America Must ‘Reassert Stability and Leadership’
Volcker: I remember there were people, beggars and tramps as we called them, who wanted to be fed. So it’s true, today we also have people who are relying on food stamps and other payments but we are a long way from the Great Depression. We are in a serious, great recession. Today we have 10 percent unemployment, but at that time it was more like 20 or 25 percent. That’s a big difference. You had mass unemployment.
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SPIEGEL: Are you sure? The Wall Street businesses are doing well. The big bonuses are back.
Volcker: It’s amazing how quickly some people want to forget about the trouble and go back to business as usual. We face a real challenge in dealing with that feeling that the crisis is over. The need for reform is obviously not over. It’s hard to deny that we need some forward looking financial reform.
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SPIEGEL: But the American government seems to have lost some eagerness in setting a tougher regime of rules and regulations to control Wall Street. Everything is being watered down. Why?
Volcker: I will do the best I can to fight any tendency to water it down. What we need is broad international consensus to make things happen.
I am surprised how many people are trying to compare the economic situation today (often using unemployment rates) and say we are in nearly as bad a situation as the great depression. The economy is certainly struggling, great recession, is a good term for it, I think. But taking the high measures of unemployment and underemployment today and comparing it to unemployment in the 1930′s is not comparing like numbers. The employment situation is bad now. It was much worse in the great depression. As intended, support systems like unemployment pay, FDIC, food stamps… have worked to reduce the depth of the recession.
He is right that we need serious reform to the deregulation that allowed the credit crisis to explode the economy.
Related: Volcker: Economic Decline Faster Now Than Any Time He Remembers – The Economy is in Serious Trouble (Nov 2008) – Unemployment Rate Reached 10.2% – Canada’s Sound Regulation Resulted in a Sound Banking System Even During the Credit Crisis