Paul Volcker: The Mother of All Crises
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April 15th, 2008 by AdvisorAnalyst
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April 15, 2008 - Courtesy of Prieur du Plessis, Investment Postcards - The video clips below are must-see material recorded during former Fed chairman Paul Volcker’s address of last week to the Economic Club of New York on the credit crises and related matters.
Volcker, who headed up the Fed from 1979 to 1987, said the credit crisis is the “mother of all crises” and the modern financial system has “failed the test of the market-place”.
“The transient causes of extreme leveraging have been exposed by force of circumstance. The nation’s spending and consumption are being brought into line with our capacity to produce,” said Volker.
“The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded Central Banking principles and practices … What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return.”
When asked about the possibility of a dollar crisis, Mr. Volcker retorted, “Dollar crisis … you don’t have to predict it, you’re in it … Let me remind you that the dollar after all is a fiat currency backed only by the word and policies of our government, policies exemplified by an independent Central Bank committed to maintaining price stability.”
Please click the images below for the views of arguably the greatest ever Fed chairman.
Please click on the following links for the rest of Volcker’s speech: Part 2, Part 3, Part 4 and Part 5.
Hat tip: RemiG2006
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