Financial crisis in the United States is more than just fodder for newspapers and television. But thanks to those sources, I’ve come to believe that government functions upon recycled personalities and, if given a chance, recycled ideas gift-wrapped as change.
Paul Volcker is one such recycled personality now camping within Barack Obama’s presidential campaign fortress; coincidentally, the same camp that stood for change before John McCain adopted that terminology.
Commenting on a Washington Wire article from January of this year, several people suggested that they felt safer voting for Obama with an economic stalwart like Volcker advising him. However, one respondent named Dave suggests that Mr. Volcker might be “…suffering from Dr. Frankenstein syndrome and wants to kill the monster he helped create.”
Presumably that monster is an outgrowth of what economist and author F. William Engdahl describes on Globalresearch.ca as “Volcker’s shock therapy,” which made a few in the financial community immensely rich while others, Americans and foreigners, became unemployed and insolvent.
“Volcker’s shock therapy, begun in October 1979, lasted until August 1982. Interest rates shot through the roof to double digits. The US and world economies were plunged into a monster recession, the worst since World War II. Within a year, the prime rate had shot up to the unheard-of level of 21.5%, compared to an average of 7.6% for the fourteen previous years, a more than threefold rise in weeks. Official US unemployment peaked at 11%, while unofficially when those who simply had given up seeking work were counted, it was far higher,” writes Engdahl.
In The Shock Doctrine, Naomi Klein adds that this shock therapy, characterized by high interest rates, was particularly potent in the developing world where debt ballooned to levels those countries could not possibly repay, therefore priming them to be controlled by the IMF, which forced the adoption of free-market ideology — a boon for American enterprises and investors.
Like Dave, some spurn Volcker, believing his economic policy created 1930s-style havoc, but others regard him as Wall Street/greenback rescuer. All must be wondering: what would Paul Volcker advise Obama to do to overcome the current debt crisis?
“Mr. Volcker is a proponent of a strong dollar — he even supported a fixed-exchange rate, whereby the dollar would be fixed against other currencies so as to prevent a steep slide in its value,” reports Julie Satow in the New York Sun.
Furthermore, he disagrees with the Federal Reserve bailout of bankrupt financial institutions like Bear Stearns. So presumably Volcker would raise interest rates to a high, fixed amount meant to strengthen the dollar despite the likelihood of triggering a depression. Likewise, he would stop using public money to bailout broke banks. But it’s unlikely that he would increase regulation of the surviving banks.
Still, as Morris Goldstein states in an interview with Steve Weisman of the international economic policy think-tank The Peterson Institute: “The more serious the crisis the better the prospects for reform.”
With expectations of write-downs totaling over $1 trillion U.S., the crisis is indeed serious and with global backwash. As such, recovery will take years. Goldstein optimistically suggests 2009 to 2010 for a resolution; however, nothing is certain.
On the other hand, what happens between crisis and recovery will probably be determined by the good old boys, despite the “change” rhetoric in both the Obama and McCain camps.
In fact, an old adage applies here: the more things change, the more they stay the same. It is the statement all should remember when politicians promise change, volleying rhetoric as if vying to rule a country is mostly like a tennis game.