Mr. Volcker was known to be frustrated with the Fed’s halfhearted efforts to curb inflation, leading Mr. Carter’s aides to warn that he might drive the economy into recession.
Meeting Mr. Carter in the Oval Office, Mr. Volcker slumped on a couch, a familiar cigar in hand, and gestured at Mr. Miller, who was in the room. “You have to understand,” Mr. Volcker said he told the president, “if you appoint me, I favor a tighter policy than that fellow.”
In taking the job, Mr. Volcker strained his finances and his family life.
The job of chairman paid half as much as his post at the New York Fed, and Mr. Volcker’s wife at the time, Barbara Volcker, who struggled for much of her life from debilitating rheumatoid arthritis as well as diabetes, remained in New York to be near her longtime physician. (She died in 1998.) Their son, James, who was born with cerebral palsy, also remained in New York.
Mr. Volcker married Barbara Bahnson in 1954. After her death, he married Anke Dening, his longtime assistant, in 2010. Besides her, he is survived by his son, James; a daughter, Janice Volcker Zima; a sister, Virginia Streitfeld; and four grandchildren.
When Mr. Volcker arrived in Washington, the national inflation rate was exceeding 1 percent a month. (By comparison, in 2017 inflation was less than 2 percent for the whole year.) Rapid and unpredictable inflation encourages spending while discouraging investment, a combination that creates economic instability and, often, political instability.
Henry C. Wallich, a Fed governor who had lived through the hyperinflation of Weimar Germany and often told of paying 150 billion marks to use a neighborhood swimming pool, was among those warning that the Fed was losing control.
Many economists still argued that the Fed could reduce inflation gently, without causing a recession, by raising interest rates just enough to slow economic activity. But Mr. Volcker said inflation had become a self-fulfilling prophecy. People had come to expect prices and wages to rise, so they borrowed and spent more and demanded larger pay increases, and prices and wages rose.