With the Federal Reserve leading the world’s central banks in a tightening cycle of interest rate rises, the likes of which we haven’t seen since 2006, commentators across the political spectrum are noting the fondness of the Fed chair, Jerome “Jay” Powell, for his legendary predecessor, Paul Volcker. On the left, the comparison is fearful; on the center and on the right, it’s one of admiration. But circumstances don’t really support the comparison.
On taking office in October 1979, Volcker declared “the standard of living of the average American has to decline” as a consequence of the war against the chronic inflation of the 1970s. He quickly set to work making that happen by driving interest rates up towards 20% and creating the deepest US recession since the 1930s.
