Volcker Takes A Powder


Reuters is reporting that Paul Volcker, head of the President’s Economic Recovery Advisory Board, is stepping down from his role.  He’s 83 and doesn’t have to worry too much about his job prospects, which is good, because heading up Barack Obama’s “economic recovery” advisory board would not look good on a resume.

Volcker was a big proponent of tax increases, toying with a Value-Added Tax that should not be allowed within a thousand miles of Washington D.C.  At our current margins, tax increases reduce Gross Domestic Product by two to three percent for every 1% of additional tax.  Anyone want to find out what the Obama economy looks like after we slap a 5% VAT on everything, blowing away ten to fifteen percent of our GDP just so Washington can keep spending with wild abandon?

Volcker defended his suicidal VAT tax idea by saying we need to “broaden our tax base.”  He was right about that – a very high percentage of our taxes are paid by a dwindling portion of the population.  When he wants to talk about replacing our corrupt “progressive” tax system with a national sales tax, we can welcome his economic advice.   Some say they could support a VAT if we also made Congress promise to cut a dollar in spending for every dollar it raises dgpaodianognk… sorry about that, I was laughing so hard I knocked over my computer.  Anyone who seriously thinks Congress could be trusted to keep the spending cut end of such a promise should have sense beaten into them with the hardcover Reagan biography of their choice.

Another noteworthy feature of the Volcker tenure was his emphasis on strict financial regulations.  He’s celebrated for the so-called “Volcker Rule,” which forbids banks from engaging in “proprietary trading,” which means financial speculation not conducted on behalf of their customers.  The Volcker Rule was unveiled in January of 2010.  By March, as related by, its author was agreeing with his critics (and Treasury Secretary Timothy Geithner) that proprietary trading had little to do with the financial crisis, and only a few banks would be affected by the Volcker Rule anyway.  It has plenty of loopholes determined bankers can squeeze through.  Despite this, Reuters still praises Volcker for “reining in financial industry excesses that helped prompt the global economic crisis.”  Marvelous: the government that crushes us with a billion regulations throws another one on the pile so it can look serious at photo ops, and impress reporters.

Jeff Berwick of, who is no fan of Volcker’s monetary policies, sees a darker reason for his decision to quit the Administration right now.  The interest on our national debt is a tremendous expense, running into hundreds of billions of dollars.  The current interest rate on this debt can be calculated at a little over three percent.  If it rises above 11%, the entirety of federal income would be consumed with paying the interest, causing the government to become completely insolvent.

Berwick sees Volcker getting out of town before Washington is faced with one of two options: “Hold interest rates artificially low and destroy the US dollar in a hyperinflation, or allow the markets to achieve its natural interest rate and bankrupt the US Government, destroying the dollar.”

Whatever the reasons for Volcker’s departure, it was clearly time for a change.  Reuters suggests that “Obama, who has been trying to mend frayed ties with the business community, is considering whether to shift the focus of the economic panel to one that has a greater focus on business outreach.”  It would be tough to create a panel that had less focus on such outreach.

At this point, anyone who fails to see the link between economic freedom and prosperity is willfully blind.  America will not suffer from the retirement of another blind adviser to this bull-in-a-china-shop Presidency.