A Christian Liberal is NOT an oxymoron.

Posted by XT on January 31st, 2008 in Campaign News

For some reason, The Hotline is calling Paul Volker “Reagan’s Fed Chair“. They note that he was first appointed by Carter, but still call him “Reagan’s”. I’m a bit baffled by this. Take this explanation of Volker’s tenure as Fed Chair:

Little wonder Reagan liked Paul Volker so much. He had already made the unpopular but necessary decisions required to tame out-of-control inflation under Jimmy Carter and the inflation arc that had been building for about a decade before Carter took office was already showing signs of coming under control by the end of Reagans second year in office.

Oh, and, of course, Reagan really liked the idea that he would get the credit for the hard decisions Carter made in choosing the right person for the right job of Fed Chairman at the right time (to his political detriment) while he had to make virtually no unpopular decsions with respect to inflation and interest rates.

Except it isn’t even that. As Time Magazine noted at the time:

While Volcker was surprised at the timing [of his reappointment], he was expecting the nod, and so was Wall Street. The stock market, which not long ago dropped sharply when it seemed that Volcker might be replaced, resumed its happy rise last week. Spurred in part by the growing conviction that the Fed Chairman’s job was safe, the Dow Jones industrial average rose 46 points, its second largest weekly gain this year, and reached a record high of 1242.19.

The markets were tanking because Reagan was considering dumping Volker. Reappointing Volker gave Reagan the second largest stock-market gain of the year.

What is Volker’s opinion of why Reagan didn’t criticize him? It isn’t hard to find out:

I saw him from time to time, but I was not a close intimate of President Reagan’s. His entourage in the White House, or certainly in the Treasury, were very critical at times. They were… kind of a funny mixture. They had monetarist doctrine, supply-side doctrine, libertarian doctrine all mixed together, so some of it wasn’t terribly coherent, which helped me a bit. There was unhappiness because there was a big recession early in his term, and things were not really stable.

Volker’s action was to raise interest rates to cut the money supply in order to raise the value of money - which would stop inflation. Reagan’s action was to boost deficit spending and give tax breaks - both of which increase the money supply andtherefore reduce the value of money - which is felt as inflation. Volker and Reagan were taking opposing actions.

Time Magazine again:

Last week they were started anew by White House Press Spokesman Larry Speakes. Immediately after the banks raised the prime rate, he told reporters, “We have been asking the Federal Reserve Board to allow sufficient monetary expansion to assure noninflationary growth. Although the economy has been growing at a healthy pace and inflation remains at a low level, it appears that the money supply is not accommodating real economic growth.”

The following day the attack was picked up by Treasury Secretary Regan. In a speech to Massachusetts businessmen and community leaders, he warned that the Federal Reserve’s stringent credit policies could begin to hurt. Said he: “If the Fed continues on its tight path now, it will have an effect on November and December. Does that have us worried? You bet your life it has us worried.”

President Reagan entered the interest-rate controversy later in the week, although he was careful not to blame the Federal Reserve. Appearing before the National Association of Realtors, he took credit for the earlier recovery in housing. But then he added: “Let me assure you we are not pleased with the recent increases in interest rates, and frankly there is no satisfactory reason for them.”

Reagans fed chair? Hardly. Why would they attack Volker this way? Does The Hotline have something against Barack Obama? If not, then why try to tarnish him by associating Volker with Reagan’s detrimental policies?

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