We aren’t the only ones who think Ben Bernanke needs to grow a spine. Paul Volcker, the only Fed chairman of the past three who had the balls to stand up to Congress and Wall Street, thinks Bernanke is taking us right back to the 1970s. The FT:
Testifying before Congress on Wednesday, Mr Volcker warned of a “resemblance” between the inflation outlook today and in the early 1970s, when the economy featured an overall tendency towards rising prices, as well as big increases in energy and agricultural prices.
Mr Volcker said the response from the Fed at the time had not been “forceful enough” in terms of tightening monetary policy.
He added: “If we lose confidence in the ability and the willingness of the Fed to deal with inflationary pressures and sustain confidence in the dollar, we’ll be in trouble.”
[Side anecdote: I spoke with some B-school profs earlier this week who believe that Bernanke’s years of study of the Great Depression have left him willing to do anything–including debasing the currency and destroying the Fed’s solvency–to protect the banking system. Although avoiding another Great Depression is certainly a noble goal, we hate to think that the alternative is the 1970s]