- Former Fed Chairman Paul Volcker is worried that political problems at home are threatening the U.S. position on the world stage.
- Volcker is known for pulling the U.S. economy out of its inflation trap in the late 1970s and early ’80s.
- “Leadership by America is not taken for granted anymore, and I’m afraid that’s been speeded up by what’s happening in Washington and the country in the last four or five years,” he told hedge fund magnate Ray Dalio.
Political divisiveness at home is threatening the position of the U.S. around the world, former Federal Reserve Chairman Paul Volcker said in an interview that painted a dour picture of the nation’s future.
“It’s different now,” the head of the central bank from 1979-87 told hedge fund magnate Ray Dalio in a talk aired on the Bridgewater Associates founder’s YouTube page. “We’re still top dog, maybe, but the top dog isn’t so readily recognized by others as it was.”
Volcker became something of a legend for his time at the Fed, helping pull the country out of its inflationary spiral by pushing interest rates higher and deliberately putting the economy into a recession.
Since then, he’s been involved in a number of endeavors. His name is part of the post-financial crisis banking reforms, with the so-called Volcker Rule aimed at stemming risk-taking by big banks. He also helms the Volcker Alliance, an effort to push for more efficient government where public service is prized.
In the current climate, the federal government is not efficient and working in the public sector is frowned upon, he said.
“Leadership by America is not taken for granted anymore, and I’m afraid that’s been speeded up by what’s happening in Washington and the country in the last four or five years,” Volcker said. “We’ve obviously got this divisiveness in the Congress, divisiveness in the country. It’s virtually impossible to take very coherent, consistent approaches to domestic programs, and particularly foreign policy.”
“Who is going to appreciate the United States as a leader, because we can’t seem to manage our own affairs at home?” he added.
Volcker was somewhat critical of President Donald Trump’s approach but also said he understands the frustration Trump tapped into. He spoke of global policies that have left some behind — “the feeling that they don’t suit everybody and that too many people have been left out.”
“I think that’s a real problem that Mr. Trump has touched upon and kind of the real base for his support,” Volcker said. “But whether we’re handling it the right way is in my mind pretty doubtful at the moment.”
Trump has set a major priority in reducing the trade deficit between the U.S. and China and thus far has had limited success. The two countries have been engaged in a now-suspended tit-for-tat trade war but are seeking to resolve their divisions before a March 1 deadline after which the tariff increases could kick in again.
“There’s some justice of course in what Trump is doing,” Volcker said. “It’s true that during our period of leadership we tended to overlook in our own country some of the problems that the world leadership implied in terms of [willingness] to accept a lot of imports in particular, and we began getting overwhelmed with imports.”
He noted that the rush of imports “didn’t bother Wall Street, doesn’t bother California, but it bothers all those small manufacturers and not so small manufacturers that were losing out.”
Volcker called for more work to deal with immigration on both an economic and humanitarian level, as well as climate change.
“There’s no doubt we’ve had some unevenness and repercussions in the United States which has presented a real political problem, and we better resolve it,” he said.
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