Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg and Umbaldonna Higher Across as reported with Bloomberg and
Speaker 1: this week on the show, Well, since vill Donna won't
Speaker 1: invite me to join any of her many, many book clubs,
Speaker 1: we're gonna have one right here on the podcast. So
Speaker 1: break out the Pinot Grigio and your coffy pants because
Speaker 1: we have a great guest this week to talk about
Speaker 1: a very important and timely book. Not only is she
Speaker 1: one of my favorite colleagues, but she also helped former
Speaker 1: Federal Reserve Chair Paul Volker write his memoirs and Taboot.
Speaker 1: She has a fascinating piece out in the latest issue
Speaker 1: of Business Week about Boker's reputation as an inflation fighting
Speaker 1: superhero and what lessons his experience holds for the current
Speaker 1: FED as it tries to play that same role. But first,
Speaker 1: Pill Donna, confess, have you read the whole book of
Speaker 1: the book? Yes, and I have proof. Well, you don't
Speaker 1: spoil the ending for me. This won't spoiled the the
Speaker 1: ending for you, but I know you'll know that I
Speaker 1: read all the way through because the acknowledgement section. I
Speaker 1: even read that, and Wolker in it talks about our
Speaker 1: guests so so nicely. And this is all at the
Speaker 1: end of the book. So this is my proof. All right, Well,
Speaker 1: you just spoiler. That was a spoiler of the acknowledgment.
Speaker 1: I'd never make it to the You didn't read the footnotes,
Speaker 1: did you? Of course I did? Are you kidding? My goodness?
Speaker 1: I was hoping to learn from them and learn I
Speaker 1: did well. I confess I've read most of the book.
Speaker 1: I had a very busy weekend. You know. It was
Speaker 1: parents weekend at my my daughter's college, so there was
Speaker 1: a football game and a tailgate, and that's lot of
Speaker 1: activity for a guy my name, guy my age. I
Speaker 1: I hardly even got a single map in all weekend.
Speaker 1: But I think I read most of it. If you
Speaker 1: count the pages in the middle with the pictures, then
Speaker 1: I read most of it. You read most of it, okay?
Speaker 1: Just to make it to make you feel even worse,
Speaker 1: the Bills were playing on Sunday, and I didn't watch
Speaker 1: the game because I sat around reading the book. Oh
Speaker 1: my goodness. Yeah, So I hope you feel really bad.
Speaker 1: That's that's commitment. I do feel bad, but it's what
Speaker 1: I read is excellent. So when you bring our guests
Speaker 1: in here we're speaking soon. Let's hear what she has
Speaker 1: to say about you not reading. It's Christine Harper. She's
Speaker 1: editor of Bloomberg Markets magazine. Christine, thanks so much for
Speaker 1: coming on the show. Thank you so much for having me.
Speaker 1: And to be fair, I don't even read all the
Speaker 1: stories I edit. Sometimes you know it's uh. But Christie,
Speaker 1: why don't you start and just tell us how um
Speaker 1: you got involved in this project and sort of what
Speaker 1: the division of labor is when you write a book
Speaker 1: with with such a legendary figure like that. Well, I
Speaker 1: can't speak for how this normally works, because I think
Speaker 1: this was a really exceptional sort of lightning bolt experience
Speaker 1: for me. I'd never written a book, and I just
Speaker 1: happened to know somebody who is in the publishing business
Speaker 1: and a friend, a mutual friend, came to me and
Speaker 1: said he suggested my my name to this friend and
Speaker 1: the publishing business as somebody who might be able to
Speaker 1: help Paul Vulcan write his memoir. So the guy in
Speaker 1: the publishing business, who name is Peter Ostos, calls me
Speaker 1: up and he says, would you'd be interested in doing this?
Speaker 1: Paul Wolker, he's getting quite old, he wants to write
Speaker 1: his memoir and uh, he just needs a little help.
Speaker 1: And I said, well, you know, I know nothing about
Speaker 1: writing books, so and I'm not really an expert economics,
Speaker 1: so I don't know why. And he was like, listen,
Speaker 1: just you know, go talk to him. It should be
Speaker 1: somebody in New York and and we want to make
Speaker 1: it his book and not bringing somebody who's going to
Speaker 1: make it their book. And I said, well, that's fine,
Speaker 1: I'll do that. So and I thought to myself, no
Speaker 1: matter what goes wrong, here, the worst case scenario as
Speaker 1: I get to spend a bunch of time with Paul Volker.
Speaker 1: How great is that? So so I had an introductory
Speaker 1: meeting with him in his Rockefeller Center office in a
Speaker 1: sort of late summer, and he was absolutely charming and
Speaker 1: absolutely you know, great, and clearly had no qualms about
Speaker 1: working with an untested person like me. And so we
Speaker 1: just started meeting on a very regular basis at his
Speaker 1: office at his home. He would tell me stories, I
Speaker 1: would record them, I would get them transcribed. We would talk.
Speaker 1: We would talking and then eventually he started writing and
Speaker 1: handing me pages and and handing his secretary pages his
Speaker 1: hype up and and I would give him feedback and
Speaker 1: we would talk about it, and so yeah, it was
Speaker 1: just it was great collaboration. He wrote a lot of
Speaker 1: it himself a longhand on a yellow legal pads. I
Speaker 1: had it typed up by his amazing secretariat, who uh,
Speaker 1: who could read his handwriting, which is not an easy
Speaker 1: not an easy thing, and then uh and then I
Speaker 1: would sort of edit it and and make notes and changes,
Speaker 1: and he would read it and then he in his
Speaker 1: allegible handwriting right all these notes on it. He was very,
Speaker 1: very involved. He would he had a great uh attention
Speaker 1: to detail, a great interest in making sure we always
Speaker 1: chose the exact right word. And I wasn't expecting that.
Speaker 1: But as I worked with him, and as I learned
Speaker 1: more about his career, it became clear to me that
Speaker 1: so much of being in the roles he had was
Speaker 1: about really perfect communication. If you read some of the
Speaker 1: FED minutes from his time as chairman, the discussions are
Speaker 1: all about how to convey exactly the right way in
Speaker 1: their you know, in their statements and in their communications.
Speaker 1: What they were trying to achieve because of course back
Speaker 1: then they didn't they didn't announce what the FED funds
Speaker 1: target was. You know, they just it's sort of they
Speaker 1: would do it the open markets of desk would uh
Speaker 1: would make it happen. They did announce the discount rate,
Speaker 1: but it was it was a lot of it was
Speaker 1: just communication. So, um, he's a he was a great
Speaker 1: word smith, a great communicator, really cared about how to
Speaker 1: tell the story, had a lot of stories to tell,
Speaker 1: didn't really want to focus mostly on the inflation episode.
Speaker 1: That was one chapter for him of a career that's
Speaker 1: full of amazing chapters. And uh, it was just delightful
Speaker 1: and uh he he and I worked on it really quickly,
Speaker 1: got it done in I guess less than a year,
Speaker 1: which is really impressive. Yeah, and um, but you know,
Speaker 1: he was a motivated guy who's very disciplined, so you know,
Speaker 1: and then unfortunately he got sick right towards the end
Speaker 1: um and and was died a year after he came out.
Speaker 1: So it's really sad because you know, he would he
Speaker 1: would have a lot to say today. But I think
Speaker 1: in a way he knew that his lessons would be
Speaker 1: a value to people in many ways going forward, and
Speaker 1: so he tries to he tries to impart them as
Speaker 1: as clearly and uh and impact as he can. And
Speaker 1: I want to get to all those things, but I
Speaker 1: want to ask you one more question about the actual process,
Speaker 1: because I really like the stories about his childhood right
Speaker 1: at the start of the book and how I think
Speaker 1: there was one story about how he had this allowance,
Speaker 1: that it was the same amount he was getting weekly
Speaker 1: or monthly that his sister's years beforehand had been getting,
Speaker 1: and what that taught him about inflation. Um. And then
Speaker 1: I think later on in the book he mentioned something
Speaker 1: like he had been pulling out files specifically for the book,
Speaker 1: and he was surprised by the things and that he
Speaker 1: found in the notes that he had scribbled in the margins.
Speaker 1: So maybe you can just talk a little bit more
Speaker 1: about the process and what it was like where he
Speaker 1: you know, for him to be digging out this these
Speaker 1: historical documents. Yeah, I mean it was great fun because
Speaker 1: not only did he have documents that either had been
Speaker 1: sent to him by people he had grown up with,
Speaker 1: or you know, he'd sort of come across at some point, um.
Speaker 1: But occasionally I would come up with something, uh that
Speaker 1: you know, he may have over booked and uh, and
Speaker 1: so he was always delighted when something came. And and
Speaker 1: there were also some stories he told me in our
Speaker 1: discussions that I recorded that when I said, oh, should
Speaker 1: we tell this story, he'd say, no, let let's leave
Speaker 1: that one. So uh yeah. And actually one of the
Speaker 1: funniest moments, um, right towards the very end of writing
Speaker 1: the book, Um, I think actually we'd already it was
Speaker 1: already in galleys, it was pretty far along. And uh.
Speaker 1: He I was in his study in his apartment and
Speaker 1: he said he had like a first edition of like
Speaker 1: Canes or something in his in his library there. And
Speaker 1: so I was looking around on the bookshelf trying to
Speaker 1: find it, and I couldn't find it. But I found
Speaker 1: this other slim volume which was an economics textbook from
Speaker 1: the nineteen twenties or maybe even before, I think maybe
Speaker 1: the nineteen tents that had been his his mother's textbook
Speaker 1: in college. And and it was filled with MARGINALI if
Speaker 1: they note she had written and he if you'd ever
Speaker 1: realized he had it, he had totally forgotten about it.
Speaker 1: So he was sort of you know, discovering this I
Speaker 1: had handed it to him. We were looking at it. It
Speaker 1: It was amazing and uh, from her time advassaor advassor exactly,
Speaker 1: and it was I think the FED had not been created.
Speaker 1: It was like really amazing and so um. So one
Speaker 1: of the notes she'd written to herself was about how
Speaker 1: psychology was the real key to so much of what
Speaker 1: was happening in what happened in economics and finance, and uh,
Speaker 1: and I think that really was kind of a eye
Speaker 1: opener because he credits his father a lot with his
Speaker 1: interests in public service, but he also credits his mother
Speaker 1: as having been quite interested in markets and quite smart
Speaker 1: about them, and he quotes her a few times in
Speaker 1: the book. But we ended up adding this little bit
Speaker 1: about his mother's economics textbook and her note to herself
Speaker 1: about how psychology was really important, because, of course, if
Speaker 1: you look at what Volker did during his career, he
Speaker 1: really understood the psychology of investors, the psychology of consumers
Speaker 1: and business people, and so much of what he did
Speaker 1: in the inflation fight was basically around changing the psychology.
Speaker 1: So it was cool to realize that his mother kind
Speaker 1: of knew that too. That's that's pretty amazing. Yeah, setting
Speaker 1: the expectations, I guess is so important for a central pak.
Speaker 1: But I became fascinated with his father a little bit too,
Speaker 1: because Christine, I think you and I both sort of
Speaker 1: cut our teeth in journalism covering you know, small towns,
Speaker 1: small municipalities in uh Pennsylvania and I was in Pennsylvania
Speaker 1: for a while. In New Jersey, I know, I think
Speaker 1: you were in good old Delco outside of Philly for
Speaker 1: a while. Yeah. And and so Paul's father was a
Speaker 1: like a town manager. And I'm not sure if if
Speaker 1: everyone appreciates in these small towns how that works. You
Speaker 1: have a sort of a part time, you know, unpaid
Speaker 1: or lowly paid counsel and a lowly paid mayor, and
Speaker 1: then you bring in a manager who was supposed to
Speaker 1: be non political at all, and that was that was
Speaker 1: fulkers father, I guess in what in Cape may and
Speaker 1: in te Neock, New Jersey, a few other towns. Actually.
Speaker 1: Vildanna might know this from having read the acknowledgements, because
Speaker 1: he he does say in that his very very kind
Speaker 1: of words about me at the end of the book
Speaker 1: that I actually thought his father was the real hero,
Speaker 1: because I did become fairly obsessed with his father. The
Speaker 1: more I learned about his father, his father was a
Speaker 1: huge deal in New Jersey. And it was because so
Speaker 1: his father was the son of German immigrants, grew up
Speaker 1: in Brooklyn studying engineering, became an engineer, worked on the
Speaker 1: Erie Canal, met Fulker's mother up in the town on
Speaker 1: the Erie Canal, but then ended up discovering that there
Speaker 1: was this interest in kind of city managers, right, like
Speaker 1: these professionalized city managers, because you know, that was the
Speaker 1: era of like total corrupt in I mean, American politics
Speaker 1: had gotten into the cess pool. I mean, you know,
Speaker 1: you can argue, but I mean it was all crony
Speaker 1: ism all and so somehow, like New Jersey had passed
Speaker 1: this law allowing these like city managers to be appointed
Speaker 1: to be kind of professionalized the way cities were run.
Speaker 1: And Paul Volker Sr. Was the first ever in New Jersey,
Speaker 1: first in Cape May and then eventually in Neck, and
Speaker 1: he had a remarkable effect on these communities. It was
Speaker 1: really an incredible turnaround stories. And so I was very
Speaker 1: keen on sort of opening the book because actually when
Speaker 1: Paul would talk to me about the book, one of
Speaker 1: the key points he wanted to make was about public service.
Speaker 1: This was his real mission at the end of his life,
Speaker 1: is trying to professionalize and better educate people for public administration.
Speaker 1: He cared a lot about it, and that's what the
Speaker 1: Vulgar Alliance he founded is dedicated to. And it was
Speaker 1: all really what his father had taught him. Yeah, well
Speaker 1: I was gonna, I was gonna. Does that? Do you
Speaker 1: think that influence of his father sort of having to
Speaker 1: be above the politics and you know, non non political
Speaker 1: played an influence on how he approached the FED being
Speaker 1: you know, the same thing basically outside of politics. Yes,
Speaker 1: I mean, I think in all ways, but you know,
Speaker 1: like I think when people think about Paul Volker, they
Speaker 1: think of him as somebody who could kind of, you know,
Speaker 1: see every side of the political argument and stay kind
Speaker 1: of above it um. But also in the way that
Speaker 1: he sort of believed in a certain humility and sort
Speaker 1: of not not seeing himself as above the people. Right Like,
Speaker 1: So his father, you know, gave himself a pay cut
Speaker 1: during the depression, you know, spent weekends going out and
Speaker 1: meeting with the families of all the city workers, whether
Speaker 1: they were the you know, uh, sanitation workers or whatever.
Speaker 1: It just like didn't matter. He was very you know,
Speaker 1: sort of engaged in in this sort of very you know,
Speaker 1: uh democratic with a with a small d way with
Speaker 1: the people. And I think that was also something that
Speaker 1: Paul Walker brought to, you know, the his belief in,
Speaker 1: like you know, being a certain basically kind of a
Speaker 1: servant to the to the people more than like a ruler,
Speaker 1: you know. I mean, so he was above politics, but
Speaker 1: he always you know, saw himself as sort of there
Speaker 1: to serve. And Mike mentioned that you have this piece
Speaker 1: out in Business Week that recaps a lot of what
Speaker 1: what we were just talking about and what's in the book,
Speaker 1: But maybe you can just lay out for us what
Speaker 1: the environment was like back then when he became FED
Speaker 1: chair and and what some of the comparisons are to
Speaker 1: what we're seeing today because we had high oil prices.
Speaker 1: I think it's one of the main things he had
Speaker 1: been talking about. So maybe just lay out the the environment. Yeah. Yeah,
Speaker 1: So he came he was appointed by Jimmy Carter to
Speaker 1: be FED chair at this period of horrible inflation in
Speaker 1: nineteen seventy nine. Really things have gotten out of control.
Speaker 1: You've had a huge energy um crisis with you know,
Speaker 1: there was a big issue with the Saudis and the
Speaker 1: other Arab states and uh, and so nobody had been
Speaker 1: able to deal with the inflation problem. There was also
Speaker 1: quite a lot of power in the labor unions back then,
Speaker 1: so um, uh, the negotiations for you know, wages were
Speaker 1: much different from I think they are today, So that
Speaker 1: I think is a difference. But um, but yeah, it was.
Speaker 1: I mean the inflation problem was much more entrenched back then.
Speaker 1: It had been going on through most of the seventies. Uh.
Speaker 1: It had people that sort of failed to recognize during
Speaker 1: the late sixties and early seventies how much the war
Speaker 1: spending had was contributing to inflation, the war, Big Vietnam, um.
Speaker 1: And there were just a lot of factors, you know,
Speaker 1: even the role that M. Vulker was involved in taking
Speaker 1: the dollar off the gold standard at the beginning of
Speaker 1: the seventies under Nixon, and that played a role. I mean,
Speaker 1: basically the dollar was no longer anchored to you know
Speaker 1: old Um. So there was this you know, decade long
Speaker 1: kind of you know creep in in prices, and it
Speaker 1: had gotten so that people just assumed prices were going
Speaker 1: to go up double digits every year, and his predecessors
Speaker 1: that FED chairman had basically kind of thrown up their hands.
Speaker 1: They didn't know how to do anything about it because
Speaker 1: every time they would try to start raising prices, you know,
Speaker 1: they'd get all this pushback, or try raising interest rates,
Speaker 1: they'd get a lot of pushback, so much political opposition
Speaker 1: for obvious reasons. There was you know, um law passed
Speaker 1: in Congress which known as uh, you know now the
Speaker 1: dual mandate. They talked about it, which was sort of
Speaker 1: required the Fed to make employment one of its goals
Speaker 1: as well as price stability. So um, you know, when
Speaker 1: Volker became FED chairman, he knew he'd been New York
Speaker 1: Fed President that the problem he needed to address was inflation.
Speaker 1: He told Jimmy Carter that when he went to meet
Speaker 1: with him, he thought maybe that prevent him from getting
Speaker 1: the job, because he said, I'm going to raise rates
Speaker 1: a lot, and Jimmy Carter appointed him anyway, and he
Speaker 1: really admired that Carter did that because it you know,
Speaker 1: he thinks it contributed to him only being a one
Speaker 1: term president. But um, but he he went, he came
Speaker 1: into the role saying, inflation is the job I have
Speaker 1: to focus on I'm going to ignore all the other factors.
Speaker 1: You know, he said, the Fed economists at the time,
Speaker 1: we're telling him they were the economy was about to
Speaker 1: go into recession, but he kind of just disregarded them,
Speaker 1: and uh, and he had to, you know, raise rates
Speaker 1: as as strongly as he could. One thing I think
Speaker 1: is underappreciated, Christine that I've I've really come to realize
Speaker 1: by by reading the book is that, um, so much
Speaker 1: focus was on that aggressive campaign to to raise rates.
Speaker 1: I mean sometimes would be a few rate hikes within
Speaker 1: a few weeks, right, I mean they were. They were
Speaker 1: very fast and aggressive about it. But there's also the
Speaker 1: notion of he sort of embraced to some extent the
Speaker 1: ideas of Milton Friedman and the so called monitorists, you know, uh,
Speaker 1: the idea that's to control inflation, you also had to
Speaker 1: sort of control growth of the of the monitor money supply.
Speaker 1: UM and he he referred to it as practical monitorism.
Speaker 1: So I wonder if you could talk a little bit
Speaker 1: about what that means. But also, you know, I I
Speaker 1: get there the impression that he maybe wasn't sure what
Speaker 1: exactly the role that played in taming in inflation. Compared
Speaker 1: to the interest rate increases. You know that from one thing,
Speaker 1: it's just so hard to measure the supply of money.
Speaker 1: He ran in some difficulties with that. But but talk
Speaker 1: us through what you think, you know, the legacy of
Speaker 1: that sort of part of his inflation fighting campaign is
Speaker 1: you know, was that was that an important part of it?
Speaker 1: Do you think? Yeah? Absolutely? But I think that goes
Speaker 1: back to the stuff we were talking about with his
Speaker 1: his mom and the whole psychology thing. Because when he
Speaker 1: was earlier in his career, when the idea of monetorism
Speaker 1: was first being introduced by Milton Friedman and other people, Um,
Speaker 1: the idea was much more mechanistic. It was sort of
Speaker 1: that the to the degree that there should be a
Speaker 1: fed at all, you know, and some people didn't even
Speaker 1: believe you needed a group of human beings. It should
Speaker 1: just be about figuring out what the optimal supply of
Speaker 1: money in the economy was to prevent inflation, but also
Speaker 1: to allow the economy to grow and just keep that supply,
Speaker 1: you know, steady, and make sure it didn't get you know,
Speaker 1: beyond that and and and nothing else. No other human
Speaker 1: judgment should be involved. It should be like automated basically.
Speaker 1: And obviously, you know, when he was early in his
Speaker 1: career at the New York Fed, nobody he worked with
Speaker 1: agreed with that, right, and there are a bunch of
Speaker 1: people were against central banks. So he was kind of
Speaker 1: raised with this, this is a foolish idea. Monitorism is
Speaker 1: kind of you know, crazy, and it won't work. When
Speaker 1: he got to be FED chair it's actually interesting looking
Speaker 1: at some of the correspondence. I have some of it
Speaker 1: where ah, he's writing to Milton Friedman actually after he
Speaker 1: was appointed FED chairman and sort of hinting that you know,
Speaker 1: he may, you know, he may do some things that
Speaker 1: that Freeman would agree with, but he was sure Freedman
Speaker 1: was still criticize him. I think what he knew going
Speaker 1: into the job was that what they were doing wasn't
Speaker 1: really working right. So just like setting interest rates higher
Speaker 1: and higher, because as long as you were able to,
Speaker 1: as long as politicians and everybody could see human beings
Speaker 1: were setting these interest rates, there was always going to
Speaker 1: be pushed back. They're always gonna be human beings who
Speaker 1: couldn't stomach it, right. So in the second time they
Speaker 1: raised rates when he was FED chairman, there was a
Speaker 1: split on the on the committee, and he he was
Speaker 1: confident that the four people who were voting for higher
Speaker 1: rates would keep doing it. But he realized the market
Speaker 1: wasn't convinced, so he had to do something different. So
Speaker 1: he basically used monitorism as kind of a tool. So
Speaker 1: he didn't employ it in the pure way that the
Speaker 1: real monitorism monitors would have wanted. He just basically used
Speaker 1: it as a psychological crutch. So he the Saturday Night
Speaker 1: Special October six ninety nine, called This Saturday Press Conference,
Speaker 1: announced a series of changes, including a rate increase and
Speaker 1: a whole bunch of, you know, different factors, but the
Speaker 1: main thing was from now on, we're gonna we're gonna
Speaker 1: target the money supply. And what that essentially did is
Speaker 1: it sort of tied their hands. It said to it
Speaker 1: said to the market. You know, it's not us human
Speaker 1: beings who are gonna be setting interest rates anymore. We're
Speaker 1: just gonna focus on the money supply, and the interest
Speaker 1: rates will do what they do. You know, we're gonna
Speaker 1: work up, but we're gonna focus on the quantity of money,
Speaker 1: not the price of money. The price of money, you
Speaker 1: know what it'll do, what it does, you know, interest
Speaker 1: rates will do what they do. So they had this
Speaker 1: idea that they would have an upper limit and that
Speaker 1: they would revisit it. You know, if rates got to
Speaker 1: an upper limit, they would look at it. And it
Speaker 1: kept getting to the upper limit, and they kept saying, Okay,
Speaker 1: we gotta let it go, we gotta let it go.
Speaker 1: He says in the book that if he had realized
Speaker 1: that at the outset how high rates had would get,
Speaker 1: he might not have been able to do it. And
Speaker 1: so I think that's a sign of how successful that
Speaker 1: strategy was, because if he had had to, as a
Speaker 1: human being, vote for those kind of interest rates, he
Speaker 1: would have found it too difficult. But when he was
Speaker 1: able to say, this is not our decision, it's what's
Speaker 1: happening because of our money supplied decisions, it was it
Speaker 1: was a little easier to stomach. So it was purely
Speaker 1: it was kind of like used as a psychological trick,
Speaker 1: and then they abandoned it as soon as they found
Speaker 1: it kind of inconvenient. So it wasn't ever pure monetorism.
Speaker 1: But that's why he calls it practical monitorism. Maybe one
Speaker 1: thing that we can't get out of the book is
Speaker 1: the maybe uncertainty that he had felt, or unease or
Speaker 1: confusion or I don't even know us any any words
Speaker 1: that are synonymous with that. And possibly he told you
Speaker 1: about that time period and what it actually felt like
Speaker 1: for him to be working through. Can you talk about that? Well,
Speaker 1: it's funny, he he he was a little unwilling to
Speaker 1: really engage. I mean, there are there are some biographies
Speaker 1: that have been written about him, will which tell stories
Speaker 1: about how like when he got nervous, he would go
Speaker 1: to the men's room a bunch of times or things
Speaker 1: like that. You know, so, I mean he definitely felt it,
Speaker 1: but at the point when I was working with him,
Speaker 1: he kind of he a little bit sort of you know,
Speaker 1: brushed it aside. But even so I could still tell,
Speaker 1: even at age ninety, it was still it was still
Speaker 1: weighing on him whether he'd really he felt the criticisms
Speaker 1: that are still leveled at him today from like people
Speaker 1: on the left or people on the right that you know,
Speaker 1: there would have been another way, and so he wrestled
Speaker 1: with that. I remember, you know, there's a famous book
Speaker 1: called Secrets of the Temple by William Prider, right, he
Speaker 1: was reading it when I was working with him. He
Speaker 1: was like he would he would talk to me about stuff.
Speaker 1: He was reading these criticisms and how he didn't just
Speaker 1: he didn't agree with them, but like he wasn't he
Speaker 1: wasn't ignoring them. And I thought that was really interesting
Speaker 1: because he still you could still tell that he wished
Speaker 1: there had been another way. He felt the pain that
Speaker 1: he had caused. He struggled with it, but ultimately he couldn't.
Speaker 1: He couldn't think of any other way, and he understood
Speaker 1: that the value that bringing down inflation had for the
Speaker 1: for the people. And you know, it's interesting. I think
Speaker 1: ever since the FED was created, there's there's been a
Speaker 1: backlash against the FED and sort of critics and uh
Speaker 1: and the FED or on the FED type of people.
Speaker 1: But boy, that really reached a fever pitch during his chairmanship.
Speaker 1: Could talk to us a little bit about some of
Speaker 1: the protests and some of the backlash that he faced. Yeah, no,
Speaker 1: he I mean he had the so the farmers who
Speaker 1: you know, rely on borrowed money for planting their crops.
Speaker 1: They surrounded the FED headquarters with tractors at one point.
Speaker 1: The home builders who you know, because mortgage rates eventually
Speaker 1: got up beyond above like eighty they all were sending
Speaker 1: two by fours to to the FED with like angry messages. Um,
Speaker 1: you know, his speeches would be interrupted by screaming protesters.
Speaker 1: He apparently once somebody released rats in the audience of
Speaker 1: one of his speeches. I mean, whenever I would bring
Speaker 1: these things up, he would sort of go like, oh,
Speaker 1: it was a bunch of Linden LaRouche fans. Like he
Speaker 1: he sort of brushed it off as like, you know,
Speaker 1: that wasn't what the people really felt. And I get security, right,
Speaker 1: and he had to. I mean, yeah, he didn't even
Speaker 1: remember this. I found this in some of the documents
Speaker 1: in the in the Vulgar archives, like the letters that
Speaker 1: were written to him by the you know, the FED
Speaker 1: and Security Department saying we have to get you personal. Yeah,
Speaker 1: he's he was a tall guy, really imposing and actually
Speaker 1: a really fascinating thing is that I found this story
Speaker 1: from about a year after You got the Bodyguard, about
Speaker 1: this armed man who went into the headquarters of the FED.
Speaker 1: I think he was carrying a knife in a gun
Speaker 1: or something. He was he was angry about inflation and
Speaker 1: interest rates, and he uh, luckily didn't get near any
Speaker 1: of the FED people, but he was he was arrested,
Speaker 1: but I found it that same guy later ended up
Speaker 1: killing somebody like you, I mean after he got there
Speaker 1: to jail. Yeah, I think he was a guy who
Speaker 1: killed the security guard in front of the like Holocaust
Speaker 1: Museum or something, you know, down to d C anyway.
Speaker 1: So I mean, yeah, there were there were threatening situations,
Speaker 1: but like you know, he Vulker didn't really like to
Speaker 1: dwell on that because I don't think he ever felt
Speaker 1: he was in danger. He always felt people made too
Speaker 1: much of it. And I think one of the most
Speaker 1: interesting things is that when he was FED chair, you know,
Speaker 1: a group of five protesters showed up at one point
Speaker 1: outside and his um, you know, pr people were like,
Speaker 1: you know, what should we do? Will send them away?
Speaker 1: And he said, no, I actually bring bring some of
Speaker 1: the leaders into my office. And so, you know, I
Speaker 1: don't know how many people would do that today, just
Speaker 1: sort of spontaneously said let these strangers in, but he did,
Speaker 1: and a whole group of people were in his office
Speaker 1: debating it with him, and he ended up on the
Speaker 1: steps of the FED after is giving a sort of
Speaker 1: impromptu press conference with the leader of this UH National
Speaker 1: People's Action Group, I think it was called. So, um,
Speaker 1: he didn't he didn't shy away from engaging with people
Speaker 1: even though clearly people were really angry. And what about
Speaker 1: the view of what he and the FED were doing
Speaker 1: outside of the US, because I know he talks a
Speaker 1: lot about meeting with his counterparts in Germany and Japan
Speaker 1: and going through Europe on these like three or four
Speaker 1: day trips, and so what was the view outside? Yeah,
Speaker 1: so as you as you saw in the book, I mean,
Speaker 1: he early in his career was working in the Treasury
Speaker 1: Department under Nixon, and he spent a lot of time
Speaker 1: traveling around the world, including having to explain to all
Speaker 1: of our you know, allies around the world, what why
Speaker 1: we're going off the gold standard. So he had really
Speaker 1: good relationships with people in Germany and in Japan, in
Speaker 1: you know, the UK, Italy, So he was kind of
Speaker 1: like a monetary diplomat in a way. And when he
Speaker 1: was owing to try that before he did the Saturday
Speaker 1: Night specially went to Belgrade for a big I m
Speaker 1: F conference and and Burns gave a lecture there about, um,
Speaker 1: you know, how central bankers could no longer do anything
Speaker 1: about inflation. But by that time already Bulker had met
Speaker 1: with the German I think chancellor and central bankers, and
Speaker 1: they were they were going crazy that the US had
Speaker 1: allowed inflation to get so out of control, and they
Speaker 1: felt like the dollar was too weak and had to
Speaker 1: do something. So they were they were desperate for him
Speaker 1: to do something, and he sort of basically said, don't worry,
Speaker 1: I'll get it under control. So he got He He
Speaker 1: cared a lot about our relationships overseas as well as
Speaker 1: you know, what was happening domestically. One thing I think
Speaker 1: is fascinating when when we think a vulcar in this
Speaker 1: day and age in this sort of an inflation, I
Speaker 1: don't know if you call it a crisis, but an
Speaker 1: acute problem that we have with inflation. All you ever
Speaker 1: hear about is uh, you know this inflation fighting efforts
Speaker 1: uh that he had. But you're reading the book, it's
Speaker 1: it's fascinating how many other fires he had to put
Speaker 1: out along the way. You know, I didn't appreciate how
Speaker 1: involved he was with the Chrysler restructuring, for example, But
Speaker 1: what do you think, what what would he rank sort
Speaker 1: of his legacy of some of those other issues he
Speaker 1: dealt with. You know, the the lad Am debt crisis.
Speaker 1: And uh, I was fascinating to learn that the idea
Speaker 1: of too big to fail actually dates back to his time.
Speaker 1: So what you know, talk to us about some of
Speaker 1: those other fires that he put out. Yeah, well, I mean,
Speaker 1: I think you know, his his earliest one was the
Speaker 1: one I just mentioned about, you know, the taking the
Speaker 1: dollar off the gold standard. That was a gigantic moment
Speaker 1: in this country's history. Uh, when Nixon decided to sever
Speaker 1: that link and and and that was a huge crisis
Speaker 1: in its own way, and Vulker was read at the
Speaker 1: center of it, within Secretary of the Treasury John Connolly,
Speaker 1: and he has some great stories to tell about that.
Speaker 1: So he'd sort of already like become this crisis hardened
Speaker 1: person by the time he got to the Fed UM.
Speaker 1: So inflation, you know, was job one. But the result
Speaker 1: of higher interest rates, as I think some people in
Speaker 1: the markets now are worried about as well, is that
Speaker 1: there are often if you've had a period of easy money,
Speaker 1: there are often a lot of bubbles that are forming,
Speaker 1: and then when race go up more than people are
Speaker 1: really ready for, you know, accidents happen. And so you
Speaker 1: see in the book. Uh, this section on fighting inflation
Speaker 1: basically the experiment with monetarism and all that, and then
Speaker 1: you see the sort of catastrophes that resulted and how
Speaker 1: he had to clean them up. Right, So you mentioned, uh,
Speaker 1: you know, well Chrysler was sort of a little separate,
Speaker 1: but but you had a Continental Illinois, which was a
Speaker 1: huge bank which had exposure to these speculative oil loans
Speaker 1: that this bank Pin Square had originated at Pin Square
Speaker 1: went under first, Pennsylvania Bank had to be rescued. Uh,
Speaker 1: you had the savings and loan crisis. A few years later. Um,
Speaker 1: you had the Hunt Brothers, which is great, you know,
Speaker 1: a story of just these billionaire brothers who had speculated
Speaker 1: on silver because of of course silver would never stop
Speaker 1: going up because inflation was never going to get under control,
Speaker 1: and then when raids went up, they couldn't meet their
Speaker 1: margin calls. So all these brokers started calling the FED
Speaker 1: would help us, help us, and he had to get involved,
Speaker 1: even though you didn't think the FED should be involved
Speaker 1: in that. Um, but yeah, he he discovered the dangers
Speaker 1: that the financial system, you know, it has embedded in it.
Speaker 1: And then of course the biggest one was the US
Speaker 1: and European banks had these huge loans to Latin American
Speaker 1: countries funded by all the petrol dollars from the oil
Speaker 1: rich Middle East, and and they these Latin American countries
Speaker 1: were no longer going to be able to pay them back.
Speaker 1: And in some cases these loans were more than twice
Speaker 1: the you know, capital of the bank, so they were
Speaker 1: going to go under. So I think ultimately it was
Speaker 1: what really caused Volker and the FED to stop the
Speaker 1: inflation fight was they had to rescue the banks. And so,
Speaker 1: you know, I think one thing to watch today is whether,
Speaker 1: you know, we find ourselves in a similar situation. If
Speaker 1: you read the end of the book, he talks about
Speaker 1: like the biggest risk that the biggest caution he has
Speaker 1: for central bankers is not only don't let inflation get
Speaker 1: out of control, but don't let the speculation that goes
Speaker 1: with inflation get out of control, because the combination of
Speaker 1: you know, out of control monetary policy and out of
Speaker 1: control financial speculation is the most damaging potential thing to
Speaker 1: the to the economy. Well, let's talk a little bit
Speaker 1: more about today, because you wrote in the Business Week piece,
Speaker 1: uh to see the challenge ahead for Powell it's useful
Speaker 1: to revisit Vulcar's bumpy path to victory. And then I remember,
Speaker 1: I think it was at the Jackson Hole meeting a
Speaker 1: couple of months ago that Powell used a phrase that
Speaker 1: everybody recognizes being the title of your book, which was
Speaker 1: that they were going to be keeping at it. And
Speaker 1: I think a lot of people were trying to make
Speaker 1: that connection between Powell and Vulker. So can you talk
Speaker 1: about maybe some of the lessons or what actually is
Speaker 1: happening today that although I like the wise old parrot,
Speaker 1: I wish they would have gone with that. Um. Yeah,
Speaker 1: So I mean, so you know, uh, when I would
Speaker 1: talk to Volker about who should be fed chair um
Speaker 1: at the time, when like Trump was considering new alternative,
Speaker 1: always expressed, uh, his view that having had himself experienced
Speaker 1: in the private sector and in Treasury Department, that having
Speaker 1: that kind of practical experience outside of academia he thought
Speaker 1: was incredibly valuable and important. And so he was a
Speaker 1: big supporter of somebody with J. Powell's background because he
Speaker 1: thought that brings you a little more more in touch
Speaker 1: with sort of the effects of monetary policy and a
Speaker 1: little less less focused on the theory. So I think
Speaker 1: when you look at today, um, he would be encouraged
Speaker 1: that Powell is in the spot. He he would be
Speaker 1: very upset, and he expresses this in the book. Even
Speaker 1: before some of the later experiments with you know, sort
Speaker 1: of inflation targeting, he thought it was always a mistake
Speaker 1: for central banks to be like trying to create two
Speaker 1: percent inflation. He didn't understand what that was. He he
Speaker 1: thought that was a mistake and they were playing with fire,
Speaker 1: and of course it turns out they were. Um, I
Speaker 1: think he would be glad that, you know, Powell is
Speaker 1: talking a lot about trying to be more like vulgar
Speaker 1: and uh. I think he would just be concerned that,
Speaker 1: you know, some of the speculation that we saw, especially
Speaker 1: like if you think about one how crazy things got.
Speaker 1: I feel certain that if he had been alive during that,
Speaker 1: he would have been ringing the alarm bells pretty loudly. Um,
Speaker 1: So he would I think he'd be disappointed that the
Speaker 1: Fed hadn't kind of figured it out. Um. So Yeah,
Speaker 1: it's just a fascinating book, Christine. There's so many little
Speaker 1: anecdotes that I love, like when he noticed on his
Speaker 1: driver the front seat of his driver's car. There's a
Speaker 1: book called How to Live with Infliction, And and he
Speaker 1: said that he knew he had he was on the
Speaker 1: right path because the driver said, well, the ownerson I
Speaker 1: bought it was the price was reduced from like ten
Speaker 1: bucks to two bucks. But some of his uh and
Speaker 1: I think we're gonna segue to the crazy things soon.
Speaker 1: But a good segue for that is for me to ask,
Speaker 1: which I think is admittedly a crazy question. Uh. So
Speaker 1: I'm gonna go ahead and do that. But he's some
Speaker 1: of his his wit is very self deprecating. You know,
Speaker 1: he talks about being a procrastinator, and he often makes
Speaker 1: jokes about his height, Um, you know, six seven. Honestly,
Speaker 1: I gotta wonder if being such a big, imposing figure
Speaker 1: was an asset to him when sort of history needed
Speaker 1: this sort of very strong character. It might crazy to
Speaker 1: think that. No, I don't think so. I mean he
Speaker 1: had he had, I don't think. I'm not sure he
Speaker 1: would have admitted this, But look at he really played
Speaker 1: a character, right, he had that he had the whole
Speaker 1: cigar thing. You know, he quit smoking by the time
Speaker 1: I knew him, but he would sit there and testify
Speaker 1: and smoke the cigar, and he was incredibly tall. He
Speaker 1: had the deep voice, and he had this this air
Speaker 1: of authority, and I think he knew that that was
Speaker 1: you know. I mean again back to his father. His
Speaker 1: father had basically ruled this city and gotten it into shape.
Speaker 1: And his father was just as tall um. So I
Speaker 1: think I think he understood against the psychology of you know,
Speaker 1: how to assert authority, how to how to you know,
Speaker 1: he'd watch the politicians he'd worked with. He'd watch John
Speaker 1: Connolly out fox some of the other people in the
Speaker 1: Nixon administration. He was quite a quite astute student of
Speaker 1: people and how they are effective and how they aren't effective.
Speaker 1: He knew what he was that psychological effect of a
Speaker 1: big six seven cigar chopping, you know. But it reminds
Speaker 1: me of those old memes used to see of you know,
Speaker 1: a graph of interest rates and the height of the
Speaker 1: Fed chairman. You know, it went from Vulker to Janet
Speaker 1: Yellen being the shortest. That's sure enough. Here we are,
Speaker 1: uh with Powell, you know, and rates are going back up.
Speaker 1: So yeah, maybe there's something to it. But that's the
Speaker 1: craziest question I had. But I'm glad you played ball
Speaker 1: with that I'm not not as crazy have a question
Speaker 1: as I thought it was. I guess no, No, there's
Speaker 1: there's a great story that I once heard Bill Bradley,
Speaker 1: the former New Jersey Senator, tell about how he remembered
Speaker 1: when you know, Paul Wolker used to go back to
Speaker 1: New York City every weekend. You know, his wife still
Speaker 1: lived in New York. So, uh, Bill Bradley would be
Speaker 1: going back to New Jersey for the weekend, and and
Speaker 1: they'd get on the shuttle, which you know doesn't really
Speaker 1: exist in the same format anymore, but the Washington the
Speaker 1: plane that went from Washington New York, like on the hour,
Speaker 1: and they would just go and they'd sit an economy
Speaker 1: class on Friday night or Friday afternoon and get like,
Speaker 1: you know, they'd be like seat you know, you know,
Speaker 1: huddled up with their knees in the chest and you know,
Speaker 1: surrounded by other people. And yeah, it was just a
Speaker 1: different time. Another Princeton basketball playing exactly right, even taller
Speaker 1: than Paul. Great stuff, Christine. We really appreciate your time.
Speaker 1: And again I can't recommend this book us as strongly
Speaker 1: as I can. I mean, it's such an important look
Speaker 1: at period of history. That I think is is very
Speaker 1: echoing loudly these days. So we appreciate your time, but
Speaker 1: we're not gonna let you go until we hear the
Speaker 1: craziest thing you've seen in markets recently. So I think
Speaker 1: we'll start with you though. I have a pretty good one, okay,
Speaker 1: but you usually do. It's Elon musk related. Oh no, no,
Speaker 1: there's nothing crazy. But I think we might have the
Speaker 1: same one. Oh no, I hope not. But he's done
Speaker 1: so many things this week that honestly, it's it's possible.
Speaker 1: That's anyway. He's promoting a new perfume, same one, you
Speaker 1: have the same one. Shoot, but it's so good? Is good? Okay?
Speaker 1: He said, it's called this is so disgusting burnt hair.
Speaker 1: It's the essence of repugnant desire. It's a hundred dollars
Speaker 1: a bottle, and he tweeted, of course, that ten thousand
Speaker 1: bottles had already been swailed. And I don't know, I mean,
Speaker 1: I guess this is really happening. He's not joking around.
Speaker 1: I I it's you've never done with this guy, like
Speaker 1: the shorts, remember he sold shorts to try get short sellers,
Speaker 1: and also the flamethrower the flamethrower, and he said something
Speaker 1: to the effect of, uh, with with my last name,
Speaker 1: it was inevitable that I'd get into men's per clone.
Speaker 1: That's good, That's really good. Okay, well us, but I
Speaker 1: was gonna I was gonna do prices precise on the
Speaker 1: dollar value of the bottles of bottle. I shouldn't have
Speaker 1: said it for for burnt hair perfume. Maybe he's put
Speaker 1: those flamethrowers to work to get that sent possibly. Alright, well,
Speaker 1: great minds think alike, I guess, or even even you
Speaker 1: and I occasionally, how about you, Christine, what's the craziest
Speaker 1: thing you've seen recently? Nothing quite as crazy? I mean,
Speaker 1: I just I'm watching very closely what's happening with the
Speaker 1: UK Central Bank, having lived in London and and having
Speaker 1: a lot of friends over there, and watching the b
Speaker 1: o E trying to tell people on the one hand
Speaker 1: that they're going to support, you know, whatever happens. On
Speaker 1: the other hand, you only have a few days to
Speaker 1: clean it all up, and so so I think that's
Speaker 1: as crazy as it's getting. But you know, I'm sure
Speaker 1: it'll be more crazy. As soon as I walk out
Speaker 1: of this booth. There'll be something crazier. Yeah, well, if
Speaker 1: you had the challenge channel Paul Volker and give advice
Speaker 1: to the BOE, what do you think he would tell him? Well?
Speaker 1: I think he you know, he dealt with his share
Speaker 1: of exchange rate crises also including helping helping Thatcher keep
Speaker 1: the pound above the dollar, so I think he would
Speaker 1: say though that You've got to deal with your domestic
Speaker 1: situation first, So I think he would he would encourage
Speaker 1: Powell to keep at it with the inflation fight and
Speaker 1: not be distracted by helping the pound out right now,
Speaker 1: probably that sounds a out right Yeah, Christine Harper, fascinating
Speaker 1: conversation and a really great book. I hope everyone in
Speaker 1: the What Goes Up book Club will go out and
Speaker 1: read it. Who was in charge of this book club?
Speaker 1: You are? I I it sounds like you want to
Speaker 1: be in charge of it. I definitely do. All right,
Speaker 1: you're you were the chair of the What Goes Up?
Speaker 1: Book Club? Then my first sort of business is kicking
Speaker 1: you out. I know it. I know it, just because
Speaker 1: I didn't finish the book. Yeah, if you bring wine
Speaker 1: to the next meeting, then you'll will be re I mean,
Speaker 1: you're putting your children first, like, I think your priorities
Speaker 1: are all mixed up. This is why you were kicked out. Well,
Speaker 1: you got to write another book, Christine, and we'll have
Speaker 1: you back. And by the way, read Markets Magazine, uh excellent, excellent,
Speaker 1: Bloomberg Periodical Keeping at It by Paul Woker and Bloomberg
Speaker 1: Markets Magazines to two must reads. That's our two must
Speaker 1: reads for the week. Thank you Christine, Thank you guys,
Speaker 1: Thank you Christine. What Goes Up. We'll be back next
Speaker 1: week and soil. Then you can find us on the
Speaker 1: Bloomberg Terminal website and app or wherever you get your podcast.
Speaker 1: We love it if you took the time to rate
Speaker 1: and review the show on Apple Podcasts, so more listeners
Speaker 1: can find us. And you can find us on Twitter,
Speaker 1: follow me at reag Anonymous. Bildanna Hirach is at Bildonna Hirach.
Speaker 1: You can also follow Bloomberg Podcasts at Podcasts. What Goes
Speaker 1: Up is produced by Stacy Wang. Thanks for listening. To
Speaker 1: see you next time.