One of the advantages of getting older, of course, is that you acquire perspective on life and history. Fed chiefs, it seems, enjoy a similar boost of newfound wisdom after leaving the Board of Governors.
Arthur Burns served as Fed chair over a fractious eight-year period, from 1970 to 1978, that ended with inflation spiraling out of control. Once called the “Pope of Economics” by German Chancellor Helmut Schmidt, labor leader George Meany now dubbed him a “national disaster.”
Inflation averaged just over 7 percent during the 1970s—more than triple the rate that prevailed during the 1950s and 1960s.
The economist’s soul was shaken. Burns wondered why, despite central bankers’ abhorrence of inflation and the powerful weapons they wielded against it, their mission to maintain price stability so utterly failed. In this paradox, he told an audience in 1979, lies “the anguish of central banking.”
The devaluations of the dollar in 1971 and 1973, the worldwide economic boom of 19...