Paul Volcker

January 24th, 2010 by Collin Canright | Filed under Political Economy.

It appears that Paul Volcker is back. With President Obama’s proposal last week for limits on banks, the former Federal Reserve Chairman and economic advisor to the president was back center stage. Obama calls the reforms the “Volcker Rule.”

Seeking Alpha, in a good round up, called it “a dramatic about face.” A friend in the financial industry tagged it  “astonishing.” Zero Hedge wrote of the event as a “revolution” with Paul Volcker taking his “rightful place.”

The Zero Hedge article, “The Volcker Revolution – Providing Some Much Needed Answers” is an especially penetrating analysis of the banking situation and financial crisis and what we can expect from Volcker and the Obama administration, based on the writer’s reading of “Financial Reform – A Framework for Financial Stability,” a paper written under Volcker’s supervision.

Personally, I take this all as a good sign. Volcker is not optimistic and self satisfied about the economic recover, nor am I. As he said in a December interview with SPIEGEL, “America Must ‘Reassert Stability and Leadership’“:

The recovery is quite slow and I expect it to continue to be pretty slow and restrained for a variety of reasons and the possibility of a relapse can’t be entirely discounted. I’m not predicting it but I think we have to be careful.

We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.

I had very much wanted 2010 to be an easier year than 2009. I realized over the holiday break that it would not be. Cash is tight in our business and with many others I know. Credit remains tight and with banks hunkered down, it likely will remain so.

We are continuing to stay positive yet realistic and to focus on sales and service. We have a strong start to the year to show for it.

One last personal note:  I started this blog with Reganomics, a post on William Greider’s book, The Education of David Stockman and Other Americans. His next book featured Volcker, and as I read Secrets of the Temple: How the Federal Reserve Runs the Country when it ran in the New Yorker, I became a fan of Volcker as well as Greider.

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