Making sense of the markets this week: September 18 Sep 16th

We’re all Volker-ians now

Paul Volker is generally credited as the person who “broke the back of inflation” as the Governor of the U.S. Federal Reserve in the 1970s. I imagine his name is Googled often these days, as markets and investor sentiment continue to be massively influenced by inflation concerns.

In the same way former debates around Keynesian fiscal policy ideas appear to have been decisively agreed upon by governments around the world, Volcker’s single-minded determination to use contractionary monetary policy in order to drag down price inflation appears to have become a dominant approach.

Due to the fact the Fed’s committed to fighting inflation at all costs, it’s no surprise the markets reacted strongly—and negatively—when the news came in that, according to the CPI report from the Bureau of Labor Statistics, costs were up 0…