What a Modern Volcker Moment Would Mean for America

This article is a direct follow-up to our earlier piece, America Needs a New Volcker Moment. In that article, we argued that only a new Volcker-style commitment to discipline can restore order to America’s financial system. Here, we take the analysis further by asking: What would a Volcker moment look like today when it occurs, and what would the ramifications be for America?

The answer requires comparing the late 1970s and early 1980s with the world of 2025. On the surface, both periods feature inflationary pressures and a Federal Reserve that risks losing credibility. Yet beneath the surface, the differences are profound. America in 1980 had lower debt, simpler financial plumbing, and fewer digital tools of control. America in 2025 is heavily leveraged, globally entangled, and operating with an infrastructure that can seize assets instantly. Understanding these contrasts is essential to grasping why a modern Volcker moment would feel far more severe than the original.

👉 Subscribe to The Merrick Spitters Reset Report™ and receive a digital copy of our international bestseller, It Starts With Gold™, along with our white paper, Last Asset Standing™ and early updates on our forthcoming book, Killing Crypto™.

In 1979, Paul Volcker confronted double-digit inflation that reached between 12 and 14 percent. To crush it, he raised the federal funds rate close to 20 percent. This decision triggered one of the harshest recessions in U.S. history. Unemployment climbed to 10.8 percent in 1982, businesses failed across sectors, and households suffered. Yet the policy restored confidence in the dollar and reasserted central bank credibility.

Today, headline inflation appears lower, hovering just under 3 percent. Policymakers point to this figure as evidence that inflation is contained. However, core inflation paints a different picture. Housing costs, insurance premiums, medical bills, and service-sector prices continue to rise. Families feel these pressures every time they pay rent, buy groceries, or renew policies. A modern Volcker moment would not be about quelling double-digit inflation but about proving that the Federal Reserve still has the discipline to defend the dollar. Credibility is now the battlefront, not just prices.

When Volcker acted in 1980, U.S. gross federal debt was under 1 trillion dollars. That level was manageable in the context of the nation’s economy. Higher rates increased costs for new borrowing, but the government could tighten spending and maintain solvency.

Fast forward to 2025, and federal debt now exceeds 37 trillion dollars, with around 30 trillion dollars held by the public. Interest expenses already surpass 1.1 trillion dollars annually at an average rate of 3.37 percent. If interest rates were raised by 3 to 5 percentage points, annual interest outlays could rise toward 2 to 2.6 trillion dollars once higher rates rolled through the debt structure. Such a burden would rival or even exceed total defense spending and Medicare outlays. Unlike the early 1980s, when fiscal restraint was still politically possible, today’s commitments to entitlement programs, military budgets, and global obligations leave little room for cuts. However, debt is only the visible burden. Beneath the surface lies an even more dangerous web: the global derivatives market, where hidden leverage multiplies every rate shock into systemic risk.

One of the most significant differences between the 1980s and today is the growth of the derivatives market. During Volcker’s tightening, financial derivatives existed but were small in scale. Today, official data from the Bank for International Settlements places global over-the-counter derivatives notional exposure in the hundreds of trillions. However, when exchange-traded contracts, leverage, and layered exposures are added, some analysts estimate the gross size of the global derivatives web at over 4 quadrillion dollars.

Derivatives are contracts that derive their value from underlying assets such as interest rates, currencies, or bonds. They are designed to hedge or speculate, but when piled on top of one another they create hidden leverage. A sharp move in interest rates today would not only raise borrowing costs. It would trigger collateral calls across this massive derivatives web. Collateral calls are demands by counterparties for more cash or securities to backstop losses. Banks and institutional investors would be forced to post cash immediately. Liquidity would evaporate as firms sold assets into falling markets just to meet margin requirements. In 2008, the collapse of Lehman Brothers revealed how quickly derivatives exposure could destabilize the system. That crisis was measured in hundreds of billions. A Volcker-style shock today could measure in quadrillions.

In the early 1980s, America faced challenges in the savings and loan sector, but overall, bank balance sheets were simpler. Today, U.S. banks are already fragile. They hold hundreds of billions of dollars in unrealized losses on their bond portfolios. These losses remain hidden because regulators allow banks to classify securities as “held-to-maturity,” meaning they are valued on the assumption they will be held until maturity and not marked to current market value.

If rates spiked higher, these unrealized losses would deepen. Bank capital would be eroded further, and confidence in mid-sized and regional banks would collapse. The failures of Silicon Valley Bank and First Republic in 2023 offered a preview of how quickly deposits can flee. A modern Volcker moment would create dozens of such failures, potentially forcing system-wide bail-ins and consolidations. In the United States, insured deposits are protected by the FDIC, but uninsured deposits and certain creditors can be written down or converted in a resolution.

Corporations and real estate owners are also far more vulnerable today. In the 1980s, companies carried lower debt loads and maturities were less clustered. Now, corporate America faces a refinancing wall of about 1.8 trillion dollars in 2025 and 2026. A refinancing wall refers to a large volume of debt that matures within a short time frame and must be rolled over at prevailing rates. Much of this debt was issued at historically low rates. Firms that once paid 3 to 4 percent will face refinancing at 8 to 10 percent under a Volcker scenario.

Commercial real estate is even more exposed. Roughly 957 billion dollars in commercial real estate debt comes due in 2025 alone. Office towers already suffer from record vacancies and falling valuations. Higher rates would push many projects into default. Regional banks, which finance a large share of commercial real estate, would be hit hardest.

Perhaps the most disturbing difference between Volcker’s time and today is the rise of digital control mechanisms. In 1980, the government could debase money or impose capital controls, but confiscation required legal processes and physical enforcement. Today, bail-in laws allow regulators to seize or convert certain obligations instantly. Tokenized property rights and central bank digital currencies (CBDCs) are also advancing quickly.

Digital rails are the interconnected electronic payment, settlement, and clearing systems that move money across banks, governments, and corporations. These rails can be monitored, restricted, or shut down in real time. A CBDC would run on such rails. In the United States, no retail CBDC has been authorized yet, but the Federal Reserve is actively researching the design. In a crisis, however, the political will to accelerate and impose a CBDC could materialize quickly.

In the event of a modern Volcker moment, policymakers would not simply allow defaults and failures. They would use the crisis as justification to roll out CBDCs and other digital containment measures. The language of “rescue” would mask what is really confiscation. Citizens would be herded into digital systems that permanently track and restrict their financial lives.

A modern Volcker moment would cascade through multiple layers of the economy. If rates rose by 3 to 5 percentage points, the federal government would face nearly 1.5 trillion dollars in additional annual interest expense. Mortgage rates would surge from their current 6.3 percent average to 8 to 10 percent, freezing the housing market and locking out first-time buyers. Corporate defaults would surge as debt became unserviceable. Banks would face hundreds of billions in additional unrealized losses. Unemployment could rise back toward the 10.8 percent peak seen in 1982.

These outcomes are not hypothetical. They are mechanical consequences of the current structure. Unlike in 1980, when America had room to absorb the pain, today’s system is already stretched. A true Volcker shock would not just create a recession. It could collapse the financial architecture itself.

Beyond the numbers, there is also a critical difference in how pain would unfold today compared to the 1980s.

The 1980s were painful but analogue. Rates rose, mortgages soared, and businesses failed, but confiscation was slow. Families had time to react. The system, though stressed, was still built on paper records and physical enforcement.

In the 2020s, pain would be digital and immediate. Deposits could be frozen overnight. Withdrawals could be capped without warning. CBDCs could be issued under the banner of “emergency liquidity” and then remain in place permanently. Every purchase could be tracked. Every transaction could be limited. The system is already wired for such control. A Volcker moment would simply provide the excuse to flip the switch.

A Volcker-style tightening in the 1980s reinforced American dominance. The dollar became the anchor of global finance, and higher rates attracted foreign capital. Today, the situation is different. Many nations are already searching for ways to reduce dependence on the U.S. dollar. China and Russia are deepening currency trade arrangements. BRICS countries are exploring settlement mechanisms outside the dollar. Even U.S. allies are testing alternatives.

If the Federal Reserve invoked a Volcker moment today, the immediate effect would be a stronger dollar. But in the medium term, countries facing unbearable dollar-denominated debt would accelerate dedollarization. Instead of cementing U.S. financial dominance, a Volcker shock could weaken it. America would still be powerful, but the world would no longer accept the dollar as unquestioned king.

In the early 1980s, Americans endured unemployment and hardship, but the social fabric held together. Families lived on single incomes more often, communities were stronger, and social media did not amplify every grievance. Today, the same level of pain would produce far sharper consequences.

Student loan delinquencies would soar as graduates faced unemployment. Auto loans and credit card defaults would spike. Homelessness would rise in cities already under strain from high housing costs. Political unrest would intensify, particularly among younger generations locked out of home ownership and secure jobs. A Volcker moment would not just be an economic crisis. It would be a social crisis that tested the cohesion of the nation.

Public and private retirement systems also face risks that were not as severe in the 1980s. Then, many workers still had defined-benefit pensions, which promised guaranteed payments. Today, most depend on defined-contribution systems such as 401(k)s. These accounts are directly exposed to stock and bond markets.

If a Volcker shock collapsed both equities and bonds, retirement balances would plummet. State pension systems like CalPERS are already under strain. A downturn could push them into crisis. Retirees, depending on market performance, would see their security vanish. The middle class, already fragile, would find its future stability erased.

A Volcker moment is unlikely to be chosen voluntarily. It will be forced by events. Possible triggers include:

• A bond market revolt where Treasury auctions fail or yields spike uncontrollably.
• A dollar crisis where foreign creditors dump U.S. debt.
• An inflation resurgence driven by energy shocks, war, or supply chain collapses.
• A collapse of confidence in the Federal Reserve itself.

Each of these scenarios could corner policymakers, leaving them no choice but to raise rates and hold them high despite political backlash.

What happens if the United States refuses the Volcker path? By 2030, debt could exceed 50 trillion dollars. Inflation could settle permanently at 4 to 5 percent. The dollar could lose its reserve status, replaced by a basket of currencies or new international settlement systems. Digital controls could become permanent as the government tries to manage capital flight.

Avoidance is not neutrality. It is surrender to a future where America becomes weaker, poorer, and less free.

Despite these dangers, invoking a Volcker moment is necessary. The alternative is not stability but slow decay. Permanent inflation erodes savings, punishes productivity, and destroys the middle class. A refusal to act condemns America to a future of endless borrowing, shrinking purchasing power, and creeping financial control.

Volcker’s harsh medicine in 1980 restored trust because it demonstrated discipline. The same principle applies today. If the Federal Reserve refuses to act, confidence in the dollar will collapse. Without credibility, the United States loses its most powerful asset: the world’s reserve currency. Once that trust is gone, it cannot easily be rebuilt.

Yes, a modern Volcker moment would trigger defaults, recessions, and political upheaval. But enduring pain now is still better than surrendering freedom later. Only through discipline can America reset its financial system on a foundation of credibility. If the nation chooses avoidance, it chooses subjugation to inflation and digital control. If it chooses the Volcker path, it chooses hardship today for the chance of sovereignty tomorrow.

The painful truth is that the likelihood of a true Volcker moment today is low. In politics and business, the instinct is always to “pay later.” Leaders postpone hard choices because the immediate costs are visible, while the long-term collapse feels abstract. That instinct is as old as government itself.

The power to force another Volcker moment rests with the Federal Reserve’s Board of Governors and the Federal Open Market Committee, led by the Chair. They can raise rates and hold them high despite political outcry. Yet their independence is fragile. Political pressure from Congress and the White House, combined with lobbying from Wall Street and corporate America, works constantly to push them toward the easy path of lower rates.

Can it be encouraged or influenced? Yes, but mostly at the margins. Markets themselves sometimes corner the Fed by forcing discipline. When bond yields spike or the dollar wobbles, the Fed has no choice but to act. Citizens and investors can encourage integrity by rewarding leaders who defend fiscal responsibility and by refusing to accept inflationary erosion as “normal.” But in practice, elites prefer delay. They prefer printing, spending, and postponing pain. This is why the Volcker path, though necessary, remains unlikely until a crisis makes it unavoidable.

The deeper issue is not just economics but national character. Can America still endure short-term suffering for long-term stability? In Volcker’s era, political leaders accepted pain because they believed in the value of discipline. Today, the culture has shifted toward instant gratification. Citizens are conditioned to expect relief checks, bailouts, and easy credit.

A Volcker moment would test not only the economy but also whether Americans still have the resolve to accept hardship for the sake of sovereignty. The temptation to delay will always be strong, but the longer the delay continues, the harsher the eventual reckoning will be.

Individuals and families cannot control federal policy, but they can protect themselves. The key is structuring wealth by security, not convenience. Digital accounts can be frozen or converted, while assets held directly remain outside institutional control.

Physical precious metals such as gold and silver are central to this approach. They carry no counterparty risk, cannot be printed or reprogrammed, and have preserved wealth through every major currency collapse in history. Whether the future brings harsh monetary discipline or ongoing inflation, gold and silver remain reliable stores of value when paper assets fail.

Other tangible assets, like farmland and food production, also provide stability, producing real output that cannot be erased by financial engineering. Reducing reliance on banks and intermediaries further limits exposure to bail-ins and account freezes.

Preparation is independence. Delay leaves families vulnerable to solutions imposed by governments in the name of rescue.

The urgent themes discussed here are expanded on in our #1 international best-selling book, It Starts With Gold™, co-authored by Peter J. Merrick, TEP® and Adrian C. Spitters, CFP®. In the book, we reveal how monetary discipline, tangible wealth, and the defence of sovereignty are the keys to surviving the storm. Visit www.ItStartsWithGold.com.

At our firm, we help clients structure their wealth by Owning Assets in Order of Asset Security. That means protecting the most vulnerable assets while strengthening positions in what history has proven to endure, including precious metals, real assets, and other tangible stores of value.

If you want to learn how to prepare for the shifts ahead, book your complimentary review with us today.

👉 Sign up today for The Merrick Spitters Reset Report™ to receive a digital copy of our international bestseller, It Starts With Gold™, our White Paper, Last Asset Standing™, and early updates on our upcoming book, Killing Crypto™. 

Stay informed. Stay prepared. Take action while you still have the freedom to choose.

Prefer a hard copy of It Starts With Gold™? You can order one from Amazon now.

1. Bureau of Labor Statistics – Consumer Price Index Data (August 2025)
2. Federal Reserve History – Volcker’s Disinflation and the 1981–82 Recession
3. U.S. Department of the Treasury – Monthly Statement of the Public Debt (August 2025)
4. Congressional Budget Office – Monthly Budget Review, August 2025
5. Bank for International Settlements – OTC Derivatives Statistics (June 2025)
6. Federal Deposit Insurance Corporation – Quarterly Banking Profile (Q2 2025)
7. Office of Financial Research – 2024 Annual Report
8. Securities Industry and Financial Markets Association – U.S. Corporate Bond Maturity Wall 2024–2026
9. Mortgage Bankers Association – Commercial Real Estate Mortgage Maturity Volumes (2025)
10. Freddie Mac – Primary Mortgage Market Survey (September 2025)