It was just a matter of time http://www.ritholtz.com/blog/ "Bailout Ben iphone app" As for Volcker raising rates to "combat inflation" - didn't that lift a ceiling on rates at the time, which later allowed companies to charge usurious interest rates?
The conditions - record low household and corporate debt levels - were very supportive of real economic expansion and these were independent of Fed policy. In fact, it took two generations or so for household debt levels per capita to come down that far. Had consumers and corporations been in debt up to both ears (like today) Volcker's results - or the results we like to attribute to him in hindsight - might have been different.
The inflation at that time was caused by high oil prices and previous Fed chairman Burns ineffectual handling of monetary policy. Volcker was very unpopular for taking the stance he did and Reagan listened to him (which turned out to be the right course). Fed policy combined with fallling oil prices broke the trend back then. The question raised is the Fed even capable of stopping what is coming in the future?
Countered it how? It never stopped. At some point, it went down to a few %, but it never went anywhere. Meanwhile Reagan's team was kicking up his policies which was aimed deregulation for the large corporates. That was the real driver for the boom, led by the financials. It's comical to see people praising Volcker while condemning Greenspan & Bernanke. They are all on the same team, and it ain't ours. There is a method to their madness, and Volcker's policies were meant to seed the direct effects we are seeing now. Although to be fair, the more important trigger was finalizing the USD as a pure fiat by Nixon.
Volcker never was for deregulation of the banking industry, which is at the heart of this mess. "In the spring of 1987, the Federal Reserve Board votes 3to2 in favor of easing regulations under the Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker." Frontline - "The Long Demise of Glass-Steagall".
So you don't think Volcker, doing the very unpopular act of raising rates until it was in the double digits, helped at all?