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Comment by rb808 | Hacker News Reader

My view isn't full of praise. My family was really affected by the recession he caused. The recession was brutal and lots of people never worked again - it caused a lot of pain and despair.

Everyone talks about how taming inflation is so wonderful. Taming mostly benefited the wealthiest - as interest rates have tumbled asset prices have soared in value. Ever since working people's salaries have stagnated. Ironically now people are worried about deflation.

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Not sure if you know this, but dropping interest rates is a policy that is strictly speaking opposed to taming inflation. It in fact creates inflation. You might have your history wrong?

> Everyone talks about how taming inflation is so wonderful. Taming mostly benefited the wealthiest - as interest rates have tumbled asset prices have soared in value.

After Volcker's deflationary policy, the authorities got scared from a small bump, instituted a reactionary inflationary policy, and that inflation has helped the wealthiest.

> Ever since working people's salaries have stagnated.

That is a designed consequence of inflation:

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

> Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis.

Or, to put it differently, inflation is necessary to cheat the working class out of the value of their money, in the name of posting good employment numbers. (https://en.wikipedia.org/wiki/Goodhart%27s_law on a societal scale)

> Not sure if you know this, but dropping interest rates is a policy that is strictly speaking opposed to taming inflation. It in fact creates inflation. You might have your history wrong?

Doesn't this depend on how much of the money supply is debt?

I agree that dropping interest below zero when 99% of the money is debt can be inflationary, but back then maybe most money was "real" (not debt) and then dropping interest would have been deflationary?

Money==Debt by definition. Except back in the gold standard perhaps.

1) as to 'real'ness, which is not really I think anything I can comment on (or IMO, any honest economist can) writ large -- in the 80s we were well past nixon shock when the US detached from the Bretton Woods II.

2) Perhaps you're referring to reserve limits holding back the money multiplier to a maximum of 10x, which would make it realer than now, when the multiplier is unbounded?... Even if money is realer, if we have any debt at all (presumed by the notion of an interest rate lever) you are lowering the price of debt, which encourages borrowing, meant to or not, which will not pump M0 but will increase the amount of money that people think they have (presuming they can be paid back as creditors), or really, the amount of money that people think they have in their bank accounts that they think their banks can recover from their leveraged adventures.

3) now probably the real fake labor subjective value of money is neither true to the austrian nor the keynesian/chicagoan extremes, certainly not the smith/marx/ricardian absolute (I mean let's say you do something crazy like save the earth from an asteroid strike, how much was that one hour of looking at a photograph worth surely not the same as one hour of a worker in a nail factory), and not really a thing that depends entirely on M0 nor the velocity of money (an immesurable measurable if ever there was one) in which case who the hell knows. In the end we're all dead anyways. The three universal truths are death, taxes, and network splits.

If this[1] is to be believed, Volcker intentionally targeted working people's salaries.

> Volcker said that the prosperity of the 1950s and 1960s was a "hall of mirrors" and that the "standard of living of the average American must decline."

> Volcker angered Reagan officials by keeping interest rates too high. When they complained he would pull “out his card on union wages” and note that inflation would not come down permanently until labor “got the message and surrendered.”

1. https://twitter.com/matthewstoller/status/120406526269525606...

I'm a software engineer, but I've started reading about this time period recently. I don't understand most of it, but what appears to be obvious, is that stagflation was largely a fight between capital and labor. Volker ruled in favor of capital, and crushed labor.

Inflation also benefits debtors at the expense of creditors. That's why the government likes having a certain amount. Benefits not as one-sided as you might think.

OT: Is that the best picture they could have used?

Your experience is anecdotal, and whether inflation helps or hinders is still up for debate by economists [0]. Remember that many of the poorest do not keep assets in banks, let alone in stocks or other assets that appreciate or keep pace with inflation. Every recession causes pain, and no one man can cause a recession. I doubt we'll ever have enough data to determine if a given policy during a past recession helped or hindered.

[0] https://fivethirtyeight.com/features/inflation-may-hit-the-p...

"Other People's Blood".

“...to establish its credibility, the Federal Reserve had to demonstrate its willingness to spill blood, lots of blood, other people’s blood.” - Reagan’s economic adviser Michael Mussa on Volker

https://nplusonemag.com/issue-34/reviews/other-peoples-blood...

I've been desperate to learn more about this since watching Mark Blyth's talk "A Brief History of How We Got Here and Why" (https://www.youtube.com/watch?v=tJoe_daP0DE&t=1243s)

And while Blyth takes the opinion that Volker and Friedman were just the next steps in the evolution of capitalism, and I am still desperately lacking knowledge about this context, I can't help but have a feeling that if the future is continues with worsening inequality and political instability in a neoliberal context, we'll look back and be able to say it started with Volker.

It’s actually older and dates back to early 20th century ordoliberal ideology. Essentially, their idea was that it’s more important to protect global Capitalism than local democracy, so when the two come in conflict, global Capitalism should be made to prevail through parallel, extranational institutions. Quinn Slobodian wrote a whole book about it called “Globalists” and did a great synopsis interview about it on the Dig podcast:

https://www.thedigradio.com/podcast/a-history-of-neoliberali...

Well said. As setpatchaddress highlighted downthread, Volker was responsible for undoing the socioeconomic order the New Deal put in place, setting the stage for our new gilded age and all the political and economic chaos that has come with it:

https://mobile.twitter.com/matthewstoller/status/12040573856...

Seems like you are getting downvoted and I don't really understand why. You expressed your view in a civil way and linked to an interesting tweet.

I remember it differently.

There was 'stagflation' then, which made things more expensive as jobs became more scarce. It was slowly strangling the wealth out of everyone.

After Volcker killed inflation, the economy boomed through the 80s and into the 90s. It was a great time, right up until the crash of 2000 stopped it all.

I'm sorry your family was negatively affected. But please know for most people (this is assuredly provable by Ronald Reagan's re-election margin) found the policies an improvement.

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