By Rachel Poole and Tyler Thompson

There are those who make a difference. There are those who draft history. And then there are those who change history forever. We hope that our readers will enjoy one of the last interviews that Paul Volcker – the best Chairman of the Fed – gave last year. Paul Volcker with his policies changed financial and world history.

Lessons Learned: A Conversation with Paul A. Volcker

Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard, Yale University
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Former Fed Chairman Volcker weighs in on several issues pertinent to the Federal Reserve’s role in the US. He recalls how when Continental Illinois was on the verge of failing, the Fed and the FDIC were forced to construct an effective plan to prevent the bank from going under, a procedure that would set a precedent for years to come and make “too big to fail” a watchword in the global financial crisis of 2008. Continental Illinois’ crisis illustrated the need for bank supervision while also showing why such supervision is so difficult to enact – nobody is happy with regulation. Volcker saw the need for a stronger centralized regulator, one who could keep the big banks in check without ruffling political feathers. While some of these policies drew criticism at the time, they have nevertheless proven effective at handling inflation and holding large banks accountable. Political intervention is Fed’s policies always has been counter-productive. At the same time when central bankers’ policies create or sustain a climate of moral hazard, the macroeconomic effects (including asset price inflation) could create major distortions and market dislocations.

It’s 2022. What Does Life Look Like?

David Leonhardt, The New York Times
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Covid-19 will undoubtedly reshape our daily lives, much like past global crises have. Already we are seeing the effects. Thousands of well-known stores and companies are disappearing, colleges are closing their doors, and politics are becoming even more divided. On the other hand, as history shows, there will be many things that will not change.  
One change that is certain is that weak companies will die. When the economy opens, people will start cutting back on the products and services they find the least valuable or that can be replaced with a cheaper alternative. An economic downturn such as this will reveal inefficiencies. As Warren Buffet likes to say “It’s only when the tide goes out that you learn who’s been swimming naked.” We may very well see the demise of industries that have already been on the decline such as malls, department stores, and local newspapers. Consolidation will make the bigger companies richer and more powerful while the small businesses will struggle to survive. Another at risk industry is higher education. Enrollment rates will drop and state funding will be cut. These cuts to higher education budgets would make it even harder for poor and middle-class students to graduate, highlighting the inequalities in our country’s education system. 
Politics will have a dramatic effect on the economy during this crisis. Government policy has almost always transformed the economy in past crises. Take for example the Civil War that allowed the creation of the transcontinental railroad or the Great Depression that led to a series of federal laws that reduced inequality. The author of the article suggests that a Republican party loss in November could jolt the party into being more open to government action. On the other side of the aisle, a Democratic win could make Joe Biden a much more history-altering figure, presiding over a period of large scale political change. If a scientific breakthrough leading to an effective vaccine comes quickly, there may not be many permanent changes to everyday life. However, long-term changes could be significant if a vaccine is years out of reach. 

China is Done Biding its Time

Kurt M. Campbell and Mira Rapp-Hooper, Foreign Affairs
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As US-China relations have deteriorated over the course of the pandemic, China has taken a much harder line than usual in foreign policy, leading some to wonder if it has pivoted away from its traditional diplomatic philosophy. In the past, China’s diplomatic style was one of conservatism and tact, making measured moves to prevent any degradation of its image abroad. With the onset of Covid-19, Beijing has removed the metaphorical gloves from its rhetoric, using military and economic power to back up its statements. Clashes on the Indian border, escalation in the South China Sea, and spats with Australia, all illustrate China’s new style – a transition from defense to offense. Some of this new aggressive style can be attributed to President Xi Jinping’s consolidation of power, as many of the institutions for collective leadership established by his predecessors have been dismantled under Xi. With the US slipping at the reins of global leadership, China seems to have seen its opportunity to push for higher standing. Fortunately for US interests, the path to a better approach to China is clear: the reformation of alliances with Europe and Asia, reinvestment in international institutions, and restoration of domestic health and prosperity.

“The Pandemic is Gaining Momentum:” Africa Prepares for Surge in Infections

David Pilling, Financial Times
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The number of Covid-19 cases and deaths in Africa has begun to increase sharply, raising concerns that the continent may be about to enter a critical phase of the outbreak. As of July 20th, there were 667,000 confirmed cases and 14,500 deaths. South Africa is the worst affected country so far. Cases are doubling every couple of weeks and intensive care wards in the country’s capitals, Johannesburg and Cape Town, are overflowing. However, not all African countries have been equally struck by the virus. Countries that do not have strong air links to the rest of the world have been spared, but 22 out of Africa’s 54 countries have seen a doubling in cases over the last month. 
The continent has seen a trickling effect of the virus given that many national leaders decided to take safety and health measures very early on despite having very few cases. In general, death rates have been 2-6 times lower than the death rate in the US. Some health experts attribute this to the continent’s youthful population which has a median age of 19.4 years as compared to 38 in the US and 43 in Europe. On the other hand, some evidence suggests there is a high prevalence of asymptomatic cases thanks to its young population. Certainly more widespread testing is required to fully understand the virus and its effects on communities. Governments are trying to come up with a middle way between full lockdowns and “letting the epidemic run rampant”. Nonetheless, if 60% of Africans become infected, more than 4 million will die.