When I hear complaints about less liquidity, remember there is such a thing as too much liquidity.
Paul VolckerRead
It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. [I]f the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with 'free banking.' The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.
Interpretation
What this quote means
Central banks, while powerful, have often been associated with rising inflation instead of price stability.
In this quote, Paul Volcker reflects on the historical context of central banking, suggesting that the increase in central banks' influence has paralleled rising inflation rates. He argues that a focus on price stability may have been better achieved in the past under systems like the gold standard, indicating that the ability of central banks to create money can lead to negative consequences, including inflation.
Themes
Central BanksInflationMoneyPrice StabilityEconomic Policy
In practice
Example use cases
During a discussion on monetary policy, one might reference this quote to emphasize the risks associated with central bank power.
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