Thin Ice

Paul Volcker: So I think we are skating on increasingly thin ice. On the present trajectory, the deficits and imbalances will increase. At some point, the sense of confidence in capital markets that today so benignly supports the flow of funds to the United States and the growing world economy could fade. Then some event, or combination of events, could come along to disturb markets, with damaging volatility in both exchange markets and interest rates.
What I am talking about really boils down to the oldest lesson of economic policy: a strong sense of monetary and fiscal discipline.

Volcker wrote that in 2005, central bankers and government ignored him then as they do today.

Leave a Reply

Your email address will not be published. Required fields are marked *