This article in yesterday’s NYT chronicled the infighting among Obama’s economic advisers, but it didn’t mention Paul Volker. I find that disturbing, because Volker is the only one who has really gotten the US out of an economic mess. Greenspan looked like he did, but it turned out that he was only postponing trouble and making it worse. Larry Summers was Bob Rubin’s deputy, when they looked great, but not it turns out that they led the changes that got us into this economic mess. We don’t really know about Geithner, but suspicions are that at the New York Fed, he was in bed with the Wall Street wizards who got us into this mess. Bernanke gets points for taking unorthodox steps at the Fed that may have prevented the financial system from imploding, but he did it by making money easier and basically making everybody happier. I’d feel better if he had made somebody hurt. I’d prefer that the bankers hurt, but if it had to be the general population, so be it. Bernanke has done smart things, but he has not done difficult things. When you mess up by overcharging on your credit cards or by making a bad investment, it’s unusual to have someone give you a billion or a trillion dollars to make it alright. Usually you have to cut back in some way. But that’s because you can print money like Bernanke does. It’s unlikely that zero interest rates are the answer to every problem.
So far, for the last several decades, nobody in government has inflicted pain on the US economy. Private citizens, of course, the leaders of our banking and investment establishment, have produced the savings and loan debacle, the tech stock bubble, the housing bubble, and then the financial system meltdown.
Volker actually got us out of the Nixon-Carter-Reagan stagflation quagmire by prescribing tough medicine for the US economy. Nobody else has had the foresight or the guts to do the same thing in response to our more recent problems.
Granted Volker is in his 80’s, but these young whipper-snappers ought to be seeking out his advise and listening to it. The NYT article intimates that Summers doesn’t have a very high opinion of anybody else’s opinions. I hope Obama listens to Volker more and Summers less.