The one president who disappointed Volcker, not surprisingly, was disappointed by him. Carter blamed his hand-picked Fed chairman for dooming his reelection by raising interest rates three percentage points — an almost unprecedented move — in the weeks before the 1980 election. Biographer and subject both see this as a sign of Volcker’s courage and independence. Others might see it as a sign of self-righteousness and pig-headedness by someone who could just as well have waited a few weeks until after the election, as other Fed chairmen have done.
At other moments, Volcker was certainly willing to use a bit of sleight-of-hand in the service of his policies. Shortly after taking over as Fed chairman, for example, he appeared to shed his skepticism about monetarism and convinced the Fed’s policy committee that the only way it could get a handle on double-digit inflation was to try to control the supply of money directly, rather than try to control interest rates, as monetarists such as Friedman had long espoused. In truth, Volcker never really bought into the monetarist theology, in part because it was never certain what the total supply of money was at any moment. But, according to Silber’s account, Volcker realized that by cloaking the Fed’s actions in monetarist garb, he could justify raising interest rates faster and higher than any Fed had dared to do before. The policy worked and the inflation genie was put back in the bottle, but for years afterward Friedman and others complained that Volcker and the Fed never really were serious about or successful in controlling the money supply.
Although Silber sprinkles his narrative with some personal details — the cheap Antonio y Cleopatra cigars, the argyle socks, the financial strain that forced his wife in New York to seek part-time work and take in a boarder — this is a not a book about Volcker’s life so much as one about his work.
And even in that there are some glaring gaps, such as the coyness with which Silber recounts Volcker’s judgments about his successors at the Fed.
Although he recommended Alan Greenspan for the Fed chairmanship and admired Greenspan’s pragmatic management of monetary policy, Volcker was no doubt more than a bit resentful of the excessive public adulation that Greenspan received, culminating in Bob Woodward’s book “Maestro.” By 2007, Volcker had begun to direct some thinly veiled criticism at Greenspan for refusing to acknowledge the giant credit and real estate bubble growing right under his nose. Yet Silber shies away from exploring the Volcker-Greenspan relationship.
Silber is equally circumspect in dealing with Ben Bernanke and his repeated rounds of money-printing known as “quantitative easing.” Volcker no doubt views such actions as handing a free pass to politicians by giving them the financial headroom to continue running large budget deficits — something he refused to do during the Reagan era.
Then again, such circumspection is what we’ve come to expect from Volcker, whose genius has always been to play the Washington game brilliantly while appearing not to play it at all.
is a business and economics columnist for The Washington Post and the Robinson professor of public and international affairs at George Mason University.