Correspondence
CORRESPONDENCE
Stein's Classic
I wish to tell you what you probably already know: "Love Between the Ages" by Benjamin J. Stein (TAS, January 1985) is no less than a classic. Congratulations to him...
...One write-down on one loan to Argentina, alas, does not sound regulation make, and my article faithfully reports the overall figures which show banks in grave danger...
...Tom Bethell's argument against disarmament talks is well done and timely ("The Costs of Arms Control," TAS, December 1984...
...Also, given the current ad hoc system of collective lending by banks to certain developing countries, "pressure" on smaller banks to lend might come from a variety of sources, including the IMF, the Fed, creditor country governments, or money center banks with large exposures...
...Paradoxically, by concentrating his criticism on Fed personages, instead of policies or operating procedures, Mr...
...After further consultation the White House operator asked that Chairman Volcker call the President when he returned...
...Fossedal's article asserts...
...The operator asked me to hold the line while she consulted with someone...
...For example, referring to the presumed political character of the Fed in the debate concerning the federal deficit, "a debate that Volcker regularly engages in, lecturing Congress on the front pages that its failure to raise taxes is ruining the economy" (p...
...I told her that he would be back on June 28...
...Overall, Mr...
...On at least two counts, the "mystique" of Paul Volcker and the Fed appears somewhat accountable-decisive intervention in the debt crisis during the second half of 1982, and bringing inflation under control during a period in which the fiscal accelerator was (and is still) jammed to the floor...
...Volckernomics After five months of avidly reading my new subscription to TAS, Gregory A. Fossedal's December article on Chairman Volcker ("The Unaccountable Mystique of Paul Volcker," TAS, December 1984) left me gasping for air...
...A three year old can "control" inflation with 10-percent unemployment...
...3. Regarding Volcker's interaction with Third World economies, one can hardly deny that foreign lending has increased in the last 15 years...
...With regard to the buildup of foreign lending by U.S...
...Congratulations to him and you...
...In my last letter, dated January 3, I requested several members of the White House to offer any evidence they might have that would tend to corroborate Ms...
...At no time did I speak to the President, or for that matter, to any White House official...
...If her story holds, I will issue a retraction...
...Mallardi, some observations: 1. The "false account" I have repeated appeared first in the New York Times months before my article...
...Talbott may be wrong-thinking, but Bethell's accusations are cowardly innuendo...
...What About Talbott...
...When she came back on the line, she asked when Chairman Volcker would return to the office...
...It sounds about as valid as, say, Krafft-Ebing on the mating habits of his German friends...
...Mallar-di's story or refute my own account...
...But as reportage...
...shareholders, see my article of July 20, 1984 in the Wall Street Journal...
...on June 25, 1984,I received a phone call at my home from a White House telephone operator...
...Mallardi lodged no protest with the Times, so readers might be tempted to suspect her motives...
...Ernest van den Haag New York, New York Once again Ben Stein's poignant description of one more bizarre Southern California folkway leaves me impressed and puzzled...
...I enjoy Stein's stuff and have no problem with seeing Southern California traduced in print...
...You must be overworked...
...Lastly, no theoretical or empirical arguments were adduced for Mr...
...Such a system had to be engineered, because the Bret-ton Woods agreement obligated signatories to exchange their currencies for dollars at a fixed rate, and obligated the U.S...
...In my opinion, her decision to respond here reflects her simple awareness of the vast influence wielded by The American Spectator relative to the Times...
...The drastic fluctuations in the dollar price of gold and other commodities under Volcker, cited in my article, suggest the fault lies not with our stars, or with other control banks, but with our Fed...
...I figure we must have attended some of the same parties and tribal rites...
...When the Fed is returned to the rule of law-a monetary standard, be it gold or the money supply-Mr...
...Saul David Van Nuys, California Benjamin J. Stein replies In response to Saul David, in a sense I am pleased I am telling him something new...
...I informed her that Chairman Volcker was in Europe and that, given the time difference, he was probably asleep...
...As for adding to Mr...
...So the only debate is over this: Do present exchange rate fluctuations reflect capricious policy on the part of our Fed or someone else's...
...Simply stated, the composition of tax and expenditure decisions is the purview of the fiscal authorities, not the Central Bank...
...Where does this insider stuff come from-some shrinkerei in Beverly Hills...
...Volcker with achieving this control despite pressure on the "fiscal accelerator," i.e., the deficits...
...Louis, Missouri Tom Bethell replies: Mr...
...Gregory A. Fossedal replies: Regarding Ms...
...Yet it was Volcker himself who pressed that accelerator to the floor...
...Borghese: 1. My "assertion" that Volcker, Shultz, et al...
...Bethell is a bonehead for writing that...
...Monetarists, supply-siders, and Keynes-ians alike view exchange rates as reflecting the supply and demand for various currencies...
...Some trade related credits to Argentina were recently downgraded by the bank regulators, as evidenced by reports in the American press...
...The Wall Street Journal reported on a typical example of Volckerspeak this January 16: "Though the Senate leadership has focused only on spending reductions, Mr...
...None has been forthcoming...
...2. Several letters to the White House, including two epistles which I directed to the personal attention of our commander-in-chief, Ronald Reagan, have failed to shed any new light on the events of June 25...
...Let him offer his evidence and sources...
...The operator was the only person to whom I spoke on the evening of June 25...
...Volcker for all that is good and blames him for nothing that is bad...
...Volcker's self-interested machinations will do much less harm, and then we can blissfully turn to other conservative tasks, such as initiating a nuclear war and tearing up the Bill of Rights...
...Isn't that a logical fallacy-name calling...
...William Safire's Before the Fall...
...In any hamburger or falafel joint (he'd have to take her to her accustomed haunts or risk seeing her expire of anorexia while learning to eat with a fork) he'd be pelted with "hey pop" wisecracks and he'd soon enough be eating at home and waiting for the play to start before taking her in...
...banks, it is simply not true that the Fed has "winked at the practice [of writing down the paper value of loans] and even encouraged increased foreign lending-without the reforms in Third World economic policy that would make the loans repayable" (p...
...For still more on the hardships Volcker has imposed on Latin economies and U.S...
...You blew it this time...
...3. I am therefore inclined to stand by my own account, which was obtained from a sinister White House aide who regularly sends notes on toilet paper to Strobe Talbott...
...Fossedal indirectly contributes to the "mystique," does he not...
...Fossedal repeats a false account of a telephone incident in which I was supposedly involved...
...In a government run by men, one must indeed concentrate on personages and petty power politics...
...Fossedal's equating of "currency manipulation" with the current arrangement of flexible exchange rates, a theme which appears throughout the article and exemplifies (I believe) a kind of "cloakroom theory" of exchange rate determination...
...It was Volcker, not me, who in repeated congressional testimony affirmed his role in smashing the Bret-ton Woods system...
...to trade dollars for a fixed value of gold reserves (at $35 to the ounce...
...My original article cites a leading expert: Volcker himself...
...Borghese likewise credits Mr...
...I'm a film producer and a writer, just like Stein...
...Volcker's mystique, that was my precise intention...
...Volcker said he would 'look elsewhere' to revenues and taxes if sufficient cuts can't be found...
...asking who is promoting it...
...Today's deficits mostly reflect the slow growth caused by Volcker's clumsy handling of monetary policy in 1981-82...
...And are we to assume that everyone who has worked in Time's Moscow bureau, or who has written prologues or translated Russian manuscripts, or even anyone who "is thought to have," is an agent of the KGB...
...She said that the President was trying to reach (continued on page 49)CORRESPONDENCE (continued from page 7) Chairman Volcker, but the Chairman was not at the office or at home...
...15, emphasis added), one gathers the impression that Paul Volcker might want taxes to be raised...
...Now, let us administer some oxygen to the gasping Mr...
...If Bethell accuses Talbott of being a witting or unwitting accomplice of the KGB, then say so...
...While increased foreign lending might be "suggested," this is only done (if at all) in the context of an IMF stand-by program, which seeks to return the debtor country to a sustainable current account position, including timely debt servicing...
...Leaving aside the unsubstantiated notion that "Paul Volcker, along with John Connally and George Shultz, engineered [the collapse of the international monetary arrangements in 1971]" (p...
...But look at the last two paragraphs...
...2. Paul Volcker has testified a number of times in favor of tax increases, particularly during the 1982 fight to pass the Bob Dole deficit-reduction plan...
...And what about this "Instead of asking whether it can 'work,' we should be...
...I suspect (hope) your intelligent and rational readers are more interested in the weight and substance of important public arguments...
...He completely misrepresents the facts in stating that President Reagan spoke to me on the telephone in an effort to obtain Chairman Volcker's phone number at a hotel in Europe...
...And yet he describes a world I have never seen...
...Obviously, I see it as part of my job to facilitate communications, and I am certainly not "under orders to screen any calls from the White House," as Mr...
...Ken Borghese Arlington, Virginia In his article on Chairman Paul Volcker published in the December issue of The American Spectator, Mr...
...The facts are as follows: At about 7:00 p.m...
...Mallardi's undergoing a polygraph examination on the matter in question...
...Jerry Spector St...
...To the extent this is true-inflation, again per my article, has been higher under Volcker than any other chairman-it came at high cost: the recessions of 1980, 1981, and 1982...
...However, a cursory reading of the Chairman's testimony on the International Debt Problem before the House Foreign Affairs Committee on August 8, 1984 would show that he never called for raising taxes, despite repeated attempts by (Democrat) House members to maneuver him into saying that taxes necessarily must be raised in any deficit reduction package...
...In my world, if he wears a toupee and she Clearasil, they will be subjected to a barrage of mean jokes, lifted eyebrows, and choked-back guffaws...
...Am I blind...
...Why must you publish such yellow-sensationally distorted, mean, and cowardly- journalism...
...CORRESPONDENCE Stein's Classic I wish to tell you what you probably already know: "Love Between the Ages" by Benjamin J. Stein (TAS, January 1985) is no less than a classic...
...McCarthyism...
...It was Volcker who (along with Shultz and Connally) advocated a floating exchange rate system when he was at Treasury (cf...
...That is why Irving Kristol aptly calls them the "Volcker deficits...
...Spector should reread my article, which, unlike his letter, included no accusations...
...engineered the collapse of Bretton Woods is hardly controversial, and hardly undocumented...
...He repeats that Volcker has "brought inflation under control...
...So the only question is, have such loans been properly regulated, and have they been contingent on wise economic policies...
...But in the interests of clarifying the historical record, I will gladly bear any costs associated with Ms...
...15), a number of misrepresentations appear in the article...
...Borghese, like many idolators, credits Mr...
...Catherine A. Mallardi Washington, D.C...
...After all, I suppose it's a function of journalism to tell readers something they did not already know...
...I get invited to studio screenings and have lunched (but not picked up the check) at La Serre...
...4. Finally, my description of exchange rate fluctuations being caused by monetary policy is hardly novel...
Vol. 18 • March 1985 • No. 3
