foreign [Music] Von Braun and he's so sick and tired of the high interest rates which have created a recession rendering him unemployed and desperate as far as he's concerned one man is responsible for his misfortune Paul Adolf volcker the chairman of the almighty American Central Bank the Federal Reserve Von Brown believes the FED is an illegitimate organization controlled by a certain group of people with agenda and he will put an end to it the Federal Reserve is a highly secure place [Music] after reaching the ground floor Jim Von Braun gets into a fight with security guards foreign Von Braun quickly realizes he's outnumbered his then disarmed arrested and sent to jail in the late 1970s inflation sits at a whopping 12 percent if left unchecked it will inevitably go out of control and it could be the end of American capitalism ever since Paul Walker decided to raise the interest rates he knew it would be a tough fight and after almost getting taken hostage he's reminded of just how real that fight is I don't believe it would have been possible without a man of Paul volcker's stature who understood the business of Central Banking from Soup To Nuts who understood the costs of not dealing with inflation from a broken economy with inflation run wild Paul volcker is the man who restored The credibility of the United States setting the stage for decades of new growth is the man who saved America [Music] during the 19th century America becomes an industrial superpower thanks to the work and Ingenuity of entrepreneurs like Rockefeller and Andrew Carnegie [Music] but as different parts of the economy become more connected a flaw in a system becomes evident the United States was built on the principle of decentralization where each state was given considerable power and autonomy unlike the rest of the Western countries like Netherlands and the UK at the time America had no Central Bank such a system worked well for America during a time when Banks were relatively isolated and small the failure of One Bank typically had minimal effect on other Banks from different state there was no need for a central bank until 1907. [Music] during the Panic of 1907 Banks started to fail like dominoes will one group of clients start withdrawing money from their Banks other clients of other Banks become suspicious of their Banks as well a panic of 1907 was the straw that broke the camel's back the US is the biggest economy in the world Americans are saying gee other countries with central banks are not having so many Financial crises why are we after barely surviving the crash the U. S government devises a plan to prevent the next financial crisis they realize that in the event that Banks fail like dominoes there should be an agency with virtually unlimited amount of money to land to those Banks this agency should become the bank of Last Resort it turns out the biggest borrower won't be Banks but the U.
S government by lending to Banks and to the government the FED controls the amount of money in the system but the Federal Reserve couldn't just praying automatically they want it there's a requirement to have at least 40 percent of U. S dollars backed by gold the so-called gold standard but the Federal Reserve typically helped more than 40 gold which give a room to control the supply of money the gold standard has worked well in many countries for decades but like what happened to America the world itself has become a one giant economy that is increasingly connected as America becomes the world's leader a new system will emerge the 20th century is the American Century after the decline of the Great Britain a new order is in place and a US dollar replaces the British pound as the world's Reserve currency and this new world is a drastically different game requiring a new set of rules at Bretton Woods New Hampshire delegates arrived for the opening of the United Nations monetary and financial conference in 1944 a new Global Currency system is invented from now on only the US dollar will be linked to Gold while the rest of the world's currencies will be linked to the US dollar [Music] the Federal Reserve now has practically become the central bank to the world now there's a very Troublesome conflict of interest with a setup for the U. S fed there's a guideline to stimulate employment so if the FED lowers interest rates to boost employment it may cause inflation which violates the Bret wood agreement to stimulate employment the fact ignores the Bretton Woods agreement and starts applying economy with a lot of liquidity I.
E printing money [Music] in the short term nothing negative happens an America enjoys a prosperous decade of the 1950s and it goes on to the early 1960s while the employment is stable and inflation is low they Here and Now declares unconditional war on poverty in America Lyndon Johnson a Democrat president became overly ambitious thinking that a government could do anything so he started a series of social programs called the Great Society which required a lot of government spending but there is no free lunch Johnson's Great Society program and his war in Vietnam since the government's budget Sky High it in turn pushes the prize level in the U. S to an unprecedented level [Music] to bring the prices down Federal Reserve is ready to raise the interest rates by selling more treasury bills thus reducing the amount of money in the system while goods and services in the economies stay relatively unchanged the reduction of overall money in the system means reducing prices it is only reasonable for the FED chairman Bill Martin to do so again this time but the rate hike means it will be more expensive for businesses to borrow money likely creating a short-term recession and president Lyndon Johnson why not let that happen [Music] the Federal Reserve was established to be independent but to ensure that his Great Society program succeeds Linda and Justin starts applying pressure on the FED to not raise interest rates until chairman Martin gives in we've talked for a long time about the independence of the Federal Reserve that's independence within the government not Independence of the government the FED starts printing more money that can be backed by gold effectively breaking the Bretton Woods agreement thank you and finally President Nixon makes it official this action will not win us any friends among the international Money traders but our primary concern is with the American workers I have directed secretary Conley to suspend temporarily the convertibility of the dollar into gold or other Reserve assets except in amounts and conditions determined to be in the interest of monetary stability and in the best interest of the United States removing the gold standards essentially give the FED even more power to control the money not just in America but the world by breaking the promise established by the Bretton Woods agreement the United States loses its credibility now is up to the new chairman of the Federal Reserve Arthur Burns to restore that trust in the dollar [Music] but just like his predecessor Martin Burns also caves in because of the political pressure especially the pressure coming from Nixon political pressures would grow where do they come from came from Congress they came for the administration came to the business Community came to the labor unions and it was just very hard to resist the whole climate of opinion was against them by the end of the 1970s the U. S dollar has lost half of its value with inflation sitting at a whopping 12 percent the question is how long will this go on inflation running out of control the answer probably for years after Arthur Burns President Carter appointed a new chairman G William Miller from the private sector [Music] lurches made it even worse as a businessman turned that chairman he was even more reluctant about raising the interest rates which could create a short-term recession so everyone at the FED got together and threw him out President Carter has very little options left he needs to find a replacement for the FED chairman fast he knows this decision will either make or break the American economy [Music] Paul Adolf volcker is from a well-off political family in New Jersey volker's father is an accomplished Township manager and a young Volker dreams of following his Father's Footsteps into politics his father was famous for his ability to run the government budget efficiently that along with the fact that he was born during the Great Depression really instilled a great capacity provoker to manage money conservatively and live frugally Walker graduates from Princeton with honors because of his excellent thesis on the Federal Reserve policies Walker then gets his master's degree in political economy for Harvard University with the degrees from prestigious schools Paul Walker's career blossoms in a span of two decades he goes from a financial Economist for Chase Manhattan Bank to working in the treasury Department during Nixon's Administration and then it gets promoted to the governor of the Federal Reserve Bank of New York in 1975.
in October 1979 Consumer Price inflation is running at over 12 percent and after the humiliated Exile of fed chairman G William Miller President Carter has his back against the wall he realizes there's a crisis of confidence he needs to find a new chairman who has what it takes to do the hard things even if that may cost him his second term as president and that new chairman is Paul volcker [Music] by 2022 inflation has come back with consumer prices holding a 9. 1 percent from the previous year this has left many Americans worried about the future because at this rate the dollars you stuff under your mattress will lose half of their value by 2030. in 1975 the Federal Reserve board started fighting arts program to improve the working environment of the Fed but surprisingly the value of Fighters also turns out to be a great hedge against inflation and this reputation has only grown over the years with Bank of America's Chief investment strategist recently recommending investing in real assets he believes that in eras when bonds and stocks struggle real assets have provided Superior risk-adjusted returns and according to historical data when inflation is over three percent art beats gold real estate and s p 500.
as a result real assets like art are quickly becoming essential to a balanced portfolio personally I would love to allocate a portion of income to Alternative assets to generate more Diversified returns but investing in Fine Arts has had a really high bar of Entry only available to millionaire and billionaire investors that's until I found Masterworks the Unicorn investment platform now I can just pull up Masterworks site and invest choosing from my catalog of offerings backed by physical multi-million dollar art with inflation through the roof demand for Masterworks has skyrocketed but anybody who uses my Phineas link gets Priority Access to their platform to skip the wait list and join the half a million other members of Masterworks I highly recommend you check out that link in the description of this video after his appointment Walker becomes the world's most powerful Central Banker with the tools and weapons to deal with inflation head on volcker understands that a big part of inflation has to do with expectations rather than reality important factor over the Long Haul has been changing not wiser monetary policy but but a monetary policy focused on anchoring inflation expectations on the one hand if inflation expectations are very well anchored then policy can relatively easily succeed in keeping inflation at Target and vice versa if policy is committed to keeping inflation near Target then inflation expectations tend to be well anchored so if the market received the signal that inflation will be dealt with it may stop expecting more inflation and companies may become more hesitant about raising prices of their products volcker announces that a Fed will enact a never-before-seen policy to curb the supply of money rather than focusing on raising the interest rates it's a clever play of words because those two things are essentially the same but Walker knows that a fierce sounding new policy will get the Public's attention it will signal that the FED really means business you know you can't deal with that problem by simply saying we're going to let inflation go ahead Walker Knowles solving the inflation will come at a tremendous short-term cost to the economy but what he doesn't know is that it may also cost his own life [Music] thank you [Music] [Music] even after nearly escaping from being taken hostage volker's nightmare has only just begun it was a very tough period And there's a lot of opposition and no doubt about it and somebody got the idea of sending in all these saw it up two by fours home builders sent volcker their protests scrolled on wooden planks within the first two years volker's fat actions have caused a severe drop in in employment it puts Volker at the center of attack by all fronts even a famous economist Milton Freeman predicts that volcker will fail catastrophically and by 1983 Freeman seems to be right as the U.
