Paul Volcker’s memoir, Keeping At it, is a must read for everyone interested in understanding how the global financial structure has developed to its current state. Born in 1927, now 91, Volcker is probably the only man who can tell you first hand what had actually happened before, during, and after major financial events, including the abandonment of the Bretton Woods framework, the Great Inflation, the Latin American debt crisis, and the first Basel Agreement (Basel 1).
As a reader, I like Volcker very much because he is (i) straightforward and yet practical, (ii) loyal to both his job and his heart, he seems always ready to resign, (iii) humorous in a cool way, making the book an interesting read.
Let me cite an example showing Volcker’s straightforward and yet humorous character. In drafting a speech for President Nixon upon the abandonment of Bretton Woods, Volcker said he had contributed a sentence “we have sinned and will do better”. but was changed to “bold leadership” to “create a new prosperity without war”.
Volcker’s words are refreshingly unminced, much easier to understand than other central bankers like Alan Greenspan and Mervyn King. An example is his views on the 2% inflation targeting, a monetary policy objective commonly adopted by many central banks. He wrote, “I puzzle about the rationale…I know of no theoretical justification…It’s difficult to be both a target and a limit at the same time…”
I do not only admire Volcker, but also envy him for his freedom to write about his interactions with senior bankers. I felt excited when reading the chapter in which Volcker wrote “…Cjtibank, whose leader, Walter Wriston, visited me for an educational meeting early in my new job. He explained that Citi had been consistently making profits. With that record, and what he saw as a relatively placid financial environment, he thought the bank had no need for capital…” In Hong Kong, ex-regulators, myself included, will not have the privilege of sharing this kind of information given the restriction imposed by the Banking Ordinance.
The last chapter, The Three Verities, is not an easy read (for me at least), but I hope readers will not skip those important and candid messages from Volcker. He stressed the importance of “Stable Prices”, “Sound Finance”, and “Good Government”. With the peg, I don't have concerns about the first verity, but I think the other two are very relevant and important in the context of our current situations in Hong Kong. Hope our senior government officials will read this chapter carefully and humbly.
