"Set aside for a now the undocumented, underlying premise that money, banking and markets left alone somehow generate inflation, exchange-rate instability, financial crises, and bank failures, while central bankers allegedly cause none of these things but instead fix or mitigate them as heroic rescuers and “first responders.” The naïve imagery of Volcker or the Fed as fixers with a “toolbox” has been common among Fed apologists for decades. Yet the facts show that the Fed particularly and central bankers generally have instigated many of these troubles.
It is now long forgotten by most monetary economists and biographers that for five years (1969-1974) Volcker was undersecretary for monetary affairs at the U.S. Treasury and in 1971, after just two years on the job, joined Milton Friedman and others in pushing President Nixon to jettison the gold-exchange standard. Perhaps that’s what Cheung means by Volcker’s “inspiring rethink of monetary policy.” The subsequent decade saw wildly fluctuating exchange rates, double-digit inflation, a dollar crisis, and economic stagnation. Not coincidentally, post-war U.S. productivity gains began diminishing in the 1970s and have never fully revived. Few economists today will attribute it to our inferior monetary regime."