Arthur F. Burns? William McChesney Martin? G. William Miller? Paul A. Volcker?
Dear Quote Investigator: The U.S. economy has experienced two large bubbles in recent years in technology stocks and in real estate. These gyrations in the market reminded me of an old comment from a previous director of the Federal Reserve.
He said his job was to shut down any wild and irresponsible “party” involving money before it could start. He was going to take the punch bowl away before people started profligately spending money and negligently loaning money. I know this was said before the terms of Alan Greenspan and Paul Volcker, but I am not sure who said it. Would you please explore this picturesque saying?
Quote Investigator: The earliest evidence known to QI appeared in a syndicated financial column called “Trade Winds” by Lou Schneider in October 1955. About a week before the column was published William McChesney Martin who was the chairman of the Board of Governors of the Federal Reserve System delivered a speech to the Investment Bankers Association. He employed the vivid punch bowl metaphor. Boldface has been added to excerpts: 1 2
Mr. Martin owned up that the Federal Reserve “is in the position of the chaperone who ordered the punch bowl removed just when the party was really warming up.” But it was done because there are economic danger signals in sight. “If we fail to apply the brakes sufficiently, and in time, we shall go over the cliff.”
Martin definitely popularized this figurative language, and he was the speaker in the first known citation. Yet, it was not certain whether he originated this metaphorical framework. Special thanks to top researcher Barry Popik who located the above citation. His webpage on this topic is located here.
Here are additional selected citations in chronological order.
Martin was chairman during a lengthy 19-year tenure from 1951 to 1970, and he served his term under Presidents of both major parties. The seven most recent Chairmen and their years of appointment are listed on the Federal Reserve website as follows: 3
1951-1970 William McChesney Martin Jr.
1970-1978 Arthur F. Burns
1978-1979 G. William Miller
1979-1987 Paul A. Volcker
1987-2006 Alan Greenspan
2006-2014 Ben S. Bernanke
2014-Present Janet L. Yellen
In 1966 a financial reporter at “The San Diego Union” newspaper in California interviewed William Burke who was the senior economist of San Francisco’s Federal Reserve Bank and Burke employed the metaphor: 4
The “Fed” doesn’t intend to take away the punch bowl just when the party’s getting good, Burke said, “but we will do ample goal tending around it.” The reason, of course, is to stave off any strong upsurge of inflation.
In 1970, shortly after Martin’s retirement from the position of Chairman, Time magazine published a piece reviewing the “Martin era”. Time said that Martin was a non-drinker, and it attributed the saying under investigation to him: 5
A stubborn, honest and puritanically forthright man, Martin liked to explain that the Reserve Board’s unpopular actions arose out of its necessary role of “leaning against the wind.” He said: “I’m the fellow who takes away the punch bowl just when the party is getting good.” (Martin is a teetotaler.) Above all, he defended the integrity of the U.S. dollar at home and abroad, though he and the board lacked the power to do the job effectively alone.
In 1972 the New York Times analyzed the housing market in an article titled “Housing Roller Coaster”. The saying of the previous chairman of the Federal Reserve was mentioned: 6
The Federal Reserve Board could be correct in its argument that the best way to cure the ills of the housing industry would be in effect, to manage the economy better—or at least differently—so that the central bank would not be placed, repeatedly, in the words of its former chairman, William McC. Martin Jr., in need of taking away the punch bowl just when the party is getting good.
In 1978 a Texas paper reprinted an article from the Economist in London discussing the new Federal Reserve head William Miller. McChesney’s famous dictum was included: 7
Strains are inevitable. McChesney Martin once said that a Federal Reserve chairman often has the unpopular job of removing the punch bowl just as the party starts to get merry.
In 1979 the Wall Street Journal discussed efforts by the Federal Reserve to reduce the rate of inflation. Martin and the phrase he is identified with were invoked: 8
William McChesney Martin, one of Mr. Miller’s predecessors as chairman, once remarked that a Fed function was to take the punch bowl away just as the party was getting good.
In conclusion, William McChesney Martin spoke about removing a figurative punch bowl from partygoers in 1955. He popularized the expression, and the phrase has often been attributed to him. QI would tentatively credit Martin; however, it was possible that another banker or a financial writer originated the notion.
Image Notes: Photo of the punch bowl for the USS Birmingham, a cruiser in the U.S. Navy. Attribution: Sean Pathasema/Birmingham Museum of Art, Licensed under the Creative Commons Attribution 3.0 Unported license. Photo of Atlanta Monetary Museum entrance, Author Andrey Dumchev, Licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license. Images have been cropped and resized. Accessed via Wikimedia Commons.
(This question was inspired by a question from Yoram Bauman in the comments section at the weblog of Freakonomics: Quotes Uncovered. Bauman was aware that the quote was commonly attributed to Martin.)
Update History: On November 10, 2015 citations dated 1955 and 1966 were added to the article. The conclusion and other sections were re-written.
- 1955 October 25, Greensboro Record, Trade Winds: Credit Controls Policy Unchanged by Lou Schneider, Quote Page B9, Column 5, Greensboro, North Carolina. (GenealogyBank) ↩
- 1955 October 25, Evening World-Herald (Omaha World Herald), Trade Winds: Talk by FRB Chief Explicit by Lou Schneider, (Consolidated News Features), Quote Page 32, Column 1, Omaha, Nebraska. (GenealogyBank) ↩
- Website: Board of Governors of the Federal Reserve System at federalreserve.gov, Webpage: Chairmen and Active Executive Officers of the Board of Governors of the Federal Reserve System. (Accessed federalreserve.gov on November 10, 2015) link ↩
- 1966 February 18, San Diego Union, A ‘Fed’ Economist’s View: Heated Viet Nam Kills Soft Money by Carl W. Ritter (The San Diego Union’s Financial Editor), Quote Page B3, Column 1, San Diego, California. (GenealogyBank) ↩
- 1970 February 2, Time magazine, Section: Business, The Martin Era, Time Inc., New York. (Online Time magazine archive) link ↩
- 1972 August 30, New York Times, Housing Roller Coaster by H. Erich Heinemann, Page 47 (article start), New York. (ProQuest) ↩
- 1978 January 15, Dallas Morning News, View from Britain: Miller Dollar’s Still in Trouble, [Reprinted from The Economist, London], Business Section: Page H1 (GB Page 123), Column 5, Dallas Texas. (GenealogyBank) ↩
- 1979 February 20, Wall Street Journal, Speaking of Business by Lindley H. Clark Jr., Page 16, Column 3, New York. (ProQuest) ↩