Magazine article Foreign Policy
Paul Volcker: The Legendary Central Banker Speaks with FP about Family Values, What Went Wrong with Big Finance, and Why Baseball Is to Blame
My father was in public service most of his life.And he was vocal about responsibility; he had very strong opinions about what was right and what was wrong, If he found an employee or a policeman who was not living up to his position--taking a bribe or taking tips--out they went!
Our economy spent more than 10 years overconsuming, underinvesting, too heavily engaged in borrowing from abroad--and it all contributed to the massive financial crisis we have today. This is not an ordinary recession where you may have a sharp decline, then when money eases, it snaps back. A massive amount of debt has us by the throat, so to speak. We're in for a long slog.
I think the financial markets became an enabler. There was a feeling that somehow we reached a kind of nirvana where well-developed financial markets were self-equilibrating and spreading debt around in a way that reduced or spread risks to the economy as a whole and to financial institutions. That all turned out to be an illusion.
People were making huge amounts of money in this financial transformation, but there's a real question about how beneficial it was for the economy generally. …