On Wednesday November 26th 2008, President-elect Barack Obama announced that former Federal Reserve Chairman Paul Volcker will head up the newly formed President’s Economic Recovery Advisory Board. This panel will be comprised of officials from a variety of business sectors outside of government and will be tasked with providing Mr. Obama independent advice for how to jumpstart the economy and stabilize the financial markets. This new board will be modeled on the Foreign Intelligence Advisory Board that gave President Dwight Eisenhower independent opinions on intelligence issues. Austan Goolsbee, another key Obama adviser, will serve as the economic board's staff director and chief economist, Obama also announced.

Mr. Obama called the 81-year-old Paul Volcker a voice that he knows well and trusts. "Paul has been by my side throughout this campaign, providing a deep understanding of financial markets, extensive experience managing economic crises and keen insight into the global nature of this particular crisis," Obama said at his Chicago news conference announcing the appointment. This was the President-elect's third news conference in as many days focused on trying to demonstrate to the American electorate that he is trying to do something about the current credit crisis.

Paul Volcker was appointed as the Federal Reserve Chairman in 1979 and served two terms ending in 1987 when he was succeeded by Alan Greenspan. Volcker is famous for throttling the economy to crush inflation in the 1980s at one point raising short-term interest rates as high as twenty percent. According to the Wikipedia (which at times has inaccurate information, particularly regarding controversial public figures),

Many people believe that history often repeats itself. Maybe the exact details are not the same, but the two time periods in question share many common characteristics. For example, many economists point to the parallels between the current economic crisis and the period of 1932-33 when President Hoover was in the tail end of his term and about to be succeeded by Franklin Roosevelt with his "New Deal" thoughts about change to get the economy functioning again. As a result of potential parallels between various points in time, some people study various historical events, people and time periods to gain a better understanding of how current events might be handled so as to prevent the mistakes of the past. The history of the financial markets is a case in point.

Economies have had periods of prosperity and contraction throughout all known history. Some of the contractions have been caused by excess supplies of some type of inventory; others have resulted from fears about the availability of credit or fears about the soundness of the banking system. Less frequently, the periods of contraction have been led by a complete collapse in the demand for products and services (like what appears to be happening during this credit crisis). Hence, it is often useful to have a better understanding of historical events and people.

Recently President-elect Barack Obama has been announcing the new members of this economic team, such as Timothy Geithner, Larry Summers and Paul Volcker. As a result, Toomre Capital Markets LLC ("TCM") has been reviewing just what did happen in the Korean crisis of 1997 (and which resulted in the in-coming Treasury Secretary Timothy Geithner rising to the attention of Robert Rubin and Larry Summers)? Or what were the forgotten details of Paul Volcker's "Saturday Night Massacre" in October of 1979 that inflicted large losses on many Wall Street houses as he suddenly raised short-term interest rates?

On Friday April 11^th 2008, The New York Times columnist Floyd Norris penned It's a Crisis, and Ideas Are Scarce. That article starts with: "As the credit crisis has slowly expanded and worsened, there has been a flurry of activity in Washington to reduce the damage from it. There are bailouts and tax breaks, and even checks to parents of school-age children. But there is remarkably little action aimed at getting the credit system functioning again. In part, that is because there is a scarcity of ideas. Paul Volcker, the former Federal Reserve chairman whose legacy has not crumbled since he left office, was right this week when he said the financial engineers had created "a demonstrably fragile financial system that has produced unimaginable wealth for some, while repeatedly risking a cascading breakdown of the system as a whole.""

The above quote is from the extraordinary speech Former Federal Reserve Chairman Paul Volcker made to the Economic Club of New York on April 9, 2008. In the April 12^th 2008 edition of the (Toronto) Globe and Mail newspaper, Avner Mandleman penned A blunt former Fed chairman takes on Bernanke. Take heed of what he says. This is an article that Toomre Capital Markets LLC ("TCM") strongly recommends reading in its entirety. It starts with:

A few days ago an unusual event took place: Paul Volcker, the mythical U.S. Federal Reserve Board chairman from the Reagan years, criticized the policy of the current Fed chairman, Ben Bernanke, in a speech to the Economic Club of New York.

Just so you grasp how extraordinary this was, you should first understand that normally a past Fed chairman scrupulously avoids saying anything at all about current Fed policy - for the simple reason that the current Fed chairman's words are one of his most important tools: They can sway markets.

This ability does not fade entirely when a Fed chairman leaves.

So when a past Fed chairman speaks, his words can clash with those of the present one and make that one's job difficult. Out of professional courtesy, past Fed chairmen therefore keep quiet; Mr. Volcker especially - the man who hiked interest rates to 20 per cent to kill inflation, at the cost of a deep recession. But last week Mr. Volcker spoke his mind bluntly. He said, in effect, that the current Fed is not doing its job.

This would have been unusual enough. But Mr. Volcker went further. Not only is the Fed not doing its job, he said, but it is doing the wrong job: It is defending the economy and the market, instead of defending the dollar. And just to stick the knife in, Mr. Volcker added that this bad job now will make the real job - defending the greenback - much harder later. It'll cause even greater economic suffering.

In plain words, Mr. Volcker implied that the current Fed is not only incompetent, but [also] that its actions are dangerous.

There is no record of Mr. Bernanke's reaction, nor that of anyone else inside the Fed. But there was plenty of buzz in the market because what Mr. Volcker said amounted to a rousing call to raise interest rates. Yes, raise rates, and do it now. [emphasis added]