 This is Mises Weekends with your host Jeff Deist. All right, ladies and gentlemen, welcome once again. It's Mises Weekends and as you can see, we're joined by our old friend, Daniel D Martino Booth, who's gonna be speaking at our event this weekend. You can still find out about that at our website under events. Daniel, how you doing? I'm doing great today, how are you? Well, you've been very busy for people who aren't familiar with Daniel D Martino Booth. You might know her from Bloomberg. She worked for many, many years at the Dallas Fed under and with Richard Fisher, who by today's standards is a Fed hawk. Most importantly, she is the author of Fed Up, which is an excellent, what I would say, populist take on why the Fed and central banks generally are out of control. And when we finish, we'll talk about some of the things she's doing more recently. But Daniel, for starters, you were in Belgium recently. I know you travel a lot. You gave a talk about returning to normal monetary policy. Just give us the quick and dirty. First of all, what's normal? What's extraordinary? And how the hell do we ever get back? Gosh, those are like, those are really big questions. Normal existed sometime before Arthur Burns. Paul Volcker tried to get us back to normal. In reaction to that, he had to suffer mutiny and was ousted. And Alan Greenspan came in as his successor and started a over 30 year, three decade era of over intrusive monetary policy that unfortunately has been mimicked worldwide. So if you look at the excesses of the Swiss National Bank, Mario Draghi at the European Central Bank, they've really taken Alan Greenspan's lead. He is the one who I think separates the prior era from the current era. It puts the onus, it puts the weight on Jay Powell to break this trend. Yeah, well, talking about Paul Volcker, they used to have something called interest rates and people used to make money for saving money. If you say so. Yeah, but here's the thing. You know, since the crisis of 08, the Fed has more than quadrupled its balance sheet from 900 some billion to over 4 trillion. What they've said in terms of tapering so far has been miniscule. I wanna give you a quote. This is James Bullard as recently as 2010. So a couple of years after the crisis broke, he said, well, when this is all over, we'll return the Fed's balance sheet to its pre-crisis levels. And now they've walked that back. They're talking about maybe getting tapering down to 2 trillion from four. Do you think this will ever happen? Well, the $2 trillion bogie in theory, if everything runs along at the CBO estimates that are right up there with unicorns and fairy tales, they'll get to 2 trillion by 2022. At that point, stick a fork in me because it's all gonna be well done. Look, it's apparent that we will go into recession before the Fed could even cut its balance sheet in half. And I think that that is where reasonable people should have a starting point of discussion. The Fed getting back to a trillion dollar balance sheet is just not gonna happen. They created, it's deep in the weed stuff that is not applicable to a podcast situation, but they created a facility called the Reverse Repo facility that it is not, they have basically backed themselves into by design, never being able to reduce the balance sheet lower than 2 trillion dollars. I don't know that normalized is ever coming back. Right. But to sell those treasuries, that probably means, and they've claimed that they're going to allow the Fed funds rate and in general interest rates to rise, there's a whipsaw effect there though. If interest rates rise, all of a sudden, Congress finds that debt service isn't 300 some billion a year, it's 500 billion or a trillion. It becomes the single biggest item maybe in the federal budget. That becomes political. And Paul Volcker certainly felt the wrath of politics when he didn't do what the president or Congress wanted. You know, he did. And I think that if there's one thing that politicians have learned very quickly, it is the acute sensitivity that not just the Congress is borrowing costs, not just the country's borrowing costs, but that that of corporations and households have to US interest rates. Once they cross the 3% line, the spillover effects in Turkey, in Argentina, in Italy became so tremendous that they forced a walk back on interest rate policy. And now we have markets pricing in the potential for a June rate hike, but pricing out that of September to say nothing of December. Again, normalization may end up being a pipe dream because central bankers have been so controlling of every aspect of price discovery for so many years, over 30 again, that they have literally rendered markets incapable of setting prices in a natural way. If the current situation continues and they don't raise interest rates much, I mean, what does that mean? We effectively recapitalized US commercial banks in 2008. We bought all their treasury debt and worse. Paul Krugman says that's A-OK. It doesn't matter if you quadruple the monetary base as long as we're in a low interest rate environment. What if that, I mean, if that's true, that sounds like magic. Well, it sounds like a debt jubilee, which is my worst nightmare. And that is actually what I fear is a natural next step out onto the spectrum. It is one of the reasons that I actually have faith in the pragmatism that Jay Powell has already exhibited and hopefully is not buying into this Keynesian's train of thought that is led by the Paul Krugmans, the Ken Rogoffs, the Ben Bernanke's of the world, who seem to think that everything can literally be controlled and manipulated from on high because that is the antithesis of what capitalism is meant to be. And it also completely thwarts any ability for creative destruction to take hold and for the best and brightest and most innovative companies to succeed in this country. I think what's so interesting about you is you worked at the Fed, nine years. When Janet Yellen retired, yeah, nine long years, that when Janet Yellen retired, all these young Fed economists were taking their pictures with their collars popped up because apparently that was her fashion. And what struck me is how young they were and it terrifies me in the sense that they, I'm sure they're brilliant Ivy League people, kids. I don't want to disparage them, but do they know anything about history? I mean, who are these technocratic elites that seem to have so much power? Well, the thing is millennials have never known interest rates that are positive, right? Their entire lives, they've been around post facto Alan Greenspan coming into power on August 11th, 1987. A lot of them were born after, even those with PhDs. So it's an intellectual academic train wreck because they actually believe that the world they've grown up in is reality. And reality actually is that interest rates should be in the positive realm. Yeah, do you know Jerome Powell? You have any thoughts about him? I, you know, I've never met him personally. He's similar with who I am and I am certainly familiar with who he is through the work that I did for Richard Fisher. So I'm not an unknown to him. I'm proud to say, you know, he is somebody who was practical enough to work for a dollar salary to explain to the Congress the perils of the United States defaulting on its debt. It's just, these things are not done unless you just wanna hand over the reins to China tomorrow. And he is, this is in no way, actually this is the opposite of an elite statement. His net worth is somewhere in between 55 million to a hundred million dollars. That actually is a bonus because he doesn't need the Fed's pension. He doesn't need anything new. He doesn't need anything that the Fed can possibly offer to him in terms of renumeration, which is a hard word for me to say. He doesn't need it. He's simply there to serve his country. And that's the first in a long line. He has no agenda. He's not a PhD in economics. Excuse me, in economics. He's the first since Paul Volcker to not be referred to as doctor, thank you very much. The only doctors I like to have in my life are the ones that can write prescriptions. And he founded the industrials group when he was in private equity at the Carlisle group and speaks to CEOs all the time who can tell him that even if the core PCE does not say that inflation is rising, that they're getting eaten alive by their input costs and that inflation is alive and well. He will listen to his CEO contacts before he relies on some broken theoretical model. So I have hopes for him because I think he actually lives on the same place that you and me live, which is called planet Earth. So he's a little closer. He's not a wonk. He's not a wonk. He's not. But a lawyer by training. He has to stand financial markets. He truly, and you need to have that. Remember, William McChesney Martin, the longest serving Fed chairman in its history who didn't even have a graduate degree in economics to say nothing of a PhD. He was named chairman of the New York Stock Exchange at the age of 31. He was called the boy wonder of Wall Street. He was the best Fed chairman in all of its history. He coined the phrase that it's a Fed's duty to remove the punch pole just as the party gets started. I think and I hope that Jay Powell is inspired and wants to walk in the shadow of McChesney Martin and live up to his standards. That's gonna be interesting to watch his career. You mentioned that the Fed has had an impact on some other central banks, certainly Bank of Japan, ECB, Swiss National Bank. A lot of them have been in a... That's true for Mr. Carney, the Bank of England, who's afraid of his shadow. And I had great respect for Carney when he was in Canada, not so much at the Bank of England. So when they adopt similarly loose policies in some sense, in some cases even below zero interest rate policies and they do so for a long time in Japan's case, certainly. You know, we get to this question of whether the US dollar becomes the least dirty shirt in the laundry and a lot of people view Austria and the Europeans and fellow travelers as doom and gloomers and that really, relatively speaking, any sort of financial crisis actually probably nearest to the benefit of the dollar, at least in the short term. You know, and that is the sad thing. Everything that I have seen come off of Wall Street trading desks since the recent upheaval in the emerging markets, followed by Italy, is that this is great news because it's going to ensure that Mario Draghi does not push through with the tapering by September or December at the latest, that interest rates stay negative in Europe, that it stays the Fed's hand, that the last interest rate hike is going to come on June the 13th, and that it's going to be finished at that point and that all as well because we can get the printing presses revved back up and running again. This conventional wisdom turns my stomach, but again, it is what makes the markets hum and it is what is fundamentally broken in our country that again, and the world's financial system, worldwide, that began with Alan Greenspan really wanting to be a popular person and not disappoint politicians by raising interest rates. Again, that's a big no-no given the Federal Reserve is not a party of elected officials. They're supposed to be a political and objective and work to the benefit of all of their constituents, not just those on Wall Street. What's so amazing to me though, you go back and look at the federal funds rate, not the prime rate, the Fed funds rate in the late 70s under Volcker was in the high teens. I mean, a kid or a little old lady could go get 15 or 20% on a savings account. You know, it's true, Volcker's predecessor was hypnotized and paralyzed by inflation and Volcker's successors have been hypnotized and paralyzed by the specter of deflation and the only thing, there are mirror images of one another, but they behave and they act in the same way in that they force central bankers into a sensation that they can't do anything aside from try to create more debt to resolve a problem of over indebtedness. Well, last question for you is more cultural or existential. Forget the debt, forget entitlements, both of which are big enchiladas. How do we get people to care about the Fed? How do we get people to think about central banking and care about it and not relegate it to even a corner of the economics profession? Because this matters, this affects us. Look, I'm gonna put this disclaimer out there that I will never, ever, ever make a penny on FedUp. The book went to number 22 worldwide. I still won't make a penny on FedUp. The next book I write, yes, maybe so. For the moment though, I will say that because FedUp has begun to enter the classroom and the college classroom and the high school AP economics classroom that financial literacy is at the core of getting people to understand the very direct role that the Fed plays in their life. I wrote FedUp in plain English to invite people outside of our world into our world and begin to understand the role that the Fed plays. I ripped the curtain back and I'm public enemy number one at the Fed because I translated what they want it to be, gobbledygook and black magic into something that people can access and understand very easily. Again, I don't care if you go to your public library to find it, refedup. Once you've read it, pass it forward and make sure that people understand in plain English the role the Fed plays. Well, it's a great book FedUp, Daniel D. Martino Booth. You can find it at the Mises Oreg website. You can find it on Amazon. But more importantly, you can come see here this Saturday if you happen to be in Texas or the Dallas-Fort Worth area, we're having an event in Fort Worth on Saturday morning. She's gonna be one of the great lineup of speakers. You can get a signed copy from her at the event. If you want to, just go to mises.org slash events to find out about that. The easiest way to keep up with Daniel is just via her Twitter feed. It's at D. Martino Booth because she's got a great, very interesting looking new newsletter called The Daily Feather. And you can find out her website and where she'll be speaking, that sort of thing. She travels and speaks quite a bit. So that said, Daniel, thank you and we look forward to seeing you soon. Thank you so much. I appreciate your time this afternoon. Thank you.