Paul Volcker’s op-ed in the WSJ today has drawn quite a bit of attention; we think the attention is well deserved. 

Here’s his opening salvo –

Today, the financial crisis has reached a critical point. The sharp decline in the stock market and its volatility dramatically make the point. More important if less visible, the flow of credit through the banking system and the financial markets is seriously impaired — even in part frozen.

For months, the real economy, apart from housing, had not been much affected by the developing crisis. Now, a full-scale recession appears unavoidable. Important state and local governments face deficits they may be unable to finance. Recessionary forces are apparent in other important countries and exchange rates are unstable.

Those are facts.

They are the culmination of economic imbalances, a succession of financial bubbles and financial crises that have been building for years. It’s no wonder that confidence in markets, banks, and financial management has been badly eroded. Without effective action, fear might take hold, threatening orderly recovery.

Fortunately, there is also good reason to believe that the means are now available to turn the tide. Financial authorities, in the United States and elsewhere, are now in a position to take needed and convincing action to stabilize markets and to restore trust.

He goes on to detail what he opines makes the most sense to calm the turbulent waters – a concise, well prescribed remedy in our minds. 

The key need might be the most difficult to find today –

To that end, the immediate and critical need is determined, forceful and persistent leadership — extending across administrations and Congresses. Both the public and private sectors must be involved.

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