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Did Paul Volcker 'Save' A System That Was Simply Not Worth Saving?

Tyler Durden's picture




 

Submitted by Bill Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

Disappearing Growth

Investors are regaining their calm. A few weeks ago, it looked as though the end of the world had begun. We are talking, of course, about the world in which credit, stocks, and central bank reputations only go up.

 

Eccles Building

Fated to eventually become a house of ill repute: the Mariner Eccles building (Fed board HQ)

Photo credit: AgnosticPreachersKid

But after a big fright in August, investors recovered their relaxed madness. They concluded that there was nothing to worry about. They may be right. You never know. But our guess is that the end of the world has already begun… and they just can’t face it.

 

1-SPX

The SPX, monthly – a proxy for the seemingly never-ending asset bubble. What if the end of the party is already here and people have just not noticed yet? – click to enlarge.

 

Since the end of World War II, credit has been expanding in the U.S. At first, it was a healthy expansion. Young, middle-class families took out mortgages and ran up bills on “charge cards,” such as Diners Club and American Express.

Then, in the late 1950s, came the first credit cards. This was accompanied by large increases in consumer credit. Until the 1970s, all was well, because wages were rising, too. And with so much new technology coming online, people believed their wages could only increase.

Debt was no problem – neither for the nation nor for households. We would “grow our way out of it.” But a strange – and as yet not fully understood – new trend began in the 1970s. After accounting for inflation, incomes for most Americans dramatically tapered off.

 

2-debt, debt and GDP

Total credit market debt, federal debt and GDP – a non-problem on its way to becoming an intractable problem … – click to enlarge.

 

The economy was slowing, too, after taking the effects of inflation into account. At first, this was thought to be temporary – a fluke, perhaps caused by the 1973 oil crisis. But the trend toward lower economic growth continued. Decade after decade, the trend in GDP growth was down. In most parts of the U.S., GDP per person peaked in the 1970s or 1980s.

Remarkably, the average American working man earns less today than he did a half century ago (again, accounting for changes in consumer price inflation). That is not the same as saying that a person with a good job earns less today than he did in the 1960s.

According to Census Bureau figures, the average inflation-adjusted wage for Americans in the top 5% of earners is up by more than 75% since 1967. Women earn a lot more, too.

But good jobs have become scarce. The labor participation rates – the number of people who have jobs or are looking for jobs as a percentage of the people who are of working age – is at its lowest level since 1977.

 

3-Labor force participation rate

Labor force participation rate – at its lowest level since 1977. Something is clearly amiss – click to enlarge.

 

Debt Goes Sour

But although economic growth and most people’s incomes slipped, debt (the flip side of credit) kept growing. This was Stage II – the unhealthy phase of the credit expansion. No longer backed by broad-based wage increases, debt was expanding beyond the capacity of the economy – and borrowers – to repay it.

Now we were asking for trouble. You may be wondering how this was possible. Why would lenders extend credit to people who couldn’t pay back? The answer: The fix was in.

In 1971, President Nixon dramatically transformed the global monetary system. Under the previous Bretton Woods system, the dollar was backed by gold. And the major global currencies traded at fixed rates to the dollar… and by extension to gold.

This meant a nation couldn’t get too far into debt… especially when it came to its trading partners. Trade surplus nations – which amassed dollars in return for net exports to the U.S. – could ask to redeem their dollars in gold. This caused gold to leave the overspending nation and flow to the creditor nation.

That’s how the U.S. got so much gold in the first place. France and Britain spent more than they could afford on World War I. The U.S. sold them food, weapons, and fuel… and demanded gold in repayment. But by the 1960s, the shoe was on the other foot.

The U.S. started spending money on both “guns and butter” – a Great Society at home and a war in Vietnam. Much of the spending to fund the war in Vietnam ended up as dollars in the hands of Vietnamese branches of French banks.

French president de Gaulle warns of the dollar-centric monetary system that was leading to enormous debt growth and would one day lead to an uncontrollable crisis. He started coming for his gold shortly thereafter, ultimately exposing the fact that dollars were no longer fully backed by gold.

 

And when, in 1965, president Charles de Gaulle sent the French navy across the Atlantic to pick up $150 million worth of gold in exchange for dollars, it was greeted like a long-lost relative at the reading of the will.

Finally, with gold being airlifted from Fort Knox to meet foreign demands for payment, rather than honor Washington’s promise to convert dollars to gold, Nixon panicked and defaulted. Henceforth, anyone holding dollars was on his own …

Nixon announces that the US will default on the gold exchange standard by “temporarily” suspending gold convertibility, while raising tariffs concurrently. Essentially he was telling a whole bunch of lies in the process, while proudly parading his appalling economic ignorance. This was called the “Nixon shock”. We’re not sure if people were more shocked about the lies or the ignorance, but surely many people must have wondered if it was April 1 instead of early August.

 

“Tall Paul” Takes Over

It all would have gone bad very fast. By April 1980, the annual rate of consumer price inflation was running at almost 15%. Gold soared as high as $800 an ounce. It looked as though Nixon’s new fiat money system would go off the rails soon – as all previous experiments with paper money had.

Instead, in 1979, President Carter appointed Paul Volcker as Fed chairman. Volcker stepped in front of the runaway train and commanded it to halt. And it did. By January 1981, “Tall Paul” jacked up the federal funds rate – the key lending rate in the economy – not to 2%… or 4%… or even 8%. He set it at 19% – and placed the train squarely on the tracks again.

We remember the howls of discontent. Volcker was “stifling the economy,” said the politicians. He was “killing jobs,” said the newspapers. He was causing “the worst downturn since the Great Depression,” said the economists. But Volcker didn’t budge. And when Ronald Reagan entered the White House in 1981, he backed Volcker.

 

volcker

Paul Volcker applied tough medicine for about two years, but by the time he became Fed chairman, US true money supply growth had already been declining sharply for two years running. In other words, the main driver of price inflation was already in retreat when he entered the scene. Later, in 1982, he produced the biggest one year surge in the broad money supply aggregate TMS-2 that had been seen since the war, a feat never again repeated. While he fended off assorted yammering politicians in the first two years of his chairmanship, it is a good bet this was actually a mock battle to pull the wool over the eyes of the hoi-polloi. We won’t be able to shake his firmly cemented reputation as an “inflation fighter”, but it is not nearly as deserved as is commonly assumed. Plus, as Bill Bonner notes below, in the best case he saved a system simply not worth saving.

Photo credit: John Duricka / AP

 

Volcker announced his intention to squeeze inflation out of the system soon after he became Fed chairman. Bonds – which do well when inflation is low – should have rallied. Investors should have raced to lock in roughly 10% yield available on the 10-year Treasury note. Instead, bonds price fell… and bond yields rose.

Then, as now, people were not aware – or were not willing to believe – that a major change had occurred. It wasn’t until 1982 that the bond market turned; finally, investors realized that it was a new world. Volcker saved the system. Bond yields – and interest rates – have been coming down ever since.

Too bad he didn’t save a better system. Not many men can resist the appeal of free money. Americans proved they were no better at it than others. Falling interest rates and the paper dollar gave them a way to impoverish themselves – by spending money they hadn’t earned.

They took the opportunity offered to them. They borrowed and spent… and drove the entire world forward at a furious pace. But now that stage is over.

 

4-TYX

The “stability” of the “scientific monetary policy” in one stark image.

Investors only realized in late 1981/early 1982 that the era of rising CPI inflation had ended – a reaction delayed by nearly two years. Something similar could well be happening now – an era is ending, they just don’t know it yet – click to enlarge.

 

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Wed, 10/21/2015 - 20:53 | 6696753 Newsboy
Newsboy's picture

Yeah, maybe, but don't you miss those 22% mortgage rates? 

Wed, 10/21/2015 - 20:58 | 6696760 TeamDepends
TeamDepends's picture

Mister we could use a double digit man like Volcker again
Didn't need no welfare state
Everybody pulled his weight
Gee our old K-car ran great
Those were the days!

Wed, 10/21/2015 - 21:20 | 6696839 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

K-cars were the worst lemons of all the lemons ever manufactured in the history of car manufacturing. My brother bought one used and had it in to the mechanic about 35 times before he junked it. When it backfired after a carb repair it sounded like a real gunshot every time, and it would take about a minute to blast every time the ignition switch was turned off. For the entire time my brother had that car he was giving the mechanics all of his income. The K-car was a mechanic's dream come true.

Thu, 10/22/2015 - 00:16 | 6697233 wee-weed up
wee-weed up's picture

 

 

Yep, we are definitely in need of a hard-ass tough-love economist in charge again.

Fuck the wussy Krugmans, Bernankes, Yellens, etc., we are saddled with now...

Trying their best to protect Obozo and his pitiful legacy.

Thu, 10/22/2015 - 03:36 | 6697404 Pinto Currency
Pinto Currency's picture

 

 

Volcker won't save anyting.

Architect of paper money and ultimate collapse:

http://www.safehaven.com/article/35156/golden-yuan-world-reserve-currenc...

 

Wed, 10/21/2015 - 22:42 | 6697022 RaceToTheBottom
RaceToTheBottom's picture

No one has the NADs nowadays to do do what he did.

Bunch of big hat coyboys is what we have nowadays.  All hat no cattle...

Wed, 10/21/2015 - 21:08 | 6696805 nmewn
nmewn's picture

A fan of borrowing are you?

Wed, 10/21/2015 - 21:29 | 6696864 A Nanny Moose
A Nanny Moose's picture

high interest rates = cheaper housing. Ceteris Paribus

So yes. I miss high interest rates.

Wed, 10/21/2015 - 22:00 | 6696919 junction
junction's picture

The worst mistake Carter made was appointing Volcker to head the Fed.  Volcker was and is a deranged idiot who took sadistic glee back then in wrecking the U.S. economy.  The "oil shock" of 1973 and the military overspending on the Vietnam War boosted inflation.  What Volcker did was to raise the cost of credit across the board, so that credit cards no longer had a maximum 12% interest rate and mortgage rates went to 20% plus points.  The United States economy never recovered from Volcker's lunatic increase in the cost of borrowed money.  The value of the dollar went through the roof, you could get a 22% interest rate on your passbook bank savings account or, at a bank in Texas, a lower rate plus a free shotgun if you deposited enough for a fixed period of time.  The Savings Bank of New York, the first bank to use savings passbooks around 1819, did not survive Volcker's incompetent reign.    

I was in a toy manufacturing business on Cook Street, Brooklyn, in 1983 where the owner showed me a telegram he had just received from a customer in France.  The telegram told him to cancel all their toy orders, that the dollar was so expensive that his French customers would be losing money trying to sell these dollar denominated toys in France for francs.  That scenario did not just happen in Brooklyn.  By boosting the value of the dollar to all time highs, in one fell swoop, Volcker wrecked a good chunk of the manufacturing base in the USA that depended on exports.   

Wed, 10/21/2015 - 22:30 | 6696999 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

I believe your perspective on Volcker, but I must say that even my father liked Volcker as did most of Volcker's peers. I'm still debating whether Volcker is as innocent regarding the calamity we all find ourselves in today due to his involvement with the architecture in the past. He is a notable man in the financial world IMHO, but these dudes in central banking have no idea what damage they cause by their so-called interventions. Greenspan was way worse than Volcker too.

Wed, 10/21/2015 - 22:46 | 6697037 RaceToTheBottom
RaceToTheBottom's picture

When you get a ticket for speeding do you blame the cop or man up and take the responsibility for your own actions?

The same thing applies here.  

Thu, 10/22/2015 - 00:01 | 6697209 OldPhart
OldPhart's picture

Last time I got a ticket I WAS speeding, doing about 75 in a 55 mph zone in the middle of the desert.

Most of my family was touring Germany and I was feeding the livestock at my dad's.  Step-brother had been shot by a .45, point blank, over a poker game.  We were heading back to the hospital 100 miles away to check on him after feeding the animals.

Pulled over, cop came up, wife and I are too busy talking about him and basically ignore the cop.  He says I clocked you at 95 MPH.

To wife:  I don't have a fucking clue how to get in touch with them to tell them.  Wife:  Call his sister, maybe she knows a way.

To cop: I said fine, give me the ticket, I gotta go.  Got my fine and shit mailed to me.  Nearly $700 total.

Went to court.  Hardcase judge.  First thing going on is shit that had already happened.  You violated my orders, you're jail.  You didn't do traffic school you're going to jail.  This kind of shit. 

Then he started to have those with fresh tickets stand and argue.  No success, fine announced.

Then he gets to me.  We know each other.  He calls me by my first name "OldPhart" what are you doing here.

Everyone's head turns to look at me.

I got a ticket.

What for?

Speeding.

Were you speeding?

Yes, sir, but not this damned fast!

Ok, fine's $100.  Pay the clerk outside.  (lowest fine levied by a factor of $100's)

Yes, sir, thank you.

Hey, don't speed no more, next time it'll be $200.

I've become a courtroom celebrity.  People are standing up to see who I am (basically a nobody).

Pay the clerk.  Haven't had a speeding ticket since.

 

Wed, 10/21/2015 - 23:47 | 6697194 OldPhart
OldPhart's picture

I remember that one of the first industries, as in almost every manufacturer, to go bust and pretty much disappear was the textile manufacturers.  We suddenly had lenins and fabrics, paper thin and with all the strength of toilet paper, showing up in clothing that would rip at the slightest touch (and no, back then I was more than normally fit), I once raised my arm to wave at my wife at DisneyWorld (where we worked) and the sleeve did this Incredible Hulk rip.  A couple girls nearby started giggling, meantime I'm baffled at how the sleeve was so shredded.  I had big arms, but not that big.

Wed, 10/21/2015 - 20:55 | 6696757 blindman
blindman's picture

yup, and worse.
BABY WHAT YOU WANT ME TO - Jimmy Reed
https://www.youtube.com/watch?v=cEkepygs_bM
.

Wed, 10/21/2015 - 21:01 | 6696784 Usurious
Usurious's picture

 

 

the future cannot repay todays debts...trav7777

fuck USURY

Wed, 10/21/2015 - 21:02 | 6696786 A Dutch on Meth
A Dutch on Meth's picture

The west made the USSR go bankrupt by going bankrupt themselves.

Wed, 10/21/2015 - 21:23 | 6696845 Oldwood
Oldwood's picture

Mutually Assured Destructiin

Wed, 10/21/2015 - 22:47 | 6697041 RaceToTheBottom
RaceToTheBottom's picture

Mutually Assured Debtstruction.

Wed, 10/21/2015 - 21:04 | 6696795 blindman
blindman's picture

Muddy Waters - Got My Mojo Workin'
https://www.youtube.com/watch?v=8hEYwk0bypY

Wed, 10/21/2015 - 21:10 | 6696814 Usurious
Usurious's picture
Miles Davis - 'It's about that time'

https://www.youtube.com/watch?v=xhFbNwMY_qg

Wed, 10/21/2015 - 21:42 | 6696894 0b1knob
0b1knob's picture

Dire Straights - 'Money for Nothing'

https://www.youtube.com/watch?v=lAD6Obi7Cag

 

Thu, 10/22/2015 - 18:59 | 6700587 blindman
blindman's picture

l.
ove it.
.
Jef Lee Johnson - A Vaulx Jazz Live (2009)
https://www.youtube.com/watch?v=cA8Gqc7l-cA
.
for now, the world still turnin'.

Wed, 10/21/2015 - 21:09 | 6696810 ucde
ucde's picture

"Free money" is the only kind of money that exists. 

That phrase sets up a morality tale, that somehow, if you squeeze money out of a person by selling them aluminum siding, for example, you have 'earned' it. 

But that person had to get the money from somewhere. And all money ultimately comes from government issuance. When the government runs a deficit, we have a private surplus, when the government runs a surplus, its because they create a private deficit. This graph makes it clear. 

So my question to the audience at home is: Would you prefer that the government lower its spending, in order to prevent the flow of 'free money' into the economy, or would you prefer the government to create more money, and filter it to useful projects?

Wed, 10/21/2015 - 22:49 | 6697047 RaceToTheBottom
RaceToTheBottom's picture

Free Money has a price

Wed, 10/21/2015 - 23:20 | 6697136 r00t61
r00t61's picture

The government should pass away into oblivion like the barbarous relic it is.

And while we're at it, take your Chartalist magic money tree theory someplace where the natives are stupid enough to believe in unlimited printing.  Say, Zimbabwe.

Thu, 10/22/2015 - 06:05 | 6697475 RockySpears
RockySpears's picture

Root61

Zimbabwe is an interesting place:

Currency has been crap for 10-15 years if not more, but so what?  It still exists, life goes on, you can holiday there if you wish (go shoot lions or something).

So, how bad does it get when a country gets completely barking mad?  Well, not so bad, at least, that's how it appears.  No revolution, no general riots or strikes or mass die-offs - nothing.  OK, I do not want to be there, but others are, and seem ~OK.

So if the US goes barking mad, so what?

Thu, 10/22/2015 - 07:30 | 6697558 graspAU
graspAU's picture

Did you see the conditions of people who tried to survive that economic horror? I mean the people who were at no fault? The grandparents and the children who could not eat? The ones who barely got to eat because another family member slaved all day to buy them enough bread just to make it to the next day? The 85 year old living in house with only a partial roof, having to bike for many miles to earn enough to get a can of anything to eat? I don't think many people survived when it took  3grams of gold to get enough bread for the day, and they had to go find and dig it by hand every day. If they were supporting other family members it was 3grams * number of family members. Point being, the process you are talking about is not without real human suffering, and yes, in some cases death.

Thu, 10/22/2015 - 16:00 | 6699768 MortimerDuke
MortimerDuke's picture

...and the magic monry tree folks are in the house!  Welcome!  Now to answer your very compelling question:  I'd prefer we reduce government spending and at the same time, increase existing money stock into useful projects.  Two things.  Please cite the link to the list of the government's useful projects.  I'm pretty sure the list, among other cronyist projects includes paying for $100 hammers and bombs.  You do mean useful projects like that, right?  The ones they already fund, right?  Second, try to find the accounting identity that says more government debt = crowding out of private investment.  Hint: it won't be in your Keynes General Theory.  Finally Mr. Magic Money Tree, if the government runs a surplus, they return the money to the people they took it from and private deficit solved!

Wed, 10/21/2015 - 21:09 | 6696812 Mark Mywords
Mark Mywords's picture

The Walking Dead and American Horror Story have nothing on reality.

Wed, 10/21/2015 - 21:15 | 6696820 bid the soldier...
bid the soldiers shoot's picture

The system was worth saving*** before the election of Ronald 'Turd Bomb' Reagan

 

 

*** just barely

Wed, 10/21/2015 - 22:01 | 6696938 jcdenton
jcdenton's picture

Moron ..  You have no clue about Reagan .. His aim was to end the FED .. End the CIA .. End the IRS .. Bring GHWB and other cronies down .. He will do it. He is dead, but his plan is still in play ..

 

https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp (Read Me First)

Thu, 10/22/2015 - 00:04 | 6697219 bid the soldier...
bid the soldiers shoot's picture

"His plan is still in play."

Don't make me laugh, I'm going to a funeral.  The funeral of the United States of America

"Starving the beast" is a political strategy employed by American conservatives in order to limit government spending[1][2][3]bycutting taxes in order to deprive the government of revenue in a deliberate effort to force the federal government to reduce spending.

 

The term "the beast" in this context refers to the United States Federal Government and the programs it funds, using mainly American tax payer dollars, particularly social programs[4] such as educationwelfareSocial Security,Medicare, and Medicaid.[3]

Starving the Beast.  Giving the National Debt escape velocity.  Reagan's plan.  All the same, n'cest pas?

Where's the National Debt now, birdbrain?  Pushing $20 trillion.  So when does Reagan's Plan kick in, if you'll forgive me asking such a rude question?

When is the beast starved?  At $30 trillion? $40 trillion? $50 trillion?

Or is Reagan's Plan just the TURD IN THE PUNCH BOWL OF AMERICA?

Daintily sipped out crystal punch bowl cups by brain dead conservatives, some fortunate enough to get a flake of Reagan's turd in their cup.

OR IS THE PUNCH IN THE PUNCH BOWL JUST KOOL AID THAT ONLY CONSERVATIVES WANT TO DRINK?

Thu, 10/22/2015 - 00:07 | 6697225 OldPhart
OldPhart's picture

Kindly link to the appropriate article that you believe is relevant.

Thu, 10/22/2015 - 01:36 | 6697319 Alvin Fernald
Alvin Fernald's picture

Did Raygun ever say he was going to end the fed? What the fuck are you talking about?

Thu, 10/22/2015 - 03:50 | 6697411 bid the soldier...
bid the soldiers shoot's picture

denton

So you left the s/ off your comment and I thought you were serious.

Imagine, Reagan wanted to end the CIA and he appointed his campaign chairman William Casey to be its director, about whom there is some question whether or not he ordered a CIA operative to blow Chernobyl.

You fooled me.  My bad.

But I was very glad to read this:

"he personally delivered $10 billion to Gorbachev to end the cold war. He will personally $30 billion to Putin when those funds are released..."

When I learned on the news 25 years ago that Russia was shedding its communist past, I immediately thought that Washington had paid them off to do so.

And when Ambassador Strauss would not present his credentials (and cashier's check) until the so called coup was defeated, I knew that there had been a genormous payoff.  

The $40 billion you mention would certainly bestow a nice largess on all the worthy and loyal communist apparatchiks who would be displaced until things got back on track.

The notion that Gorby only got $10 billion and that was for himself and the final payment of $30 billion was stretched out for 25 to years to the reign of Putin is beyond laughable.

But thank you for reinforcing my idea that the Cold War wasn't won.

THE US SIMPLY PAID THE ENEMY TO LEAVE THE BATTLEFIELD. 

Wed, 10/21/2015 - 21:14 | 6696824 fowlerja
fowlerja's picture

Oh no..not another history lesson from Bill Bonner...so what else is new?

Wed, 10/21/2015 - 21:20 | 6696837 Jack Burton
Jack Burton's picture

I got my first mortgage as a young guy at a cool 10.5%.

Cost of the house? $12,000

Thu, 10/22/2015 - 00:08 | 6697228 OldPhart
OldPhart's picture

My first house had a 10% mortgage, cost was $19k, Panama City, Florida.

Wed, 10/21/2015 - 21:29 | 6696861 SILVERGEDDON
SILVERGEDDON's picture

Paul was just another lackey pulling his 30 pieces of silver before bailing out to let another eager fiscal Judas take the helm. 

Same as it ever was. What's yours is theirs - first a bit, then a lot, then, everything, until the people revoilt, burn down the ivory towers, and the whole mess plays out all over again.

Maybe evolution will outstrip the longevity of the money changers, and destroy them for once and for all.

I ain't gonna hold my breath waiting for the miracle, though.  

Wed, 10/21/2015 - 21:35 | 6696870 yogibear
yogibear's picture

Borrowed all that people can borrow. Debt  saturation is a debt based system.

Already kids just born are in debt big time.

Wed, 10/21/2015 - 21:40 | 6696888 mojojojo
mojojojo's picture

PROJECT NIRP

FED rate will not rise. Too much leverage and debt. Nothing new there. Needs NIRP to keep the ponzi going. Agreed. At a certain negative rate, however, a socioeconomic cataclysm will manifest. People will rush to paper. Banks close. Only plausible scenario. You lose. Haircut. Bail-ins.

Another problem. US debt securities. If the yield across the board turns negative, who will buy? The FED will have to buy to keep the ponzi going. So the FED piles negative yielding debt securities onto its balance sheet. Operation - Hug the Tar Baby. Spiral of death. Meltdown. Can not continue into perpetuity!

QE4 and beyond, NIRP, these are the signs of something worse to come. That is hyperinflation.This mad science experiment, as far as my limited knowledge can forsee, will end cash and kill USD hegemony.

A geopolitical turning point, not seen since WWII, is approaching; and the death of cash is looking imminent. Gold will likely be made illegal. Been done before.

Once cash is dead, you can't take your 'money' out of the bank. You will have no recourse. What value is gold if it is illegal, and you are being carted off to a FEMA camp for political dissidence?

Wed, 10/21/2015 - 23:12 | 6697110 RaceToTheBottom
RaceToTheBottom's picture

The only real solution is high fatty acids.  Relish your food as you never know which meal will be your last.

Wed, 10/21/2015 - 21:41 | 6696893 flyonmywall
flyonmywall's picture

If interest rates went back to 10%, the cost of houses would be back to 15k for a decent house.

Sadly, that will never be allowed to happen, because another decrease in house and asset prices would bankrupt the system. You know it, and I know it.

So, it will not be allowed. Ever. They are taking this Titanic all the way to the iceberg, and will then play it by ear. Sadly, a lot of people will be fleeced, but not the bankers and their friends. I'm hoping they are wrong this time around.

 

Wed, 10/21/2015 - 21:52 | 6696913 Zerohedge fan
Zerohedge fan's picture

come on, he did not save the system, he emptied Ford Knox

Wed, 10/21/2015 - 21:52 | 6696916 Tejano
Tejano's picture

No, a fiat 'system' wherein central planners like Volcker and Greenspan and their ilk tamper with interest rates was not worth saving - unless one is a member of criminal central banker crowd. For the rest of us, well we are just further down the road to serfdom.

Oh, and thanks for the 30 year bond bubble, shithead - its over now.

Wed, 10/21/2015 - 21:55 | 6696923 tictawk
tictawk's picture

We have had 45 years of INFLATION in all ASSETS and we are begining to roll over into DEFLATION.   CASH and CREDIT is used as money and given that credit is borrowed from the future, we now have to reconcile all the accumulated debt.  That all spells a deflationary spiral.  The Fed cannot print its way out of this mess. Defaults are coming, its a matter of time.  "Cash is trash" mantra will change to "Cash is King". 

Wed, 10/21/2015 - 21:56 | 6696924 acetinker
acetinker's picture

To the headline- not only did Volcker save a system that was not worth saving, he 'saved' a system that was designed to fail at its' outset. P<P+I

Wed, 10/21/2015 - 22:28 | 6696991 GRDguy
GRDguy's picture

Volcker did what he was told to do.   Everything was getting out of hand too fast, it would have been obvious who the agents of The Great Red Dragon were.  For something that started over 300 years ago, the goal "to own the earth in fee-simple" could not be abandoned for sake of a few financial sociopaths.  Take a look at all the mergers and consolidations that have taken place since Volcker. Ownership has been placed in fewer and fewer hands over this time, and it hasn't stopped yet. Sucks!

Wed, 10/21/2015 - 23:13 | 6697112 Bluntly Put
Bluntly Put's picture

I like that last graph but I would like to see the total debt superimposed on the right vertical axis so you could see the exponential increase of cummulative debt over the steady decline in interest rates.

Thu, 10/22/2015 - 01:04 | 6697295 truth vs fraud
truth vs fraud's picture

The present sytem is so bad that Volker action is no longer possible.  This is like a skyscraper made of paper and the only possible future is a massive crash and starting over.  There is no alternative, no policy, only preparing for the crash and getting ready for a new beginning and almost no one even sees this.  They expect some organization to fix it and will be extremely dissapointed as the Fed keeps lying about it.  It will be like lemmings following the fed over the cliff

Thu, 10/22/2015 - 06:56 | 6697498 falak pema
falak pema's picture

Volcker saved the petrodollar's inflationary spiral fed on Saud's black gold revenues recycling and Ronnie Reagan --along with Maggie's offshored City farm-- spawned REAGANOMICS; the FIRE asset steroid injected stawks and penny (junk)  bonds pumping now in the hands of Amerika's "best and brightest" --the Gordon Gekkos--that never stopped giving to the Hubristic rise of OLIGARCHY America; which under the Bush Mantra spawned "massive military supremacy/shock n awe" NWO and then under Clinton spawned the "outsourced" SQUID controlled debasement of first world production--and Oligarchy's profligate profit machine all fed on Reserve's hegemonial shadow banking debt--now latched on to Chindia "cheap labour arbitration" mantra.The credit pump moved to EM !

From that moment onwards "our money your problem" had become the NOOSE thAt WOULD stifle steroid pumped WS's FIRE economy all based on Chindia's slave labour and FED's fiat debt.

Now its all coming apart...Well, Reaganomics...you've had your kicks!

The Wolves of WS are now wallowing in Unicorn land!

Don't blame Volcker; blame Nixon's ramp up of fiat profligacy (Friedman's floating rates legacy) and then blame the hubris of the Reaganomics era which went into another paradigm--"the sky's the limit; we are exceptional" fantasty world hubris-- debasing the fundaments of prudential capitalism to the point where risk is now BLIND to return as truth is suffocated by systemic lying; all to protect the POWER construct. ...The sun never sets on our empire!...

Thu, 10/22/2015 - 21:38 | 6701184 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

I'm glad I read this summary, falak pema. Volcker has been redeemed somewhat by the slant you take. I trust your opinion on all things Economics.

Thu, 10/22/2015 - 07:36 | 6697578 Pumpkin
Pumpkin's picture

It was worth saving to the Satanists.

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