In Monday’s New York Times there is an op-ed piece by the GREATEST CENTRAL BANKER, Paul Volcker. It seems that the man who was shuffled aside by the Obama administration found a rather curious time to question the Bernanke Jackson Hole speech. (Especially since Obama and his economic team used Volcker to establish its “street cred” and then disposed of his giant stature by turning him into “AN INVISIBLE MAN.”)
The invisibility gave way to reemergence of the man in a stinging piece in the NYT a day before a significant FOMC meeting. Volcker warns Bernanke that “at a time when foreign countries own trillions of our dollars, when we are dependent on borrowing more abroad, and when the world counts on the dollar’s maintaining its purchasing power, taking on the risks of deliberately promoting inflation would be simply irresponsible.”
If Bernanke bends to the Rogoff and others view that an inflation rate of 4%-6% would help alleviate the U.S. debt crisis the FED will be making a huge mistake. When Mr. Volcker was Fed chairman in the early 1980s, it was rumored that he viewed GOLD PRICES as his enemy for GOLD at elevated levels was indicative of the FED‘s failure. Juxtaposing the Bernanke Fed versus the Volcker Fed can be measured by the behavior by the price of GOLD.
Yes, I know that using 1980 as a baseline means that the real price of GOLD has not reached its previous high–rubbish. Gold is the barometer that the international monetary system is badly frayed and in need of responsible guardianship. The shadow cast by a monetary policy giant with practical experience will loom over this week’s two-day FED meeting.