RIP: Paul Volcker

Former Fed Chairman Paul Volcker has died at the age of 92. Volcker ran the Fed from 1979 to 1987. His tenure may have been one of the most important in the Fed’s history.

Volcker raised rates to extraordinary levels in an attempt to kill inflation. The strategy worked but it sent the U.S. economy into a painful recession. At one point, Volcker was given Secret Service protection.

The inflation rate was 1% under President Lyndon Johnson in 1965 but ballooned to a breakneck 14.8% in March 1980. To combat the price rises, Volcker’s Fed jacked up the federal funds rate and tightened the money supply. The rate, used by banks and credit unions for overnight loans to other depository institutions, reached a record 22.36% in July 1981. (By comparison, it was zero to 0.25% from December 2008 to December 2015, during the financial crisis and its aftermath.) Shortly after becoming Fed chairman, Volcker raised the discount rate by 0.5%, which would be considered a sizable jolt today.

The imposing Volcker stood 6’7″. He was appointed by President Carter and reappointed by President Reagan.

Posted by on December 9th, 2019 at 11:50 am


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