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Ear to the Ground

Last but Not Least: Obama Taps Volcker

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Posted on Nov 26, 2008

After a series of depressing announcements, Barack Obama will finally turn to an economic adviser who wasn’t directly responsible for the current crisis or mentored by someone who was. According to a report in The Wall Street Journal, the president-elect wants former Fed Chair Paul Volcker to lead a new presidential advisory board focused on saving America from financial ruin.

According to aides, Volcker is considered too old to be Treasury secretary, but Obama wants him in the White House.

Update: It’s official. It’s difficult to say what kind of influence Volcker will actually have, since the board he will lead didn’t exist before Obama created it. If he is meant as a counterweight to Lawrence Summers and others among Rubin’s brood, he will have his work cut out for him. There are just so many filling up the Obama administration.


Wall Street Journal via Political Wire:

The panel, called the President’s Economic Recovery Advisory Board, is modeled on the Foreign Intelligence Advisory Board established by then-President Dwight Eisenhower in 1956, at the height of the Cold War, when officials worried that that the existing bureaucratic structure was inadequate to help the U.S. keep pace with the Soviet threat. The financial crisis has drawn similar worries that the government isn’t properly organized to monitor and respond to modern financial markets.

The board’s tasks will be broad: to help design and implement short-term programs to jump-start the economy, raise wages and living standards and confront the housing crisis. It will also address the delicate task of bolstering Washington’s oversight of the financial markets in the wake of a Wall Street collapse that has taken down many of its most venerable institutions.

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By Gawd, November 26, 2008 at 2:01 pm Link to this comment
(Unregistered commenter)

This appointment will flumux the Right. Volker was perhaps the greatest Fed Chairman of all time. Appointed by Jimmy Carter to make the politically unpopular decisions necessary to tame the hyper-inflation arc that grew under Nixon/Ford, neither of whom were willing to support a Fed Chairman prepared to do so.

Carter had to burn through at least two other Fed Chairmen in order to get to the right man for the job, Volker, so Volker’s policies weren’t in place until late in the Carter presidency. That was a timing error that cost Carter a second term because the hyper-inflation arc did come under control by the end of Reagan’s second year in office when, naturally, Reagan and his supporters happily accepted full credit for all the political risk and heavy lifting done by Carter/Volker.

However, what will flumux the Right is that Volker’s policies were so beloved by Ronald Reagan he didn’t change a thing Carter/Volker put in place to fix the disastrous economy Carter inherited from the “long national nightmare” of the Nixon years, kept him as Fed Chairman for the rest of his presidency and it was Carter/Volker’s policies that remain in the memory of clueless Reaganites as the way…LOL…“Reagan fixed the economy Carter ruined”. LOL!

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By KDelphi, November 26, 2008 at 12:03 pm Link to this comment

Friedman,oh gawd..so, the condition here seem to fit third world for some ...the deflation (finally, but..) and interest rates are sure to rise…that sounds like we’re screwed. more houasing foreclosures?

Dont know what to say

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By greenuprising, November 26, 2008 at 11:21 am Link to this comment

Yep.  As Fed Chair, Volcker “reigned in” single digit inflation by pushing interest rates up, eventually, to the low twenties.  The result was the first big housing foreclosure crisis, the S&L;crisis, and the much bigger developing country debt crisis.  Also a massive recession when the effects of high oil prices (chief cause of the inflation) were supplemented by tight money.  World markets for commodities, already hit by the effects of expensive oil, suffered serious deflation, just as interest payments soared.  Third World debt increased tenfold overnight, and the IMF and World Bank used the ensuing crisis to impose Friedmanite policies around the world.  Bubbles and busts followed in the biggest economies (Mexico, Russia, SE Asia), foreshadowing where we are today.

Though a Democrat (did I say “though”?), Volcker was a follower of Milton Friedman; so to say that he was not tutored by someone who caused the current crisis is, well, at least short-sighted.

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By KDelphi, November 26, 2008 at 10:24 am Link to this comment

I dont remember much about Volcker—Carter appointee, wasnt he? I wasnt paying much attention then…

But, better than Summers and some others—right? I cant seem to find much on him. But, I am hurrying to go to a group home and help cook.

But, I still hate holidays…lol

It looks like Volcker has been known to “go against the grain”—I just dont really remember who he is. I came here to see if anyone else did..?

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By ceti, November 26, 2008 at 9:06 am Link to this comment
(Unregistered commenter)

Unfortunately, Volcker might even have more blood on his hands. As central banker from 1979 to 1987, he gave rise to the debt crisis that has done more damage to Africa (not to mention American family farmers) that anyone since Cecil Rhodes.

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