Paul Volcker caused a minor stir last week releasing a book he has been working on. The aging former Federal Reserve Chairman apparently has a lot to say about the current state of affairs. “We’re in a hell of a mess in every direction”, he told Andrew Ross Sorkin of The New York Times. No kidding; that about sums it up.

That’s the easy part. The hard part is figuring out why. I have little doubt Volcker doesn’t have any answers. How can he? His tenure at the Fed is the very reason we are in this mess.

It was during his time where monetary policy shed all relationship with money. Central bankers couldn’t define it anymore, the “missing money” seventies were only the beginning. After the twin recessions to begin the eighties, Volcker’s role in them seemingly definable, Economists began to believe they wouldn’t ever need to.

Monetary policy had shifted from, well, monetary policy to expectations policy. There is no money in the latter and central bankers used to be somewhat comfortable with its absence. The last decade shows they still believe in expectations management, it’s just that they aren’t nearly so comfortable.

Volcker in his 2018 book apparently criticizes the Fed’s current inflation target.

I puzzle at the rationale. A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.

It shouldn’t confuse him in the slightest, his feigned outrage smacks of revisionism. There will eventually come a time when history takes a hard look at the last few decades and judges things very harshly; especially the pieces where central bankers were once thought to represent the apex of technocratic capabilities. Greenspan and Bernanke, it appears, aren’t the only former “best and brightest” concerned about their reputations holding up to actual rather than political scrutiny.

In a monetary policy that is all about expectations, a target is more than useful. If everyone believes the Fed can do what it says, because that’s how the early eighties have been put forward as an example, then anchoring expectations at 2% or whatever other arbitrary number necessarily follows. The central bank doesn’t actually have to do anything except, as Milton Friedman warned near the end of his life, keep up with public relations. Keep feeding the belief.