Summary
PBS NewsHour column (republished from The Conversation) on Paul Volcker’s legacy as the architect of modern Fed independence — written at Volcker’s death in December 2019. Traces the history from Burns-Nixon (inflationary capitulation) through Volcker’s painful rate hikes to the establishment of modern central bank independence norms. Warns against Trump I’s attacks on Powell — reads as prophetic given Trump II.
Key Points
- Arthur Burns (Fed 1970-78): kept rates low to help Nixon win 1972; inflation rose from 3.2% to 11% by 1975.
- Volcker (1979-87): inherited 13%+ inflation; raised rates to ~20%; deepest recession since 1930s; broke the inflationary spiral.
- Burns was ousted in 1978; his replacement also failed to fight inflation aggressively.
- Reagan’s chief of staff secretly ordered Volcker not to raise rates before 1984 election — Volcker complied.
- Inflation fell below 4% by 1983; economic recovery followed.
- The lesson: central bank independence is not guaranteed by statute — it’s maintained by institutional courage and convention.
- Written during Trump I’s attacks on Powell for rate hikes.
Entities Mentioned
- Jerome Powell — the modern parallel; article is explicitly about protecting his independence
- Federal Reserve — institution discussed
Concepts Mentioned
- Fed Independence — the central theme
- War-Driven Inflation — the 1970s inflation driven by Vietnam War spending + political monetary stimulus
Quotes
“To understand the stakes and the sea change that Volcker brought about, it’s helpful to recall the soaring inflation of the 1970s and what caused it. Arthur Burns… helped ignite the inflationary spiral with his efforts to help President Richard Nixon win reelection in 1972 by keeping interest rates low to supercharge the economy.”
Notes
Written in 2019, not 2025 — the Trump I context was less aggressive than Trump II, making this piece if anything understated relative to current events. Michael W Klein is an economics professor at Tufts (Fletcher School). Well-sourced and citable.