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Other People’s Blood | Online Only | n+1

In his memoir, Volcker writes, “The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets.” Statements like this make clear the connection between the scourge of the unions and the critic of the bankers, between the Volcker Shock and the Volcker Rule. Both inflation and bubbles create fictitious money claims in excess of the wealth a society actually possesses, leading to spurious GDP gains that must give way—whether in an inflationary spiral or financial panic. In both cases, temporizing economists, the enemies of practical bankers like Volcker, claim that things can be finely measured and controlled—through fiscal policy and price indexes, hedges and efficient markets—and in both cases pride brings a fall.