed's picture

I'm sure he'd love to.  Sometimes an asshole with a microphone or notebook pops up in unexpected places at unexpected times.  Most often having left the "critical thinking" part of the brain at home.

rejected's picture

LOL... funny!

It seems like only yesterday I was 35. Now at 66 I wonder where all the years went. Just like you, I funned the oldsters but karma always wins.

Careful what you wish on others... jmo.

Dubaibanker's picture

Volcker was Fed Chair between 1979 and 1987 during which period he brought interest rates down from 20% to 6%.

Just like an exit from Afghanistan or Iraq, US will never be able to leave the zero rates!

azusgm's picture

Volcker was the Fed Chair who raised the interest rates before he lowered them.

knukles's picture

YES!  And Glass Stegal was repealed in 1999.
Volcker is a GOD.  But if all public servants left their egos at home and looked out for the common good as he did during his Fed Stewardship.

Bastiat's picture

I once heard that Paul Volcker was one of the few men who got away with taking his wife on a fishing trip for a honeymoon. 

So I can share that accomplishment with him, anyway. 

pods's picture

That's pretty solid. I took my to be wife fishing a lot when we dated.  We went wading in the river for Smallmouth.  She was actually pretty good at it and never made a fuss. Well, she did leap out of the water once when something hit her leg. Only other person besides Jesus to ever walk on water.


Bastiat's picture

Heh.  I pulled it off by selling it as a romantic secluded houseboat vacation with sunbathing and wilderness swimming in clean water and all -- and lots of fresh trout, btw. ;-)

redpill's picture

He's also the one that raised interest rates to 20% to begin with in order to combat inflation.  It created a sharp but relatively brief recession, but then was followed by a much longer period of economic expansion.  While I'm no fan of central bankers or centralized monetary policy, what Volcker did was lightyears more responsible than Greenspan & Bernanke.

Bastiat's picture

Unfortunately the expansion was done with debt.  Also, the high interest rates turbo accelerated the growth and metastization of the financial sector. 

NoDebt's picture

OK, Paul, your story does tend to hold water and the Tylers are even giving you some grudging support, so I guess I'll give you the benefit of the doubt here.

Now, on to your past deeds.....

Please put your head through this noose that we've just thrown over that lamp post.  And before we pull it tight and hang you by the neck until you are dead, dead, DEAD, I want you to know something very important:  It's nothing personal.  Just like fucking over the American people was nothing personal to you.  It's just what you did, and this is just what we're doing in response.  I wouldn't want there to be any hard feelings about this.


Volcker has been on my extraordinary rendition waterboarding list since March 10th 2008, and I called first dibs on all these architects way before you did, so get in fucking line, BuckO. Moreover, Volcker is a sincere man that has expressed remorse for not stepping up to the plate to iron out economic quanta previous to the 2008 crash, and he is worthy of being listened to given his unparalleled experience in the industry. Bottom line is that he was the only individual to somewhat assist Occupy Wall Street, and he is instrumental in the area of reform when it comes to lost regulatory framework/infrastructure. In other words, the enemy of my enemy is my effing' friend, eh.


Z/H is right to lend some support to Volcker. He ain't all that bad when one examines the whole and gets a Gestalt perspective.

NoDebt's picture

Like I said.  It's NOTHING PERSONAL.  I have some admiration for Volcker myself.  But he's still a part of the cabal, and that's why he has to be on the "terminate with extreme prejudice" list.  No exceptions here or we're going to look all weak and indecisive.  Do you think he thought for one minute about how people felt who got fucked over by the country's banking cleptocracy?  No way.  Not even once.  The way he sent it out is the way it's gotta come back to him.  Therefore, "it's nothing personal."  

And if you get to him before I do, he's all yours.  I just want you to be prepared when it comes time to say something to him at the end.  That's not a situation where you want to choke and be at a loss for words.  You need to practice what you would say so it comes out smooth, natural and sincere.


I was raised by the cabal in so far as my father was Senior Rulings National Revenue, Oil, Mines, and Resource Taxation Revenue CANADA. Since infancy I have been indoctrinated by my Chartered Accountant father. I have known what to say to Volcker since childhood, believe me. When it comes to knowing exactly what is going on in terms of the destabilization of Wall Street, and American Hegemony, there is no single individual in the entire World that knows what is manifesting more than myself. I do understand the points you are articulating and I agree with you more than I may let on. You always make great perspective, but sometimes you need to be challenged a bit is all. Just sayin' cheers

Implied Violins's picture

No, hanging won't work. Too many to process, so guillotine it is. This whole thing was predicated on volume, after all.

NoDebt's picture

You never know where you're gonna be when such an opportunity presents itself.  Rope you can find pretty easy just about anywhere.  Guillotines, not so much.

For all the people on ZH who have talked about lynching bankers I get the feeling very few have ever really throught this process through completely.

Implied Violins's picture

Yeah, people in the heat of the moment always forget to properly calibrate the counterweights, so they end up ripping the head off. Makes it pretty gross if you want to reuse that rope. Or, they don't do the knot properly and their head slips out; or they just hang there taking forever to die. Or worse, they break the neck instantly so the fuckers don't suffer. Pity, that.

Obviously, I HAVE thought this out, and because of all that can go wrong, I still prefer the guillotine. All you need is a rope, a couple tall grooved guideposts, and a sheet of at least eight-inch steel with an edge. Doesn't even need to be sharp if you weight the thing properly. Plus, it's just faster when you have a lot to process (though messy).

I came by my user name honestly, I did :-)

Implied Violins's picture

p.s.: /sarc. Just in case, you know, NSA.

paint it red call it hell's picture

Bovine Excrement, another 'NOT ME'! So ok then, WHO?

Lady Jessica's picture

I took this to mean that he is extremely worried about liquidity in the markets.

Everybodys All American's picture

I actualy agree with Volcker on this one. The Volcker rule is not responsible for the liquidity crisis. The liquidity crisis is a result of an out of control spending binge in the U.S. Government and the zero interest rate policy the fed enacted to allow for it that now globally is collapsing confidence in U.S. Treasuries.

jcdenton's picture

Grant it, Volcker and anyone previous was better than Greenspan et al. However, when ever did Volcker insist that the "Coup of 1913" must be overturned? He deserves to hang along with Greenspan et al. If he wishes to plea pointing his finger at GHWB et al at his trial, then lets let the jury decide ..

Everybodys All American's picture

Or the near ten trillion in debt which is more than the previous presidents combined under zero. It's clear to me now that the new world order has decided they are going to take down the U.S. I don't think that was ever in play under Volcker. Not even close. The global totalitarians that are driving this country into debtor hell have full control over the media, banks and government and its impossible to see this ending with anything but complete destruction of the U.S.

El Vaquero's picture

Every time the debt doubles over a president's time in office, it is a case of that president taking on more debt than all previous presidents combined.  On average, the national debt doubles every 8 years.  It is baked into the monetary system.  If private debt faulters, public debt must take up the slack, or else the house of cards comes crashing down.  We're living in the largest ponzi scheme in human history.  Obama is certainly complicit, but this has been going on long before he was elected. 

Chupacabra-322's picture

The "government" has not been legitimate since Lincoln's War. When the southern States' contingent walked out of congress and congress adjourned "sine die" (without a day), congress officially dissolved. They never had a lawful quorum so never lawfully reconvened.
It was Lincoln ruling by decree back then which is the basis for all actions since. He ordered congress to do certain things under martial law (military rule). He even had the governor of New York arrested for opposing certain decrees.

We have had a corporation ACTING as government since 21 Feb 1871.
28 U.S.C. 3002 (15)
(15)“United States” means—
(A) a Federal corporation;
(B) an agency, department, commission, board, or other entity of the United States; or
(C) an instrumentality of the United States.

So... B and C are subdivisions of the "Federal corporation." For further verification go to Dunn & Bradstreet ( or You will find that ALL government entities are listed as private corporations right down to your local police department and school district.
The "law" isn't what you think it is. It's all corporate regulations. Congress and legislatures are acting as the board of directors for the corporations and most don't have any idea. You are simply seen as a corporate asset (human resource) with an asset tag # (SS#) that is not allowed to tell your owner what to do.

The questions you should be asking are, "Who owns it?" "Who are they really working for whether they know it or not?" "What are the requirements to be a CEO of a corporation?"
Hint: You don't have to be a Citizen of any specific country to head up a corporation.

These Criminal Psychopaths / Sociopaths are just minions gaming a Criminal FRUAD system all based on Contract Fraud through our CONSENT (Blacks Law Dictionary) & deception.

From Lincoln, to the Act of 1871, Fed Reserve Act of 1913, to The Emergency Banking Act of 1933. No doubt, thse Megalomaniac's have taken historical FACT, twisted it, kept it from public knowledge to use as leverage in their diabolical plan to Enslave / Control mankind. And, the entire planet.

El Vaquero's picture

Not to mention that a lot of what is on the Fed's balance sheet isn't very liquid.

Chupacabra-322's picture

I never get tired of reposting the following:

The Bankruptcy of The United States
United States Congressional Record, March 17, 1993 Vol. 33, page H-1303

Speaker-Rep. James Traficant, Jr. (Ohio) addressing the House:

"Mr. Speaker, we are here now in chapter 11.. Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner’s report that will lead to our demise.

It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1, Public Law 89-719; declared by President Roosevelt, being bankrupt and insolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 - Joint Resolution To Suspend The Gold Standard and Abrogate The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments and is further evidence that the United States Federal Government exists today in name only.

The receivers of the United States Bankruptcy are the International Bankers, via the United Nations, the World Bank and the International Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers. With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America. This act was instituted and established by transferring and/or placing the Office of the Secretary of Treasury to that of the Governor of the International Monetary Fund. Public Law 94-564, page 8, Section H.R. 13955 reads in part: "The U.S. Secretary of Treasury receives no compensation for representing the United States?’

Gold and silver were such a powerful money during the founding of the united states of America, that the founding fathers declared that only gold or silver coins can be "money" in America. Since gold and silver coinage were heavy and inconvenient for a lot of transactions, they were stored in banks and a claim check was issued as a money substitute. People traded their coupons as money, or "currency." Currency is not money, but a money substitute. Redeemable currency must promise to pay a dollar equivalent in gold or silver money. Federal Reserve Notes (FRNs) make no such promises, and are not "money." A Federal Reserve Note is a debt obligation of the federal United States government, not "money?’ The federal United States government and the U.S. Congress were not and have never been authorized by the Constitution for the united states of America to issue currency of any kind, but only lawful money, -gold and silver coin.

It is essential that we comprehend the distinction between real money and paper money substitute. One cannot get rich by accumulating money substitutes, one can only get deeper into debt. We the People no longer have any "money." Most Americans have not been paid any "money" for a very long time, perhaps not in their entire life. Now do you comprehend why you feel broke? Now, do you understand why you are "bankrupt," along with the rest of the country?

Federal Reserve Notes (FRNs) are unsigned checks written on a closed account. FRNs are an inflatable paper system designed to create debt through inflation (devaluation of currency). when ever there is an increase of the supply of a money substitute in the economy without a corresponding increase in the gold and silver backing, inflation occurs.

Inflation is an invisible form of taxation that irresponsible governments inflict on their citizens. The Federal Reserve Bank who controls the supply and movement of FRNs has everybody fooled. They have access to an unlimited supply of FRNs, paying only for the printing costs of what they need. FRNs are nothing more than promissory notes for U.S. Treasury securities (T-Bills) - a promise to pay the debt to the Federal Reserve Bank.

There is a fundamental difference between "paying" and "discharging" a debt. To pay a debt, you must pay with value or substance (i.e. gold, silver, barter or a commodity). With FRNs, you can only discharge a debt. You cannot pay a debt with a debt currency system. You cannot service a debt with a currency that has no backing in value or substance. No contract in Common law is valid unless it involves an exchange of "good & valuable consideration." Unpayable debt transfers power and control to the sovereign power structure that has no interest in money, law, equity or justice because they have so much wealth already.

Their lust is for power and control. Since the inception of central banking, they have controlled the fates of nations.

The Federal Reserve System is based on the Canon law and the principles of sovereignty protected in the Constitution and the Bill of Rights. In fact, the international bankers used a "Canon Law Trust" as their model, adding stock and naming it a "Joint Stock Trust." The U.S. Congress had passed a law making it illegal for any legal "person" to duplicate a "Joint Stock Trust" in 1873. The Federal Reserve Act was legislated post-facto (to 1870), although post-facto laws are strictly forbidden by the Constitution. [1:9:3]

The Federal Reserve System is a sovereign power structure separate and distinct from the federal United States government. The Federal Reserve is a maritime lender, and/or maritime insurance underwriter to the federal United States operating exclusively under Admiralty/Maritime law. The lender or underwriter bears the risks, and the Maritime law compelling specific performance in paying the interest, or premiums are the same.

Assets of the debtor can also be hypothecated (to pledge something as a security without taking possession of it.) as security by the lender or underwriter. The Federal Reserve Act stipulated that the interest on the debt was to be paid in gold. There was no stipulation in the Federal Reserve Act for ever paying the principle.

Prior to 1913, most Americans owned clear, allodial title to property, free and clear of any liens or mortgages until the Federal Reserve Act (1913)

"Hypothecated" all property within the federal United States to the Board of Governors of the Federal Reserve, -in which the Trustees (stockholders) held legal title. The U.S. citizen (tenant, franchisee) was registered as a "beneficiary" of the trust via his/her birth certificate. In 1933, the federal United States hypothecated all of the present and future properties, assets and labor of their "subjects," the 14th Amendment U.S. citizen, to the Federal Reserve System.

In return, the Federal Reserve System agreed to extend the federal United States corporation all the credit "money substitute" it needed. Like any other debtor, the federal United States government had to assign collateral and security to their creditors as a condition of the loan. Since the federal United States didn’t have any assets, they assigned the private property of their "economic slaves", the U.S. citizens as collateral against the unpayable federal debt. They also pledged the unincorporated federal territories, national parks forests, birth certificates, and nonprofit organizations, as collateral against the federal debt. All has already been transferred as payment to the international bankers.

Unwittingly, America has returned to its pre-American Revolution, feudal roots whereby all land is held by a sovereign and the common people had no rights to hold allodial title to property. Once again, We the People are the tenants and sharecroppers renting our own property from a Sovereign in the guise of the Federal Reserve Bank. We the people have exchanged one master for another.

This has been going on for over eighty years without the "informed knowledge" of the American people, without a voice protesting loud enough. Now it’s easy to grasp why America is fundamentally bankrupt.

Why don’t more people own their properties outright?

Why are 90% of Americans mortgaged to the hilt and have little or no assets after all debts and liabilities have been paid? Why does it feel like you are working harder and harder and getting less and less?

We are reaping what has been sown, and the results of our harvest is a painful bankruptcy, and a foreclosure on American property, precious liberties, and a way of life. Few of our elected representatives in Washington, D.C. have dared to tell the truth. The federal United States is bankrupt. Our children will inherit this unpayable debt, and the tyranny to enforce paying it.

America has become completely bankrupt in world leadership, financial credit and its reputation for courage, vision and human rights. This is an undeclared economic war, bankruptcy, and economic slavery of the most corrupt order! Wake up America! Take back your Country."

Atomizer's picture

He loved our country and didn't have a $600 taxpayer haircut to prove it. Sadly, we was wiped off the map. He was ahead of our time. God bless him. 

azusgm's picture

Let me get cranky and say that it is the ratios in banking, the quality of collateral, and the use of T's for tier one capital. Too much debt backed by debt.

Time for a jubilee.