SPIEGEL: The US has not yet instituted any kind of reform policy. What we see is the government and the Federal Reserve pouring money into the economy. If one looks beyond that money, one sees that the economy is in fact still shrinking.
Volcker: What should I say? That's right. We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.
SPIEGEL: To get the recovery to the point where it is right now has cost a lot of money. National debt will probably reach $12 trillion in 2019. Just serving the debt costs $17 billion a year -- at least according to this year's forecast. That's difficult to sustain.
Volcker: You've got to deal with the deficit and you've got to deal with it in a timely way. Right now, with the unemployment rate still very high, excess capacity is still evident, and the economy is dependent on government money as we said. We are not going to successfully attack the deficit right now but we have got to prepare for attacking it.
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SPIEGEL: At that time, America was the biggest exporter in the world and not the biggest importer. The America you are referring to was the biggest lender in the world and not its biggest borrower.
Volcker: That is correct. And we don't perhaps have to get all the way back there, but we have to get back in an area where there is confidence in the stability and the authority of the United States. I think we can do that but we have a challenge, we have gotten a wake-up call. There is concern in our recovery advisory group about how to rebuild the competitiveness of the United States, which inevitably means rebuilding, in part, the manufacturing sector of the economy.
SPIEGEL: What part of the manufacturing sector do you envision?
Volcker: I think there are a lot of opportunities in the so-called green economy for taking leadership. On the technical side, I mean technology development, research development, the US is doing ok, but when it comes to manufacturing some of this stuff, somehow the Germans do it all!
SPIEGEL: And a lot of Americans try to blame the Germans for this, saying that we are depending too heavily on the export industry.
Volcker: I must say, I admire Germany in this situation even with its high costs. In some ways, I think the labor cost is higher in Germany than it is in the United States but you can somehow maintain that export edge. You are dedicated to exporting, we are dedicated to financial engineering and it hasn't worked out too well. I wish we had fewer financial engineers and more mechanical engineers. Tell me the secret of how the Germans keep this going.
SPIEGEL: Maybe the reason is that the Germans don't trust the American boom and bust economy with its dedication to fast money.
Volcker: I think part of it is the psychological. The young, ambitious Germans realize that export industry and heavy engineering is the German competitive advantage. The best Americans don't even think about that. We have the Silicon Valley and that whole kind of high tech industry is still our strength but we need something broader than that too.
SPIEGEL: Outsourcing and off-shoring have been the key words of the last decades. You don't think that the times of "made in America" are over forever?
Volcker: That has been the mentality and we have to change that somehow. I think it's self-correcting in part. The glamour of going to Wall Street is not as great today as it was a few years ago.
SPIEGEL: Are you sure? The Wall Street businesses are doing well. The big bonuses are back.
Volcker: It's amazing how quickly some people want to forget about the trouble and go back to business as usual. We face a real challenge in dealing with that feeling that the crisis is over. The need for reform is obviously not over. It's hard to deny that we need some forward looking financial reform. ...
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