Paul Volcker has died
Volcker taught the world how central banks should reconcile their multiple, sometimes conflicting mandates to effectively manage monetary policy.When he became chairman of the US Federal Reserve in 1980, the US was suffering from stagflation, or stagnation + inflation, which economists previously believed was impossible to have at the same time.The fear was that solving stagnation by lowering interest rates would drive higher inflation, possibly hyperinflation, but conversely that raising interest rates to solve inflation would exacerbate the stagnation, possibly into a depression.Volcker showed that focusing on and killing inflation by raising interest rates, even to extreme levels (briefly up to ~20%), you end both inflation and stagnation.  For one reason, low, steady, predictable inflation, better enables businesses to plan, hire and invest.And that has been central bank policy ever since (though they arguably mistakenly deviated from it under the latter part of Greenspan’s tenure).  As Bernanke said, “He personified the idea of doing something politically unpopular but economically necessary.”  It’s rare to have such an impact on one’s field, especially under such adverse circumstances.