Paul Volcker & Ray Dalio | State of the US Economy & Government

– Hello, I’m Ray Dalio,
and I’m happy to be here with Paul Volcker, who
is my greatest hero. And, probably to many people, the greatest living American,
and that’s a big statement. I’ve watched Paul evolve since 1970, when he was Under
Secretary of the Treasury and Monetary Affairs, all
the way through the present. And, during those years,
he had more affect on the world economy, and
built up more credibility, and has been at the center of
more economic decision making than any man alive. In his 91 years, he’s affected
the world in profound ways, some of which are very famous, and some of which are just a
reflection of his credibility. For example, when the issue,
the controversial issue, of the monies that Jews
lost in the holocaust went into Swiss banks, and
that very delicate subject, very different from regular economics, the man that they chose
to examine that question was Paul Volcker. Paul, in many, many different occasions, and at many different times, shaped many, many different issues. So, this is a man who has
extraordinary principles. I’ve known him to be the most
principled person that I know, and also to have been at the center of most important economic decision making during those many, many
years, for many decades, and to see things from the top. This is a man with great perspective, and, so, I’m here today to pull
out the principles from Paul and to understand how
he got those principles. So, Paul, to start off, please
give me what you consider to be what your most
important principles are. – Well, first of all, thank you for those very generous comments, and let me say I’m glad to
see you here at this point. I’ve been a little under the
weather, I hope I’m recovering. But, you know, it’s a book I just wrote, we got something to talk about. You ask about my principles
and the first thing that comes to mind, which
I’m sure we’ll get to later, is my first principle
is effective governance. And I go back and we can
discuss this in more detail. Alexander Hamilton put
it all in a nutshell. Alexander Hamilton is an old treasury guy, he’s a financial guy,
he restored the credit of the United States,
so he’s a hero of mine. He said, “The true test of good government “is it’s ability to administer.” Not the great policy but can
they carry out the policies effectively and economically? And good government is
not just high policy, it’s making the machine work,
day after day, efficiently. Faith of the American people
in our government today is really distressing. There have been polls taken every year, ask the same question,
see how the trend changes. Do you trust your government
to do the right thing most of the time? Doesn’t sound, the right
thing most of the time, Doesn’t sound like all
that difficult a test. You get maybe 20% that say yes. You ask about the Congress,
it’ll be less that 20%. And, it’s no great secret,
that we’re torn apart by ideological and other differences now. So, we got a real challenge. So when you ask my principles, my first principle is good governance. When you talk about principles,
they go down in the family, and we were not a family
that spent money easily. We liked to economize and be sure how we were spending money. I’d like to think we carry
this over, or I carry it over, when I had some
responsibilities in government, to try to do it sufficiently. Not only as accurately, but
as efficiently as possible. You know, my father, he took over as city manager of this
bankrupt town in 1930, and lasted for 20 years. But he became the principle
figure in the town, and, no question, he was the best known and, fortunately, highly respected. But he was a fanatic for disclosure. He would do a very
detailed budget every year and distribute it to everybody in town. And it went down to how many
police cars they bought, how many fire engines they bought, and he professionalized
the police department and the fire department. Two departments that are
essential, obviously, in any town. And he was a bug for not spending
more than he had to spend, but spend what was necessary
for a professional operation. – It appears that he had a
profound impact on your life. You were born in 1927, this was two years before the stock market crash
and the Great Depression. In 1930, at the beginning
of the Great Depression, he took you and the family
to Teaneck, New Jersey. By the way, read about this in this book because it’s the building of a great man and a system, to build a great system. And he came as the manager of that town. I’m gonna read a quote of your father’s that relates to what you’re saying. “Government is a science, and
I’m happy that the officials “and the people of this community, “agree that the man who is the manager “should be thoroughly trained
in the science of government.” And in that part of the book, you also refer to that it was a solidly, middle-class town and you refer to his good education, his basic, good, solid education. And in the book you talk about
your good, solid education. You talk about the importance of family and the science of government, the idea of that good management, and you refer to its outcomes. That there was no crime
in Teaneck, New Jersey. The Saturday Evening Post wrote an article that’s entitled, There is No
Crime in Teaneck, New Jersey. Because it was well managed,
because there’s a middle-class, because there’s good education. I’m interested in what
you think is happening to infrastructure, education, family, middle-class, and
government management. And you expressed worries about
the United States’ position in the world. Do you think these things are related? What are your thoughts on this? – Yeah, and all these things
you say are very familiar. But I grew up, precisely at the time, when I graduated from
high school or college, World War II was over, the
United States had won the war, in our opinion. It rules the world, it
developed, presumably, a multicultural, multilateral system of governance and mutual growth. It all seemed very successful, we kind of forget that we
had two miserable wars, in Vietnam and then in Iraq. But, by in large, I grew up in a world where I moved into the
United States Treasury, I felt the kingpin of
treasuries around the world because–
– You were! – Well, I wasn’t, the US Treasury was. – Yes, the US Treasury was. – And the Federal Reserve. It’s different now,
we’re learning in a world where we’re still top dog, maybe, but top dog isn’t so readily
recognized by others as it was. And we obviously had the rise of China as a clear competitor for world influence. And how that all works out, we’ll see, but it’s not the comfortable
world of assumed leadership that I grew up with. And that’s what I struggled
with in the Treasury and, later, in the Federal Reserve. There are other forces, the
rest of the world is growing, some of them more rapidly than we. When I was in the Federal Reserve, Japan was the big question as to the rival of the United States,
and growing very rapidly. Has very good success economically. We kind of forget about
that now, as things change, now it’s China. But we have to learn in a world in which leadership by America is not taken
for granted anymore. And I’m afraid that’s been speeded up by what’s been happening in
Washington, and the country, in the last four or five years. – How so? – I think we, obviously,
got these dividers, divisiveness in the Congress,
divisiveness in the country. It’s made it impossible
to take very coherent, consistent approaches to
our domestic problems, but particularly toward foreign policy. And that sense, again, that we are the natural leader, we have certain allies
that seemed permanent 10, 15 years ago that don’t
seem so permanent anymore. It’s the toughest situation
that we have to accommodate to that makes some emphasis
on effective government all the more important, in my mind. Who is going to appreciate
the United States as a leader if we don’t seem to be able to manage our own affairs at home? – You keep referring to
management of the government, and your father was the manager, and you’ve been around the
management of all governments around the world. You’ve also explained
that the discouragement of government workers to
be professional managers. Could you embellish on that point? I know this is, maybe,
probably, your greatest mission, is to have a beneficial impact on that. – Yes, you know there are two million federal employees, Not counting the Army, the
Air Force, and so forth. Two million civilian employees, which is exactly the same amount we had back in the Kennedy administration,
which is 80 years ago. And you ask how is the
government operating, same number of people? It does an awful lot of
outsourcing, out-contracting. The defense department, itself, outsources 300 billion a year, or more. Who’s minding the store? And I’m not sure we’re
well enough equipped for those two million people. I headed a commission on the civil service when I left the Federal
Reserve, which was in 1987, and there was a big commission, we had ex Vice Presidents,
we had ex cabinet officers, we Congressmen, we had a lot of people. We issued a good report. What impact did it have, very little. About how you needed to develop a more effective civil service. Make it easier to hire,
make it easier to fire, get the right leadership in there, which some departments
have and some do not have. Five years later, I
headed another commission. Much smaller commission
with another good report. But what impact did it have? Not enough. One of the observations
that’s often struck me is there’s a feeling by many business men, the government’s not efficient,
doesn’t do things right, shouldered a lot of time,
service, and not very helpful, which, obviously, there
are isolated places where all those things are true. But, by enlarge, I have
been struck by the number of businessmen who have
been called into government for secretary or something
or other, under secretary, in the White House or wherever, who, after two or three
years in government say I didn’t realize
there were so many people in the government that
knew what they were doing, and can do it effectively. And it’s one of the biggest
experiences I take away from my years in government. That it’s much more
effective, potentially, with a better staffing than I thought. But that’s a hard lesson
to sell, generally. And it’s not always true. We have to improve the damn thing and that’s what I’m after. – At this point in your life, the thing that you have
devoted the most to is the proper,
professionalization, education of government managers. You’ve created the Volcker Alliance, in which you’ve devoted
most of your net worth to, in order to foster the proper development of government workers in that way. You’ve spoken to me in the past about how they’re not respected, and, also, how it’s
difficult at universities, and various places, to get
them to be attracted in there because they’re not
given a good career path, they’re not given good training, and they’re not given much respect. And that that is undermining
the effectiveness of the system. What are your thoughts about that? – Thank you, you preached
my sermon very well. I have been concerned about the strength of the civil service. People who want to go in the civil service often can be selected, maybe in a school or public administration,
say, okay, you got a job, it’s February, but we can’t
have you, we can’t pay you until the new fiscal year,
which is six months away. So, these people can’t
sit around with no pay or anything for six months, so they go get a job on Wall
Street, or some place, instead. And that’s typical of the kind of thing that needs to be repaired. But what concerned me is the attitudes toward government itself
and the difficulties in getting and attracting
and keeping the best people. Paralleled by the growing
lack of interest, as I see it, in universities. 50 years ago, 100 years ago,
schools had departments, so schools of public administration. Public administration’s a bad word now. People associate public administration with a bunch of time servers, sitting in some government
office, producing nothing useful. Administration, people don’t think that when you say business administration, but they think it when you
say government administration. But we have a problem in these schools. Many of them have lost
sight of how to teach. What are they teaching, what
should the curriculum be? How do we train people to
oversee all that outsourcing? Hundreds of billions of
dollars being outsourced. Who’s minding the store? Are people equipped to do that? Have we taught them the right thing? Have we taught them how to manage? Have we taught them how to debate issues as a right of good memorandum? How to deal with other
people, other departments. And, so, this little Volcker Alliance is trying to get a kind of
marriage, a new marriage, between universities and the government. State and local government as
well as federal government, to see whether we can
develop a stronger sense of interest and efficiency. Last time this was true
in the United States was before World War I, when there was a great movement
for improving government. And the civil service came in to effect. And up to the Depression years, there was a lot of pressure, a lot of done to improve government organization. And a lot of people wanted
to go in the government. Now we are, what, 80 years
later, we’ve lost much of that. – So, would you say a principle of yours is that in order to have
effective government you have to have effective civil servants. – Whether you call them civil servants, or whatever you call them, you have to have people running it. I’m with Alexander Hamilton,
the true test to government is the ability to get
something done efficiently. And we lapse in that respect. – You’ve been in contact with
economics in every country, every major country. Is that a distinguishing characteristic of those that are successful
and those that are not? – You have to have a great
feeling of commitment to whatever you’re doing,
whether it’s economists or civil servant. They still exist, there’s
still a lot of people in government who have a
great sense of commitment to doing what’s going on and, you know. Look at this present change in government. I think there’s something
like 700, maybe more, potential presidential
appointments in the new government. All the secretaries and
the secretaries assistants, secretaries judges, so forth and so on. About a third of those
offices have failed. Now, nobody’s paying attention. Now, who’s running those departments while the civil servants are left there, maybe in good form, maybe not,
but leaderless, basically. That isn’t the way to run a government. And that’s just one
example of the difficulties we’re having these days. – Looking around the world,
what are the principles of great government? – Well, obviously, you need
a strong leader at the top, that helps, quite a lot. But what we are running into is a life of democracies. Are democracies really able to do the kind of thing I’m talking about, or do they eventually, as Plato said, end up with some plutocracy? And you can’t really maintain a democracy over a period of years. But you have countries
like France and Germany, had a very disciplined, very
prestigious civil service. So did the UK, that’s
deteriorated a lot in recent years because it’s considered too elitist, too far removed from the public aspect. And I guess this a great shake. How can you get the
expertise that you need, and the leadership that you need, and still respect the popular desire? And the vote, in the end, the politicians are going to decide the
direction in which to go. – You referred to Plato’s cycle, in the republic, the idea, of course, that
democracies are threatened. Describe that and describe how you feel that that pertains to today’s situations. – Well, I think if you
look at the United States, that we’re very familiar with, you have a very divisive new administration. You have the kind of gridlock that we saw in the Obama administration. I was friendly with Mr. Obama, I was disappointed he
couldn’t get more done, but here you got a situation
where the Congress, in effect, said, the Senate said, whatever Mr. Obama is for, we’re against. And they maintained that
position for three years, really. And did the government
suffer from that? Yes. Did it have a really well designed, efficient healthcare system for the uninsured? They tried very hard but
it was very difficult to develop it and maintain it. And you see symptoms of that sort all over the place now. An inability to reach
some reasonable consensus on how to administer certain programs, or how, in the first
place, to get agreement on what the program ought to be. And it’s not a phenomenon
just for the United States, unfortunately. Obviously, in Eastern
Europe, Latin Americas, the hardship case, almost,
from top to bottom. But even within the established
democratic countries in the euro zone, we’re all having some trouble in maintaining the progress that we made internationally. And developing a set
of international rules and developments that suit everybody, and the feeling that they
don’t suit everybody, and that too many people
have been left out. I think that’s a real problem that Mr. Trump has touched upon and kind of the real base for his support. But whether we’re handling
in the right way is, in my mind, pretty doubtful at the moment. – You had, probably, the
greatest economic challenge, and you were both also the
greatest, most powerful man in the country, in the world actually, in terms of your control
over monetary policy. So, 14.8% inflation is where we hit in March of 1980, and as a result of that, you
tightened monetary policy, I remember it very well. You set an M1 target of 5.5%. And, as a result of that, interest rates went up to 20%. – More than we ever expected. – And when you tighten
monetary policy like that, it drove the unemployment rate up to 10% and it caused the worst downturn in that period of time since the Great Depression. And you held tight in that. There were protests, there was anger, and you held tight in that
and you followed it through. And as a result of that, you
broke the back of inflation, and in 1983, that inflation rate went down to 3% inflation, at that time. And we began a decade of prosperity, of strong growth with low inflation. Now, you had to have a
vision of what it was like, you had to fight through that vision, despite all the opposition. That’s an example of leadership under, people now look back and they say that was a great accomplishment. But, at that time, that must
have been very difficult. Can you describe it and then, also, tell us more about what you’ve
seen to be the qualities of great leadership that
you’ve seen in others as well? – Well, this all happened,
the fight on inflation, inflation itself, 50 years ago, roughly. And people, today, people my age, are all dying off, and even middle-aged
people with children then. Now, you may not remember the atmosphere as it was experienced, the
inflation rate had gone up. For more than a decade, there
were kind of feeble efforts to deal with it. During the Ford administration,
they handed out buttons. Whip Inflation Now, but it
had more buttons than policy. And there was always this
conflict, it’s always existed, don’t tighten monetary policy too far, you’ll get some unemployment. So, we went a decade that
way and we got more inflation and more unemployment. And, when I took over the Federal Reserve, at the end of Carter’s administration, President Carter was totally frustrated because he seemed to be unable to take any initiative anyway, because all this inflation
was backfiring on him, he couldn’t do anything in the budget, couldn’t do anything on energy, all these things he
would’ve liked to have, seemed to be stalled by
this fear of inflation, it was very real at that time. And, so, he asked me to become Chairman of the Federal Reserve. Well, it was obvious that
existing policies weren’t working. And, actually, I was in the
Federal Reserve before that, voting against some of those policies. But I decided we had to change in approach and we’ve got to stop worrying
about increasing unemployment at any time, we’ve got to
deal with this inflation or it’s going to get worse and worse. ‘Cause it was accelerating when it got close to 15% annual rate. And if we pussy-footed much
longer, we’re going to be 20%. And people were really fearful about the stability of the country. So, we did tighten, it took
a long while, actually, for the unemployment rate to go up. It was very stubborn
and the inflation rate was very stubborn, and we
made one or two false moves that we had to take back,
it took a little longer than we thought. But I saw no other way to approach this, other than kind of a bulldog
biting at it, straight out. And I got plenty worried in ’82 when we did begin getting unemployment, and the damn inflation
rate wasn’t coming down, and the money supply wasn’t
coming down the way we wanted. But I felt that we were
stuck, we couldn’t back off or all the effort we were
making would be for naught. Fortunately, by the summer of ’82, the money supply came
down, inflation rate became coming down, we had a recession. But by the end of the year,
it looked like the recession could be over, or at
least stop getting worse. And it ended pretty quickly. But it took that last year of sticking with it that I think was necessary to do the job. Now, you talk about how
unpopular it was, yeah. The farmers had tractors
outside the Federal Reserve, we had community groups,
we had one Congressman spent every day, for two years,
asking for my impeachment. But my sense was the country
as a whole understood that inflation was
getting us by the throat, and they were willing to sit back and not be too aggressive because they thought I
was attacking a problem that needed to be attacked. And I had more support, I
think, well, I know I did. A good measure of that was
when my reappointment came on, at the end of this process. I was first nominated, it was unanimous. Nominated four years later,
it was not unanimous, I had eight democrats voting against me, eight republicans. They were eight left-wing democrats, eight right-wing republicans,
and 84 votes with me. And I think that was a fair
representation that people, things were getting better then, but people tolerated what it took to deal with the inflation problem. And I don’t think there was
any other answer, frankly. I consoled myself, it was a tough time, but do you have any other
answers, or what do you think? – No, I remember going through it. Every single day, I was
wondering what Paul Volcker was thinking since you said that. You set the M1 target of 5.5%, and I did the calculations of velocity, and I thought, oh, my God, is that really going to be happening? Because you have a 14% inflation, that means the interest
rates have gotta go up. So it was a time. People don’t have any understanding of how challenging that time was. We think of 2008, but the 1982, the unemployment rate rising to 10%. The rate at which the economy plunged, all of those conditions were worse than in 2008. So it was a more dramatic time, even in terms of volatility
of interest rates. – But people forget about, going back then as compared to 2008. We had a bankrupt Latin America, and the banks had head over heels in lending to Latin America. They had one and a half
to two times the capital, not just big American banks, but big international banks elsewhere, invested in Latin America. One day Mexico said, we can’t pay anymore. – August, 1982, I remember it well. – August, 1982. Then, what happened? Well, we hook and by crook
and with the help of the IMF, which is very important, we
stalled, stalled for time, and they go, oh, this
is not very dramatic. We got the banks ’cause it
was in their own interest to continue lending enough,
to pay interest anyway. We forced constructed reforms, we saw it on Mexico, Brazil, Argentina, a lot of that’s been lost since. But that was with the help of the IMF. And it held together, we
didn’t have a banking collapse. It wasn’t subprime mortgages, it was subprime Latin American borrowing. – It was a good example of how
you could roll things forward from 1982 until 1991
when they had the Brady– – That is correct. Things as capital had been restored, some of the debts had been lowered, and he could finish it off with the so-called Brady Plan, yes. – You have known most world leaders for most of the last 50, 60, 70 years. Tell me, what are your principles about what makes a great world leader, or a great leader in general? – Well, sometimes when
you get close to them they don’t seem so great. When you look around at world
leaders in recent years, when you begin thinking
of, I think Mrs. Merkel did a pretty good job
in Europe and Germany. – We had dinner with
Lee Kuan Yew, you and I, you might remember. – Lee Kuan Yew was the next
name I was going to mention. And the third name I
was going to mention is, I don’t know how much
you ran into Zhu Rongji. – He’s been a hero of mine,
I didn’t know him personally. – Well, he was a hero of mine. This was in the 1990s when
I was in China quite a lot, I don’t go to China, very little now, and I don’t know the leaders now. But I knew the leaders in the 90s, when they seemed to be a
blossoming, capitalist economy, to exaggerate a bit. With hopes for an open,
democratic society. Doesn’t look that way, quite, now, but back when Dung and
Zhu Rongji were there, it looked very promising. And they’d come to us for advice, they don’t come to us for advice anymore. They might come to us and tell
us what to do, but. (laughs) – Well, they seem to
be doing pretty good– – Yeah, that’s right. That’s right, they say we don’t
have to follow you anymore. But Lee Kuan Yew, of
course, is a special case. Here he is– – But what are those qualities? – Well, he knew what he wanted
to get done and he did it. And in a small, relative enclave and he did a lot of things
that we tutted about, in terms of democracy, he was a little too eager to put people in jail to quiet down opposition and worry about what the
newspapers said about him and so forth. But he had a drive to develop Singapore with a very strong civil service, very effective, corrupt-free government, as near as I can see,
and he pulled it off, and he maintained a very strong position. And Singapore is,
economically, I don’t know where it ranks in the world by
pro-capita income, but it’s– – Way up there. – [Paul] Very high, come up from nothing. – So, your principles,
if I get it correctly, your principles would be a great leader has an accurate vision of where to go. A great leader has, will fight the opposition in pursuit of that, and deliver. A great leader has a deep
caring for the people that they’re leading. A great leader also seems to be leading with an effective management of civil service in government, or a effective bureaucracy to carry those things through. Are those the principles? – Well, I think we have to add
a principle, the one you had, you gotta have a respect for the people. I don’t know if you included that. Some of the qualities you mentioned, you could apply to Adolf Hitler. But we don’t want an Adolf Hitler, we want somebody who’s got
some democratic instincts and recognizes that he’s
only there temporarily. And that he wants to lead
the country effectively, but peaceably, and without dictatorial demands. So, it’s a nice balance to be in charge, and maybe less efficient
when you have to deal with public opinion and
different points of view. But it’s obviously essential
if democracies going to last. We legitimately worry about democracy now. My mother, who was quite
a character herself, I recall, vaguely,
whining to her when I was, probably, a young man in government, Vietnam War or something,
rioting in the streets… We were threatened, the
country was threatened to survive all these tensions. She said, sonny boy, she didn’t
call me sonny boy, (laughs) she said we’re 200 years of democracy, we’ve been a longer democracy than anybody else in the world, we’ve gotten over worse than this before, go get back to work and do something. And I take a little
comfort in that thought, that we can straighten ourselves out after this little turmoil,
not so little turmoil. – What do you see the
United State’s future, and China’s future, over the
next 10 years, let’s say. – Well, you know, I
sometimes, it sounds terrible, but I respond more favorably to what the President of China is saying than the President
of the United States. The President of China at least says that he’s looking forward
to a harmonious relationship over time and that he’s
looking for the world being divided up through
different spheres of influence, and that China will take
care of the Asian sphere. But looking for peaceable outcomes, where we’re all threats and demands, and, so it’s a different story being told. Now, there’s some justice, of course, in what Trump is doing. It is true, during our
period of leadership, we tended to overlook, in our own country, some of the problems that
world leadership implied in terms of willing to
accept a lot of imports, in particular. And we began getting
overwhelmed with imports and it’s only part of the sections, didn’t bother Wall Street,
doesn’t bother California, but it bothered all those
small manufacturers, and not so small manufacturers,
that were losing out. And it’s true, we do have a
big current account deficit, it’s not all China, and China no longer has the big surplus that it had worldwide. So, we may not be analyzing
this all correctly, but there’s no doubt
we’ve had some unevenness and repercussions in the United States, Which was, then, a real political problem, And we’ve got to resolve it. – That political problem is the polarity, that political problem is the wealth gap? Describe the political problem. – Well, to reach some agreement upon what an appropriate influx,
under what conditions, immigrants are. We’ve, in recent years,
taken a lot of immigrants, maybe we don’t want so many,
but what should the rules be? Both in terms of our economic needs, but in terms of our moral needs? When people are being
oppressed in different ways. And how can we develop an
economy that’s more balanced between the great middle
part of the country and the two coastal areas, where a lot of the vigor seems to exist? And that’s a big challenge, it’s not gonna be healed over night. What are we gonna do
about the big issues of, from my point of view, climate change? We don’t seem to be able
to reach and work with other countries effectively in that area, which may kill the whole next generation if we don’t worry about it. So there are a lot of
issues that, somehow, have been polarized to the extent, we’re having great difficulty
in achieving the consensus that we need. – Paul, what would you
like your legacy to be? – Oh, God, my legacy,
I’d like to see my legacy in more effective government in general. I haven’t got any control
over the high politics, or any influence, but I would like to see
a general acceptance of the need for an efficient
public service ethic. And see people attracted
to our public service because they can take satisfaction that they’re doing something concrete for the country and the people, generally. And it can certainly test their own acumen and intelligence, and energy,
to do that kind of thing. My father, I’m sure, got restive about spending so much time in government. But I’m sure that, in the end, he found that a satisfying career. And, didn’t make a lot of money,
he made enough to live on, Simply enough, I would like to see that kind of spirit permeate
in a wider population. And it once did, there’s
no doubt about it. When I grew up, when I got out of college and I got out of graduate school, going into government was
a popular thing to do. Now people scratch their head and say, why would you ever want to do that? And that’s not a very healthy sign, which goes along with the 20% confidence in government to do things right. Back when Kennedy came
in, it was overdone. With all the spirit that he
had, and I was a young man, and full of Kennedy glamour, or a respect for it. You asked that same question,
do you trust your government? 60% or 70% said yes, now that’s a healthy, we should be skeptical, I
want 30% to be skeptical. I want more than 30% to be skeptical. Being skeptical is one thing, but being anti-government
is another thing. We repair it, we don’t dismiss it. – What does the Volcker Alliance do? – We are a young and small organization. But we’re trying to get some cohesiveness is what we perceive, many people perceive, about the needs of government
for effective administration and effective people. And get better connection
between the needs of the government and the universities, with schools of public
administration or public policy that can feed this potential demand more effectively than
has been done recently. The recruitment between
the federal government and young people, and between
these universities is so lax it’s almost disappeared. And that’s not right, these universities have to review what they’re doing to see how they can really
educate effectively. And the government has
to cooperate with them and see what kind of people they need and how they need to be trained. How they can be employed
with a minimum of red tape and delays, and be given satisfying jobs. Because there’s no doubt there are a lot of challenges in government, a lot of opportunities
for challenging jobs. – How would you hope that the government would work with the Volcker Alliance to visualize that goal? What parts of the
government would you want– – Well, you ask a sensitive question. We’re examining precisely that issue. There are people in the OMB, Office of Management and Budget. The management part of
that has been very weak but it still exists. It’s been there, I guess,
since the, I don’t know, the Truman administration. That should be a central focus
for government management. With a few experts and interested people. They now are taking an
initiative to do precisely what I’m talking about. So we had seven or eight
questions, we asked all 50 states, with the help of some of the universities, how are you doing in budgeting? How are you doing, [do you have] funds to reserve for emergencies? How’s your pension system? And three or four other questions. We published a nice, shiny book. All the states were ranked,
we didn’t rank them in order but we said are you doing a good job, bad job, impossible job? And this attracted a lot of attention because it’s a competition
between the states. So people say, oh my
God, here we got a report by the Volcker Alliance that says we don’t have good budgeting arrangements. So, some of them have actually changed their budgeting procedures. – That’s a good example of the impact of the Volcker Alliance. By being able to put the grades on those for everybody to see, it changes behavior. – Everybody talks about infrastructure. Nobody’s doing anything about it. That I can see, anyway, ever. It’s obvious infrastructure projects is new rail tunnels under the Hudson. We’re sitting here with leaking tunnels, totally dependent upon
these two very fragile existing pieces of infrastructure that we built more than 100 years ago? What are we wasting time on a few blocks at Second Avenue Subway? Why are we wasting a lot of time with some elaborate way of
bringing two or three Long Island trains into
Grand Central Station? When big, obvious needs are going undone. So, I’m trying to make a little project to bring out some of those problems. And does it take a federal
government leadership to somehow bring people
together to see which are the most urgent of these
infrastructure problems? And to what extent should
the federal government, that inevitably gets involved,
be doing the financing? And checking its viability, working with the states and cities. And it’s just not being done now in the way it should be done. And the states are all
being squeezed financially, which makes it all the more difficult. – How can others help
you achieve your legacy and the Volcker Alliance to– – Well, they can look it up
on their iPhone, (laughs) I guess they can see. But we do need some money
and we’re at a point where we’ve got some money to
function this year, next year, but if we’re gonna continue after that, we’re gonna need some
influx of real money. And we’re a very small organization, but it’s interesting what you can do with a small organization. But we do have to get, and
we’re gonna spend this year making another try of
demanding more cooperation from the universities themselves. Because they, potentially, have
more resources than we have. Public administration, public management, they put a lot of money
into business management. Not putting money in
the public management. Economics, it was a prestigious, I hesitate to call it a science, but it’s got great prestige, or it did, until it missed the 2008
crisis pretty completely. Economists have lost a
lot of prestige, I think, in recent years, and rightfully so. The amount of money that’s been poured into economic research as compared to the amount of money poured into research and public
administration is astonishing. It just hasn’t got the same respect. My old university of Princeton, once got a huge donation
for public managing, training for public service. Where’s the money, it goes
to the economics department to oversimplify. When I went to Princeton,
the president of Princeton was a professor of public administration. I tell people that now, in
the economics department, they don’t believe it. Woodrow Wilson was the father
of public administration. President of Princeton. One of the things you did not touch upon, which I think are a big problem, is the amount of corruption in the world. Fiduciary responsibility
seems to have vanished from the, doesn’t vanish
from their statements, the nice statements of
ethics that they print. But when it gets down to the trading desk, when it gets down to making
a deal with Malaysia, with the big payoff, you wonder whether the ethical standards ever get down to the
people doing the work. And, enormous number of
conflicts of interest that have developed in banks,
and elsewhere in finance. – I did a study of what
made countries succeed and fail with a 10 year time arise, and looked at different indicators. And there’s a negative 52% correlation, in other words, a very
strong negative correlation, between the level of corruption and the level of relative growth. You recently received a lot of attention for making the statement
that, related to government, that it’s a hell of a mess all around. And I think you were talking more broadly, but clarify what you mean by that. – We have fake news, you
don’t know what to believe, what not to believe. You got presidents that don’t seem to mind either personal behavior or
making outrageous statements, true or not. You have a Congress that’s been unable to function effectively. Maybe, hopefully, maybe
that’ll change a little bit but we’ll wait and see
after this past election. But we have not been on
a constructive track. I think that’s fair to say. We rammed through a massive tax bill, whatever you think about that tax bill, shouldn’t be rammed through the Congress without any debates, at
midnight, on December 31st, or whatever was done. With almost nobody in the Congress having a very good idea
of what was in the bill, and whether you like
what was in it or not, it wasn’t subject to
the right kind of debate that we should’ve had. But that seems to be true
in other areas as well. I just refer you to the morning press if you wanna know a description of how effective government is these days. – So, a lot of people have claimed that we’ve always had
challenges in government, and we’ve been through these things. – Including my mother. Well, in my lifetime, yes. I think there was a general,
after World War II, again, when we were king of the crop, there was a broad consensus
about the broad outlines of foreign policy. And there was a willingness,
of both Republican and Democratic presidents, to lead NATO, lead the World Trade Organization, lead the whole effort
to reduce terrorists, that all went hand in hand. There were a lot of debates about it but the basic core of the
policy was generally accepted. And that’s changed. And we’re not always
gonna have happy harmony about what policies should be but you’ve got to do a little better than we’ve been doing recently. I go back to, what I think
I said some time ago, of all the presidential appointments, far less than half anybody’s
even been nominated, much less appointed. The quality of the people
appointed to cabinet offices, and sub cabinet offices, I think by any estimation
is not up to scratch. That didn’t say they were not good and effective appointments, but when you see lobbyists for polluting companies named head of the agency
for anti-pollution, you wonder about the coherent
nature of the appointment. And it’s happening too often. The state department’s ripped apart, maybe it should be ripped apart. But it ought to be done
in a constructive way. We haven’t had an
ambassador in Saudi Arabia. We have all these problems
with Saudi Arabia, we haven’t even got an
ambassador there until now, why not? Too much policy seems to be
out of the back pocket today, and God knows what happens tomorrow. Look, for an old government man like me, it doesn’t look very
good, hence my comment. Let’s hope it gets better. – Well, thank you, Paul,
for spending this time and also conveying some
of your principles, and also some of what you’re
hoping will be achieved over the next few years,
to make up your legacy. I hope that we can help you achieve that. – Well, thank you for coming, I appreciate the opportunity to rant and rave a little bit because I think the country needs a little ranting and raving. – And you do that so well. – (laughing) I don’t know about that.

Maurice Vega

100 Responses

  1. POOR management of government, thats basically what he said about your country. its about poor public management and private interest capturing the government in recent decades has finally lead to this financial mess in US today. He and Ray put it in such innocuous carefree manner yet the deduction is grave.

  2. If the true test of Gov is the ability to do something efficiently………As Hamilton said…….Then USA if it wants to save its itself from calamity of Social security, Medicare and healthcare costs…..should SWALLOW its pride and learn from Germany and copy its model efficiency!!! I speak from personal experience!

  3. Let Germany and Nordic European Countries and Aryan race run USA and Europe so people and the world can be saved……but without their excessive feminism and liberalism and gayism model!!

  4. As much as I value Ray Dalio’s knowledge and successful career as a investor that truly understands global markets, it’s not obvious to me that he is also a great interviewer. Volcker has a clear mind even at old age, but we all need guidance and precise follow up questions, otherwise we just keep on rambling on and on.
    It’s interesting to listen to Volcker but ultimately a missed opportunity to get to the pressing issues of today and how he would have approached them as A decision maker.

  5. They "fixed" the inflation calculation, not inflation itself. Inflation goes on in house prices, etc which among many other things were taken out of the inflation calculation. Inflation has been slowly destroying our standard of living for over 30 years.

  6. I love the wisdom they are desperately trying to pass on to the next generation (my generation). We need more effective government. Not SOCIALISM and bureaucracy. Otherwise, china will overtake the US as a world power and we will become a relic of the past, like Europe.

  7. Ray, thank you for doing this kind of interview with truly great leaders in US and around the world as their principles will live on long after they are gone but their experiences are so valuable lessons to be learned.

  8. The host asked zero questions of any substance. What about Volcker's views on the Fed propping up RE and stock prices. What about the new fake inflation calculation that excludes house prices and many other important things? What about the $22 trillion national debt? What about the globalist job shipping to China and Mexico, etc? He wasted the opportunity with a bunch of BS.

  9. The problem with Government is that it’s been taken over by big cooperations. The senate is full of billionaires who’s best interest is not the state or the people. Greed is the main patriotism. So government isn’t the main problem it is corporate greed and individual greed.

  10. I'm sorry but I just cant watch after the statement that Government is a science-for most part it is a Fraud and any rational person should view it and those who participate in it with great skepticism

  11. the divisiveness that he was referring during 11:00 is exactly what china has done right, singapore too. Meritocracy with a sustained leadership.

  12. Infrastructure funding is such a no-brainer? Obvious tunnels under the Hudson River? Such tunnels are as obvious as a fast train from San Francisco toLos Angeles, which the federal government funded. California took the funding, cancelled the project and kept the money. This is not hard to note. And why exactly do people who note this deserve to be called names?

  13. Dear Mr. Dalio,
    This was an absolutely fantastic conversation to watch. Thank you!
    Please do another one with Alan Greenspan while he’s still alive.

  14. Wow, what a delightful interchange- massive talent combined with appropriate preparation for what is truly a historic conversation! Twitter this is not.

  15. This is when people believed and truly loved USA!!! USA today symbolizes narcissistic opportunists marketing a deluge concept "buy my book"!!!!

  16. He lost me at 'muh climate change'. Thanks for dumbing us down with public school and replacing us with immigrants. Great governance.

  17. Ray is ok. And he’s got it all sorted out.
    And that’s nice. It’s good to see.
    But he’s not too interested in God.
    My advice to him would be to apply himself to seeking God, because although money and success is important it’s not as important as his life.
    If he doesn’t do this he will regret it.
    The quest can begin with a prayer that might go something like this.
    “God if you exist and if you want me to know you, then please reveal yourself.”

  18. Question: what caused the money over supply back in the 80s? And why isn’t inflation going up like crazy after 2008 even the m2 exploded since then?

  19. At least America politicians are more mature in my country Malaysia , the prime minister najib steal money for over 9 years and still get support from his party and most rural Malays. They are just too dumb and educated to be anti Western media

  20. Practically insightful from the time of Plato through the 21st Century: Anyone with ears? A form of learning dramatically underrepresented in the USA today.

  21. What a great economic mind Mr. Volcker has and such a skilled and highly competent civil administrator. A master bureaucrat, in a good sense. Excellent interview.

  22. Fixing the economic problems were easy. Increase deficit spending by hundreds of billions per year and the economy will improve. That is what Reagan did from 1982 through 1990. Now the country is being conned again with trump increasing deficit spending by almost half a trillion dollars. If you want to see the economy boom like never before then increase the deficit spending by 2 trillion. We will see the economy boom for a short time like the world has never seen but it is not a fix. It is a con job.The 22 trillion and growing national debt is ultimately going to bankrupt and destroy our economy for good. Check it out for yourself.

  23. Paul’s remark starting from 17:37 reminded the book “The Fifth Risk” by Michael Lewis. Our mainstream media failed to educate the public the details of what each of these government department/administration do and how our current and future lives are impacted.

  24. This has been one of the most eye opening interviews I've seen in a very long time! Mr. Volcker is someone everyone should listen to. I'll be reading his book right after I finish Principles! Thank You.

  25. Thanks! for inviting Mr. Volcker to share his principles about the effective governance as the legacy from his long record.  The right management comes when promoting the right people in the right job.  As mentioned, people (the right) with the vision to see the future for the common good, aware that some tough decision should be made for offering a virtuous future.  But when those players do not represent well their roles (Government, public or private companies, and society as a whole), they will make a short term decision (not aiming the root cause) for being happy with their party and politically correct, which will create new problems in the future, raising the level of entropy.  Polarity is becoming the barrier for being focused on solving problems, more concerned in the acceptance from the close circle group (boosting the biases) than the good work entitled by the position (contributions).

  26. I'm a classical liberal and I love paul volcker, what a wise democrat,no screaming,just chill discussion and rocking it.

  27. Where does crime come from? 72% of black children born to single mothers. Black males age 16 – 35 are 2% of population committing over 50% of murders, mostly black on black. These two facts are related. Inflation and currency debasement is eroding the family and family formation. Families are failing. Five per cent children born to single mothers in 1966, when debasement began, now at over 40%. Whites don't force blacks to have babies and avoid marriage. The race card is not the issue, the family card is. Fathers matter, a hell of a lot.

  28. Jews founded Federal Reserve by German Jew Paul Warburg in 1913. Jewish Governor Eugene Mayer took us off gold standard in 1930's, and caused the Depression letting the Jewish Bank of the United States go bankrupt.Jewish Arthur Burns took America off the gold dollar exchange in 1971. Paul Volcker Jewish, Alan Greenspan Jewish, Ben Bernanke Jewish, Janet Yellen Jewish. Why so many Jewish people at the Federal Reserve, created by Jewish bankers in Europe, controlling American in an unelected office? Why does a tiny group has so much power over such a long period? Why? All great people but seem to have an agenda. Why?

  29. I love Paul Volcker and his views but he is not all spot on. England, Russia, France, and globalist Jews attacked Germany to kill their empire. It was all a set up. Germany was provoked into war, twice. American Jewish Congress declared war on Germany in 1933. Germany was totally set up. Very sad and shameful. Fifteen million Germans were murdered to eliminate the competition.

  30. Carter/Mondale didn't know what Volcker was planning to do. Years later, Mondale said he woudn't have supported Volcker had he known he was going to raise rates. Politicians.

  31. The left attacked the family the government became everyone’s parent. I think this forced the right to hate them government because it saw it destroying the family while wanting more government to fix the problems that the break down of the family had on the government. So you want to take more money from the responsible to give it to the less responsible. So has caused the responsible people to hate the government. Just my thinking maybe I am wrong.

  32. It's important to get a credible insider's version of Big Government and Central Banking manipulation though his legacy of conservative decision making as Fed Chair compared to his successors deserves respect.
    Telling is his admiration of Alexander Hamilton (first to privatize banking despite its constitutional conflicts) and Obama (socialized healthcare) not to mention his support for the fraudulent 'climate change' agenda, and on and on.
    Of course, old school Democrats were considerably more moderate (e.g. Kennedy's) than the radical progressives of today.

  33. Volcker you and the FED are the reason this country and its people are suffering so badly these days. You're the bad guy.

  34. Government workers are not paid well… simple as that, why bother with civil service career path when you can earn much more working as a financial/risk analyst for a respectable investment firm/institution in no time comparatively.

  35. 48:19 Ray says it best…. These career politicians like Pelosi, Biden Feinstein, Schumer, McConnel, Graham, Cruz, McCain, etc… (too many to list) are so corrupt they HAVE destroyed this country.

  36. I wish we had leaders like this today. When I hear interviews from Cheney and Rumsfeld I feel like I’m hearing the devil. But this guy gives me faith in humanity.

  37. Raising interest rates into the 20 plus percentage rates does not endear me to Volcker. The worst possible solution to inflation was to raise rates, it was clearly a supply side problem and this idiot started the decline of the middle class. Of course you have to give Reagan a great deal of credit for destroying the middle class. The unemployment rate was far higher than 10%. Sad to hear Ray promoting this drivel.

  38. Western Empire is dying and that's a good thing America needs to be out of the way and not only her any Nation not follow suit after the same mentality she has which is a mentality of expansionism she's an imperialist state and she needs to die who cares what Paul volcker thinks

  39. This was very insightful, thank you both for this.
    Enter the new era of Political Social Media Rockstar.
    Think of AOC as a trial run for the witty and trendy millennial political superhero.
    The concept will develop with time, of course. We are a larger generation than even the Boomers and we think differently too.

  40. Ray this was huge this interview cut into the center of the onion of what the United States needs to continue being the great economic machine wow! Proud my #1 mentor and hope to one day sit and interview you in the future 💪🏼 principles! See you soon.

  41. This discussion from an American’s point of view might sound like veterans of the good fight lamenting the good old days but these guys are deluded. American world leadership has collapsed because the US polity was and still is based on industrialized racism.

    Countries as well as individuals in positions of power and wealth, like these two gentlemen, try very hard and maybe not consciously to save their reputations and so feel good about themselves. Two salient points discussed:

    The 1982 Latin American debt crisis, and representative democracy in the United States.

    Saying the US has had a “200-year run” at being a democracy is simply false; a delusion by the unseeing. Having industrialized slavery as the core of the US economy is far from describing a democracy. The US has been a democracy in mechanics but not as a society for only about 50 years, from 1965 to 2016. Before and after that it has neither had a democratic political system nor has it been a democratic society; at best it was a struggling, aspiring but not quite there democracy, far behind any other; even places like Malaysia or Turkey. With this in mind, the second point comes into focus.

    Resolving the Latin American debt crisis, which included Egypt and Iran as debtors, the only two countries under US control in the Middle East at the time, saved US banks at the expense of Latin American, Egyptian and Iranian populations. Much like the US Midwest was thrown under the bus in 2008, the working classes of Latin America, Iran and Egypt were sacrificed to save a few US politicians’ skins, Wall Street and keep big US bank solvent in the late 70s. IMF austerity obliterated middle classes there, caused social dislocation, but saved the oppressive regime elites that were complicit in the failed loans. Unlike in the US, peoples in these countries couldn’t vote the elite out like the déplorables attempted to here in 2016: the US governed these countries by proxy without representation, not unlike how descendants of Africans were still governed here.

    Subsequent to IMF-enabled social dislocation, Socialist opposition spread in Latin America, and Islamist opposition spread in Egypt and in Iran, ultimately paving the way for reactionary dictatorships to take over again, except in Iran where the revolution succeeded against a weak Shah. These were populist revolts against a massive decline of the living standards of the middle and working classes, just like here in 2016. Over in these countries however, this popular contestation was brutally suppressed by US proxies. Iran lost 1 million casualties in a war started by the US-backed and European-armed Iraqi dictatorship, and tens of thousands of Egyptian and Tunisian youth were radicalized under brutal torture by the US-backed regimes there, laying the seeds of Islamist resistance movements, of which Al-Qaeda was the most radical and deadly. They recognized that the enemy was not the dictatorships but the power backing them, and attacked the US.

    Had these two white “masters of the universe” and their cabal paid attention and accepted these other peoples as their equal in humanity, the US would have taken more care to make sure that as bad loans were restructured, US proxies may have had to go and the economic hit surely could have been cushioned on the middle and working classes. We would not have had 9-11, would not have attacked Iraq and lost that war, would not have had the troubles in Central America that turned into the immigration crisis at the southern border, and would not have a radical-religious rule in a pivotal country like Iran. To be fair, the US electoral choice is not much better, resulting in an executive branch today that’s little more than a ridiculous caricature of Mussolini’s rule. At least though the polity now listens very carefully, now with panic and fright, as Trump prepares for another election victory.

    When it all comes down, it comes down crashing. Mr. Volcker isn’t the only one listening to Chinese leadership; billions of people in Asia, Africa and the Middle East are also liking what they hear and see. They see western – white, really – democracy having turned their countries into economic, or physical, rubble, and trashing their religions and races daily from the White House, while China is incontestably the prosperity star of the first quarter of this century, investing and building abroad. Southeast Asia, Egypt, numerous African and West Asian countries see industrial and infrastructure boosts in partnership with China. Where is the US in this? Nay a bridge nor an airport nor even a transit line built; only unfair and exploitative “neoliberal” voodoo economics disaster cases.

    While the US may find itself diminished but intact after 2025, China’s influence will be a crescent enveloping South Asia, Africa and the Middle East surrounding Europe and protecting the Middle Kingdom.

    If I were Messrs Volcker and Dalio, I’d turn and try to mend fences with central and Latin American peoples before it’s too late and the Chinese crescent reaches the new world. At least there’s a shared religion; that’s half the battle, but Americans really now, truly, everyone together now must once and for all liberate the whites in their midst – all of them, to the last – from the auto-immune virus that is racism.

  42. Paul Vocker was the only great FED chairman who saved US$. Real genius and great man, respect.
    Bernanke created this rigged game and Bernanke is one of the biggest criminal. Big difference.

  43. Looking back on the Clintons Obama's and even the bushes don't give one a lot of respect for their government. I know there are good people that work in Washington but when the head is rotten it has an effect on the whole body.

  44. For the last 40 years the American People have been thrown under the bus by politicians for money by lobbyists. Our once great country has been deindustrialized and our jobs sent overseas — this happen because of POLICY. The FED has helped politicians by masking the destruction of our country. They have done this by lowering interest rates (which allows people to take on greater debt, without making more money) that has blown asset bubbles in housing and the stock market. THIS IS WHY WE HAVE TRUMP. This is the BANKERS FAULT — I do not worry about the US — it is time we stop the bankers and their destruction of our country. END THE FED. END THE FED. Educate yourself — Volcker is not a nice guy —he is a nasty lying BANKER. END THE FED>

  45. Ray Dalio is part of the problem — he has never MADE anything in his life — it is because of the financialization of our economy with the likes of him. TRUMP IS DOING THE RIGHT THING. America First. The bankers are nothing but lying globalists that have allowed the rise of China (CCP is the 4th Reich, make no mistake) — Volcker is a LIAR!!!!!!!!!!!

  46. The glory days when everyone was making millions of dollars a year in interest back in the late 1970's early 1980's the greatest American who ever lived/still lives Thee Honorary Paul Volcker. Trump want negative interest rates which will put America into an endless recession like Japan and Europe. Vote for "ANYONE OTHER THAN TRUMP" in 2020. The Fed's mandate is to fight inflate unlike today with ten percent annual inflation and Powell at the helm.

  47. I live up in Canada I remember the glory days riding in the back of chauffeur driven limousines, cruises around the world, hundreds of sports cars and vacation properties all because of Paul Volcker. Long live Paul Volcker the greatest person ever born to planet Earth. To this day I still have large framed pictures of Paul Volcker on the walls of all my homes.

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