 I would like to welcome all the students in our audience at these intro to the real world seminar and welcome to anybody who is watching online via live stream. The title of today's debate is should we end the Fed and our two speakers will be discussing the resolution. It would be beneficial for the United States to end the Federal Reserve. Today's moderator is Mr. Isaac Morehouse, founder and CEO of Praxis and I'm going to turn it over to him now to introduce our two speakers as well as the format of today's debate. Isaac. Thank you Sarah. Thank you to Phi for putting on this great event. As Sarah mentioned, it is resolved it would be beneficial for the United States to end the Federal Reserve. And giving the affirmative case is Mr. Bruce Rotman. Bruce is a, he's been a high school teacher for economics, history, government in several private high schools all across the country. He's written articles for the Freeman, which is published by Phi. He's a Claude Lamb fellow with the Institute for Humane Studies, a Salvatore fellow at the Heritage Foundation, and the NASDAQ award winner for excellence in teaching economics. And giving the negative case is Professor Sean Mahalant. He's a professor of economics at Stonehill College, an affiliated senior scholar at the Mercatus Center, and his research focuses primarily on long run economic growth. He's published in numerous scholarly journals as well as popular outlets, and he is also an alumnus of Phi programs. So with that, I will turn it over first to Mr. Rotman to make his opening statements. Thank you Isaac. Several years ago, I actually got to visit the Fed in Washington DC. Once we got through the guys with submachine guns outside, a group of teachers were ushered into the Fed. Groups of ten, and each with a person with a gun. And we walked into the Board of Governors meeting, which has this incredibly large oval table, and we waited for Ben Bernanke to enter. And he's not called Ben Bernanke, he's called the chairman. We had to put our phones away, we couldn't record it, we couldn't touch him, we couldn't take any photos. The Fed has this amazing mystique, and I'm going to argue that mystique is largely misplaced. If I were to ask the students here, or almost anybody else in the United States, the biggest economic problems facing the United States, I think many of them would say the growth of government in the US, especially the federal government, and or the growth of debt. I think the two are related to each other. And in fact, I think these two also connect to the existence of the Federal Reserve. So I'm going to make two points. First, I'm going to give a little introduction to the basic problem with central banks, and then I'm going to give a little review of how the Fed has done in the last 100 years. First, the problem, banks. Banks have fractional reserves, as most of you know. So when you give your money to a bank, the bank loans it out, and if everyone comes and gets their money, once they get their money back, they're going to have a hard time, the bank is going to have a hard time giving all the money back. Banks worry about this, they worry about liquidity problems, they worry about failure. And banks are always historically asking for an elastic currency. So the Fed was set up after the panic of 1907, it was established in 1914, with really only one job, the lender of last resort. So the Fed is the bank that another bank can go to, to solve their liquidity problems. If they need cash, the Fed can loan it to them. Eventually, its job gets bigger, it starts doing monetary policy, and then it gets more and more tools in the last 5 to 10 years. So that's basically the short version of what the Fed does. What's its report card, how's it done? I don't give too many Fs, but I would give the Fed an F, why? Two reasons, number one, Fed officials are not gods. Number two, Fed officials are not angels. Therefore, they screw up. First, the not gods problem. Central banking assumes that people know what the correct interest rate is. Bankers are kind of a conservative lot, they really are in favor of free markets, except when it comes to setting the price of money. This pretense of knowledge, which Hayek talked about, the fatal conceit of this is the ultimate flaw in the concept of central banking. Second, the not angels problem. We assume that the Fed officials, central bank officials are not influenced by politics, not by personal motives. I don't think that's realistic in a world of public choice economics. I had a conversation with the president of the St. Louis Fed at the Fed, and I asked him, I said, wouldn't we have had a better recovery if we had not intervened? If the Fed had just let the recession in 2007, 2008 take its course. He said, yeah, it would have been a faster recovery, but we just couldn't do that. Bastiat tells us that when you intervene, you have the seen and the unseen. The first effects are often seen, sometimes they're often good. The longer term effects, the unseen effects. Bastiat says unfold in succession, and often they have bad consequences. So how's the Fed done? Has it reduced bank failures? Has it reduced inflation? Has it reduced the amount of recessions in the last 100 years? Let's start with bank failures, number one. So the Fed starts in 1914. We have the roaring 20s in the 1920s because the money supply in part because the money supply really dramatically increases. 1930s, of course, we had the Great Depression, thousands of banks failed. They had one job, the lender of last resort, they dropped the ball. What about inflation? According to 2012 Journal of Macroeconomics article, the inflation rate in the United States before the Fed was, per year, negative 0.05%. In the last 50 years, with the Fed, the average inflation rate in the U.S. is 4.14%. And that level of uncertainty, of course, hurts long-term economic planning as well. Well, what about recessions? The same article concludes, quote, overall volatility in the past 100 years has been greater than in the pre-fed period. In other words, recessions are either more frequent or deeper with the Fed than before the Fed. Well, maybe all this inflation has helped lower the unemployment rate. Unemployment rate today is no lower than it was before the Fed either. If you look at the Fed and its actions in the 08 recession, the Great Recession, and you look at what their role was in basically creating the housing bubble, the indictment is clear. After the attacks of 9-11 in 2001, the Fed lowered interest rates nine times, eventually to 1%. When they finally started raising rates after the housing prices started exploding, it caused the collapse of housing prices and ultimately the near collapse of the American economy. And then they lowered the discount rate and the federal funds rate to basically what it is today, 0% in 2008. So here it is, 2014, and it's still 0%. The monetary base has gone from $800 billion in 2006 to $3.6 trillion today. I present a simple moral case. We have in the U.S. an institution that allows government to grow, to increase its debt, and thus to pass off spending from one generation to another. It's run by humans who don't know the price of money and are as fallible as the rest of us. Should we allow this institution to continue? Thank you. Thank you. Right on time as well. Professor Mulholland. I'd like to thank Fee for putting this together and I'd like to thank Bruce for entering this. This would be a lot of fun today. According to the preamble of the original Federal Reserve Act, the Federal Reserve was created to quote, furnish an elastic currency to afford means of re-discounting commercial paper to establish a more effective supervision of banking in the United States and for other purposes. In 1977, the original act was amended when the United States went off the gold standard some years before and the act was amended so that the Fed's duty was to quote, promote effectively the goal of maximum employment, stable prices, and moderate long-term interest rates. If you look on the Federal Reserve's website, you'll actually see that they also say that the Fed contributes to quote, better economic performance by acting to contain financial disruptions and preventing the spread outside of the financial sector. Well, given that these are the stated goals and the mission of the Federal Reserve, it seems fair to me that we should evaluate the Federal Reserve based on three kind of main ideas. The way to do this would be to look at a number of items pre-fed before 1913 and post-fed. Now, there's debate amongst economists whether we should look at the interwar period between World War I and World War II. So usually what economists do is they'll look at pre-fed pre-1913 and post-World War II, say 1950 to now. And I think there's three main ways to go about evaluating them. The first one is the inflation rate, how prices have changed over time. The second one is output fluctuations, so business cycles, booms and busts, both in terms of the length and the depth. And the final one would be financial crises, so financial issues and the contagion that might follow. If you look at the research, you'll see first of all that, as Bruce correctly pointed out, the Federal Reserve has failed at its idea of stable prices. In other words, the inflation rate is, as he pointed out quite admirably in his presenting remarks, is much higher now that we have the Federal Reserve than pre-1913. So on that mark, I too would give them an F. In terms of booms and busts, there's much debate on this, but recent work suggests that there's been no substantial change or overall change in the volatility of economic activity if we compare pre-1913 versus post-World War II economic activity. So on that one, I'll call it a push. We don't really know. It doesn't really seem as though the Federal Reserve has done anything in terms of changing economic fluctuations. And the third one is financial crises, and it looks like there is no way that we can credit the Fed with actually reducing the frequency of banking panics or having actually used its lender of last resort in order to stop contagion any much more so than before the Fed. And on top of this record, and I think this is where most of the people who are concerned about this, is the fact that the Federal Reserve is not very transparent. And it seems to tend to bail out poorly managed financial institutions instead of letting them fail on their own. And so this has led to a number of interesting responses to polls across the United States. If you look at people who say, hey, should we audit the Fed? It turns out that about 90% of the population says, yes, we need to audit the Fed. Only about 30% of the people in the United States have a favorable view of the Fed. And all these reasons have called for the end of the Fed or to audit the Fed. But the question is, would ending the Fed address these concerns? And short, my answer is no. You see, for much of the Federal Reserve's history, it's existed in a Keynesian world. It's existed in a world where it's acceptable for the government to balance the economy and not to allow the economic fluctuations that would naturally take place. We live in a world where most economists and almost all congressional representatives are in favor of using government resources to balance the economy. And so what we need to take a step back and think about is what would happen if we removed monetary policy as a potential tool in balancing the economy? Currently, when we have an economic downturn, there are basically three things at which you could possibly do. The first one is monetary policy. You could expand the money supply. The idea here is that if we ended up giving everyone some money, they're much more likely to go out and spend it. And if spending is the problem, this will solve the economic downturn and get us out more quickly. The second one is to have stimulus spending. And this would be Congress passing a bill that would enable them to spend an additional amount of money. They would borrow. They could borrow on various different areas. They could borrow from the Fed. They could borrow from UNI. They could borrow from foreign governments. They could borrow from foreign individuals. And the stimulus spending would enable the Congress to go out and give it to congressional districts, people in their congressional districts, to build rows, to build bridges, again, to get economic activity increasing. And finally, we could do no action. So those are the three that we could do. Well, if we were to end the Fed, we would effectively eliminate one of the tools. Right? And what this would do is it would give Congress a license to go out and be much more active. And we would see a much more active Congress in terms of actively seeking to spend more money and an economic downturn. Now, this is what I find very interesting about and concerning about potentially ending the Fed. See, if we allowed Congress the license to go out and spend more money, they already have the desire to do so. And so by giving them this license, the Congress would then be able to say, during an economic downturn, yes, we care. We do something. And we would have the likelihood that we'd be sending funding to people that support us in our current election and maybe our future elections. In other words, the opportunity for graft would actually be larger than it is today. Now, it is true that the Federal Reserve Action's monetary policy, just as fiscal policy, will create malinvestment and overconsumption. But when Congress steps in, there's more an opportunity for graft. So while the Fed leaves much to be desired, simply eliminating the Fed would likely produce more booms and busts and more graft and probably no change to financial crises. We must first change citizens' views and understanding of the costs of government invention then, and only then we'll see less desire to use government action that distorts the knowledge and welfare produced by the market process. Thanks. Thank you, Professor Mulholland. Now you each have four minutes for a rebuttal beginning with Mr. Rotman. I love the idea of changing citizens' views. I think we both agree on that. And to the degree that we can do that, and B, of course, is involved in that, that's amazing. So you presented three options. So monetary policy, fiscal policy, and basically nothing. And that we live in a Keynesian world. I don't think we ought to bury the third option and declare it kind of null and void or dead. If you look, and I agree, this is before Keynes, but if you look at the recession after World War I in the United States, which was short and it was sharp, but nine months, maybe 12 months after it was done, it was over. Now the Fed ultimately engendered that recession and you have to, I think, place responsibility in the Fed for causing that. So to say that, if you give up monetary policy, fiscal policy, then we'll be more of a problem. It's kind of like, I don't know, if I were to say we shouldn't eat cats, because they're cuddly, they purr, they're cute, and besides they taste horrible. And the response might be, well, I don't know, if we ban people from eating cats, maybe they'll eat dogs. Well, I don't think eating either is really a good idea. So I would suggest that instead of worrying so much about the problems of fiscal policy, maybe we ought to think of ways in which to constrain fiscal policy in the same sense that we would constrain the government in terms of its monetary mischief. Ben Bernanke has stated pretty clearly what the Fed can do. This is 12 years ago where he said the U.S. government has a technology called the printing press that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of dollars in circulation or even credibly threatening to do so, the government can reduce the value of a dollar in terms of goods and services, which is equivalent to raising prices in dollars of those goods and services. We conclude that under a paper money system, a determined government can always generate higher spending and hence positive inflation. Because it's just a real scary power that we give humans in the Federal Reserve this power. And I would also add that don't forget the degree to which a fiat system with a central bank allows and makes deficit spending easier. The amount of debt in the United States, we've always had government debt, but it's increased to almost catastrophic levels, first of all during World War II, and of course then today, have only been in a system of fiat money, paper money, under a Federal Reserve. And I think governments have shown us throughout history that if it's a democracy, they want to get reelected. If they're in power, they want to stay in power. They love to go to war, and they don't want to pay for the war. And so there's an impetus to inflate, and I think it's time to remove that impetus. Thank you, Professor Mahalan. I share your concern about Congress and trying to find ways to at least make them as representatives have to go and express that their current constituents will have to pay for the spending increases. But I still kind of am concerned that, I mean, we've had the Fed over the last, you know, actively doing this over the last 100 years, and the most recent two recessions, economic downturns, while we had Fed clearly engaged in monetary stimulus, it didn't stop Congress from actively going out and doing fiscal stimulus. And so even when we have a Fed, we're going to have Congress out there attempting to stimulate the economy. And so if we removed it, it seems to me that we would make it even a larger demand or a larger request for fiscal stimulus. And it's in the backdrop of the desire to send resources to people with whom we're going to help them get re-elected for projects that they care about. I mean, we had the cylinders of the world, we'd have hundreds of them. And so we would end up with a place where we would stimulate and stimulate, and it would all be congressional-based, you know, room for graft. I too share your concern about inflation, but I actually see light coming in from non-congressional activity. I see a lot of hope in cryptocurrency, Bitcoin, Litecoin, Peercoin. It seems to me when you have alternatives to shield yourself from the inflation or potential inflation, it actually reduces the power of the Fed. And so I'm actually quite hopeful that we'll see a number of these cryptocurrencies and other ways in which we can compensate each other for our labor and pay for goods and services that will actually reduce the ability of the Fed to have a negative effect on us in terms of greater inflation. All right. With that, we will open it up to questions from the audience. Go right ahead. Hi. Assuming that we did end the Federal Reserve, what sort of currency system could we immediately move to to replace the job that the Federal Reserve is doing of monetary policy? I can start with that. It's a good question. And, you know, it's kind of hard to imagine what a world would be like in other areas when we're not accustomed to those areas. What would a world of free market and education look like, with vouchers? What would a truly free market in healthcare look like? We don't exactly know. What would a truly free market in money look like? And I'm sure it would involve alternative currencies and free banking. And I think Sean and I are both very much in favor of that. So it's a little bit hard to imagine a system without a Fed because it's been around for 100 years. But we've had experience without a Fed in the United States. Banks can ask other banks for money or they can ask other institutions for money if they need money. The temptation to bail out companies and bail out banks in the political system is just too big, I think, to give to a taxpayer-supported organization. I would just like to add, one proposal would just say, look, we kind of have this expectation that the money supply is going to increase at a certain rate. We'll just set it on that rate and tell everybody else to go home. We would know what the future expectation is based on the increase in the money supply and we could still use dollars. And over time, we would enable and encourage banks to issue their own money backed by their reserves. And so you would see a slow transition, maybe Bitcoin, maybe Litecoin, maybe some coin we can't even think about today would be one or two that would become the ones that we would use on a more frequent basis. But it doesn't necessarily mean that we'd have to just instantly drop tomorrow. I'm pretty sure that you would want to pay your taxes. The federal government want you to pay your taxes in dollars. And so I think that that would be a slower transition than kind of an instant shock. Next question. This would be more directed toward the affirmative. Would you consider a central bank engaging in either the monetary policy advocated by Milton Friedman whereby there would be a money supply that is inflated yearly at a typically constant pace or one constrained by a commodity, typically gold? Sure. You know, back in the day when Friedman suggested this, increasing money supply at an X percent per year, three or four or five percent, whatever the percentage is, money was a lot more simple. We actually knew what money is. I'm not really sure what money is. There's all sorts of gradations in what money is, how to count money. And if you look at one measure of money, if you look at the monetary base, it's exploding. If you look at M2, it's much more tame. We really don't know in velocity in how quickly money moves. So I guess theoretically in a simpler world I would support Friedman's idea if that would work. I'm also theoretically I think in favor of a gold standard as well. But it's not a panacea because you can always, governments can always jump off the gold standard. They did in World War I. They did in the Civil War. In the war of 1812, the U.S. government got off the gold standard. And so the chains of a gold standard in constraining government officials don't work if you have the key to unlock the chains. But I still, in an imperfect world, I think it's a good idea. And I moved toward it. This question is also directed towards the affirmative. Assuming the Fed was disbanded and we moved away from that administration, when other currencies moved in, would the administration to run those public or private, would that not also open up more opportunities for corruption and manipulation of currency? I don't think so. I mean, no more than allowing dozens of different grocery stores to operate brings about corruption. Usually when you have innovation in a particular society, you'll have hundreds or thousands of companies. Early in the auto industry, I think in the U.S., there were hundreds, even thousands of auto makers. And then of course it whittles down to just several. I think that's probably what would happen in a free market for money. You'd have two or three or four big ones. The transaction cost of figuring out what this money is, how does it correlate to that money, relatively low in a high-tech society, I'm not too worried about that. Let me just kind of add to that. Actually, I think having a large number of competing currencies actually lent itself really well to reducing corruption, right? Because the minute we find that somebody's doing something nefarious, that currency's gone, right? And so you don't want to put your currency at risk by doing something in that nature. If you're interested in kind of free banking and cryptocurrencies and such, Larry White at George Mason does some really good work on that. So I think that's someone whose writings I would recommend as we think more about the topic of currencies and such. Politically, as I understand it, the Fed is not part of the federal government, unlike the Treasury, since it's plausible that the Fed's responsibilities could be passed to the Treasury. Would that not make it easier for the government to print and spend extravagantly? If my premise is flawed, please elaborate. Want me to start with that one? You know, the Fed really... Fed is officially not part of really a government institution, unofficially and practically it is. And practically it's basically a fourth branch of the government. So the Fed has an interesting relationship with the Treasury and, you know, it can buy debt willy-nilly. There was a period, I think, in 2011 where the government incurred a little under $600 billion of debt. The Fed bought over $500 billion of that debt. That's a good deal for the government and it's a money-making institution for the government. So I wouldn't take the responsibilities of the Fed and give them to the Treasury. I'm not sure if that would work at all. I wouldn't trust the Treasury any more than I would trust the people at the helm of the Fed. If we were to abolish the Fed, will we place Congress in charge of ensuring steady national growth? If not, then who? Congress in charge of ensuring economic growth? Yes. So Congress needs to be in charge of ensuring economic growth. The market does quite well on its own. What government needs to do is to establish the rules of the game, secure property rights, establish rule of law, and get out of the way. And you saw that in Hong Kong. You see it in the free market. And having the Fed doesn't destroy that possibility, but think back again to the horrible consequences of the last recession, which was the worst recession since the Great Depression, from which we have not yet fully recovered. And Ben Bernanke says it's not the Fed's fault. It wasn't really caused by a housing bubble. I beg to differ. Alright, and this question is to the negative side. And this is actually from the Federal Reserve's website. And they say basically that the Federal Reserve is an independent entity within the government, which they go on to elaborate that it is not subject to any government official outside of basic laws that Congress may impose or reviews that Congress may request. Should we have an independent organization in charge of our nation's entire currency? I mean, I think that's a concern, right? Should we have an independent agency? But it seems to me that if you look across countries, countries whose currency is more intertwined with congressional representatives, we see much greater rates of inflation. We see larger financial crises. We see much more volatility. You have to remember that if it's not going to be someone who's independent, it's going to be someone whose time horizon is every two to six years. And so it seems to me that that in itself, if we're going to have a currency that's run by the, you know, by the government or assigned the right by Congress to have an independent agency use monetary policy and determine the amount of money supply, then it seems to me you want someone who has a much longer time horizon than a congressional representative, which it seemed to be what you were suggesting in the question. I'm wondering what things have to happen for a decentralized currency like Bitcoin to be successful? Number one, you have to allow it. And there are cases where the federal government has come down hard on alternative currencies. One example was Norfet. And the creator of Norfet is, I think, currently in jail. And presumably, I mean, in American history, you have a long tradition of alternative currencies from other countries being used, people minting their own coins, and yet under the current system, you can go to jail if you do your own currency. So I worry a little bit about that. And so my first suggestion is get out of the way and let it happen. And of course it threatens government power, and that's why they're worried about it. Yeah, I would say that I would agree with Bruce that we need to kind of let it run. There's two concerns that if you're a central government that you're going to be worried about if you have independent currency. The first which I would say has some legitimacy is that people who are doing nefarious things, selling illegal goods and such, may use it as a way to avoid being found. And so I could see why. This will probably be the hook that you'll hear when they go to propose legislation about all the bad stuff going on that's being compensated by these currencies. The other, of course, is that much of the exchange is not taxable. So the compensation isn't taxed because it's not denominated in dollars, so it's not really a dollar compensation, and so it's easy to avoid taxation. That will also be claimed, but I think over time it would be more acceptable to kind of grant them a freedom to move and let it build up and be developed, at which point, of course, then being compensated in dollars or Bitcoin or Litecoin or whatever the coin may be. It might be a legitimate reason to tax them, but it would be such a well-developed kind of currency system that that wouldn't actually be the nefarious idea would kind of be dwarfed by all the good that's taking place. Hi. This is a question mainly to the negative, touching on Mr. Rodman's point of the privacy of the Federal Reserve. Wouldn't you say it's better for, I guess, we're all against the willy-nilly spending and printing of money, but wouldn't you say it's better for that to be in the hands of the government adversaries that we can actually see and actually vote for rather than independent, private organizations that we're not entirely sure who they are and what they do? Man, I'm not sympathetic of that. It seems to me that if you have multiple competing currencies, then you really don't have that concern. I would strongly suggest that having independent currencies allows you to change if you feel like something's being done wrong to switch the type of currency you use. I think the problem with having it in the Federal Reserve is that you can't see what's going on. I'm not really sure if I answered your question. Maybe Bruce understands the question better than I did. In some ways, the Fed has been kind of transparent. You can go to the Fed websites and see how much money there is in various categories. But it is true. You don't know exactly what happens at Fed meetings and every time the Fed chairman sneezes, the world catches a cold. The system is kind of scary in that sense and I understand why they want to be secret. If you're in a Fed meeting and you're openly worried about a recession and that hits the papers, stock market crashes and panic ensues, who knows what could happen. They have a reason for their secrecy and I think an institution like that probably is bound to be sort of secretive. The founding of the Fed was largely secret. Certainly when it was voted on in 1913, if anyone had said, well, this institution is going to be in charge of the money supply, is going to control interest rates, is going to accumulate powers, is going to have the power to bail out companies that are failing to buy stocks, I think it would not have passed even in that progressive moment. I think the Fed is probably more transparent perhaps than we might think, but I'm not worried so much about that as the powers that they have and the effects of their actions. Professor Mohan, let me rephrase that question for you really quickly and see if I can get to what the question was asking. Do you think that having the Fed made up of, let's say, democratically elected people would make it more accountable and therefore produce better policy? No, I think the time horizon of the elected officials is so short that they would make better policy. You might be able to see it, but you wouldn't like it. Next question. I'd like to ask Dr. Mohan where the positive justification for the existence of the Fed is because as you stated in your opening remarks, it really hasn't helped with the inflation or with boom both cycles or with financial crises. I think that's a legitimate question. I mean, I think that the only positive I can see is basically in my remarks and that is because Congress and the Federal Reserve don't operate in a vacuum, in some sense they operate conditional on what the other is doing, the Fed actually, I believe, actually reduces the amount of stimulus spending that you would see in any type of economic downturn. And one of the problems with increase in stimulus spending is that what is claimed to be a stimulus spending usually ends up being part of the permanent budget in future years. So if we lived in a world where we didn't have the Federal Reserve, Congress would increase spending, that increase in spending would become just part of the average budget the next year. And so we'd actually have a larger government in terms of spending. We'd have more graft and so that is my kind of positive spin on why I think having the Fed is beneficial. I do think it does make sense to have some type of organization that serves as a lender of last resort. It doesn't have to be a government, you know, authorized agency. It could easily be one that's constructed by a number of banking institutions, insurance institutions that could be privately run. And so in that sense I think that it does serve a purpose that would exist out there, but it wouldn't necessarily have to be through as a government agency. So to kind of make the answer short, it does serve a purpose that I think is valuable, that could be run by a private agency, but the other second valuable is that it kind of restricts Congress's stimulus spending. So I guess my question is two-fold. First off, is the Federal Reserve accountable to anyone besides the U.S. Congress and the public, and second of all is it audited by any government agency, maybe the GAO and if so basically can you walk me through how that actually happens? I think those are my too many questions. So what was the first one? Is it accountable to anyone other than the public and U.S. Congress? So really I would say the Federal Reserve is probably most accountable to member banks. So the Federal Reserve is owned by commercial banks that you're familiar with, Bank of America, BB&T and such. So I would say they're probably most most attentive to the concerns of the banks. Probably secondary concerns with only through being nominated and then confirmed by the Senate in terms of the Chairman of the Federal Reserve. And so I would say they're not probably able to be held accountable so much but they do have a charge and I do think that the Congress or Senate is always kind of making sure that they meet that charge. And so I think that we'll it is a concern that they're independent but I think there is some oversight in that sense. The Fed as you know has a dual mandate and that came from Congress unlike the European Central Bank which basically their mandate is price stability. So the Fed's dual mandate is price stability and pursuing economic growth. And it's the second one which brings the mischief for Fed policy. I still remain worried about government spending as much as you do but on the other hand think about the percentage of government spending that's discretionary. I think every year it's a little less. So one might argue that Congress is constrained to some extent from ramping up spending because of the huge amount of entitlement spending that it's pretty much committed to do. This question is for the negative. I was just wondering what kind of steps would have to be taken before you were comfortable dissolving the Fed. You mentioned educating the public to reduce Congress spending. I'm just curious what kind of steps would have to be taken. Yeah, I mean that's a great question. You know I think one of the things is I would have to kind of be confident that a number of people would realize the costs of the spending the short term stimulus spending. One of the proposals that I've heard and I think would be quite I would be supportive of government spending that's higher than tax revenue that if Congress wants to go and say you have a 10% increase in spending that some fraction of that has to come from current increases in tax revenue. So if you want to increase spending by $100,000 we have to increase taxes by $10,000 or some percentage of that increase. So the cost of the increase spending today would be paid for by current taxpayers. And so that would restrict Congress's ability and we could debate on the percentages but that would restrict Congress's ability to just come in and just spend a bunch of money and put off the cost of that in the future and know you'd actually bear some of that today. I mean that would be one way in which I would be more confident that we would see less government spending from Congress and then that would enable me to be less concerned if you'd want to make sure you'd set up some type of transition to some type of lender of last resort as a private owned and agent of commercial banks and not of the government. And I also think we'd want to have other currencies kind of out there floating around being used by a large number of people. I think those three things would be really important before I would actually start being less concerned about ending the Fed. I've got a question for the affirmative. If the Fed was disbanded how would you move to other currencies? Now with currencies such as Bitcoin there have been security questions and issues about whether those currencies are actually secure whether or not people could lose hundreds of thousands of dollars. Now with the Fed as being a government organization there are tons of security checks in place to help prevent things like that. In the foreseeable future after the Fed was disbanded how would you see private currencies being able to have the effectiveness of government organizations providing security for the people that use their currencies? Yeah, two quick answers. I think ultimately growing pains will go away and those currencies will figure it out. Second response is we didn't have a Fed before 1914 and we had U.S. dollars. I don't think the two are necessarily incompatible. I'm going to ask both of you. We have a few minutes left. Final question. You alluded to it a little bit Mr. Rotman earlier but I'd like you both to talk a little bit about what might be the effects not so much directly economic if the Fed were to be eliminated and I'm thinking in particular regardless of what Congress might do in terms of economic stimulus might that affect some of the other things government does? You mentioned war in particular. What are the thoughts on some of the not as directly economic effects of a world without a Federal Reserve? I think war is a big one. A world without the ability to have unlimited amounts of debt is a world in which when you go to war you actually have to raise taxes to fight the war. In economics we want prices to actually reflect the diversity of the good. We've had an Iraq war. We've had Afghanistan war. They've basically been free wars. We've borrowed the money essentially on the margin from China and we haven't paid for it yet and young people are going to pay for that in the future. If we had increased taxes by one trillion dollars to pay for these wars. That's $3,000 every man, woman and child in the United States. I think we would have been a little bit more hesitant to use our military force and think of the long-term repercussions of these wars and for that matter long-term repercussions of the welfare state and the insidious effects of inflation. That's livable but one never knows how it ends and in all of history debt ends in either and hyperinflation erodes moral character. I have two thoughts. One which I think is quite positive and one which is kind of scary. The first is that I think if we eliminated the Fed institutions would behave in a much less risky manner. They would recognize that they would bear more cost of their action. They wouldn't view that the world is such that the benefits are privatized and the costs are socialized. They would probably view their actions in a much more private manner. I think they would be less willing to take on risk and would probably operate in a much more sound manner. One of the things that just occurred to me and I read briefly about this. Imagine a world where if you eliminated the Fed, how would the world respond? What would the world currency markets do if all of a sudden there was no Federal Reserve that was backing the dollar? The question is would the dollar still be considered a reserve currency and if not would people try to get rid of it? In other words how would that affect the prices and such in the short run if you got rid of the Fed? That would seem to me to be kind of concerning as a short run issue especially if we hadn't developed these other currencies as ways of trading. Thank you very much. We have two minutes for each of our debaters to give their final remarks and we're going to flip that order from the beginning so we're going to start with the negative with Professor Mulholland and then we'll move on. I want to thank Fee again for inviting me to be a part of this and I want to thank everybody here that was watching and everybody online. John Maynard Keynes once said you can't make a fat man skinny by tightening his belt. The moral of course is that he has to become skinny first and then he'll fit into the smaller loop. Eliminating the Fed will not shrink government. It'll find a way to borrow. It will not reduce intervention. It will simply grant Congress a greater license. Congress who's made up of men and women who are worried about the election that's almost always next year. They have a short time horizon and so they're worried about being able to come home to their constituents and tell you I've done something today because I care because I see that you're suffering. I'm spending on your future citizens for revenue today and instead of having prices that signal information and knowledge it becomes muddled with malinvestment and overconsumption so I think ending the Fed would result in greater amount investment, greater over consumption and greater graft for the people who help get them elected. Thank you. Mr. Rotman. I'd also like to thank Fee and thank Calvin College and I was a Calvin student. I imagine a scenario of a rogue Calvin student perhaps sneaking something like vodka into the water supply and I'm sure it would never happen but what would happen and perhaps students would be bumping into trees and losing their way and would you blame the students or would in fact you blame the guy who spiked the punch bowl. I think the Fed by spiking the punch bowl creates the booms that lead to the bus in our society. It's like a monetary pusher to a nation addicted to spending. It won't, ending the Fed won't solve the root problem of our wanting something for nothing. Wanting a free lunch. Ultimately I think education has to solve that problem and it probably will never be completely solved I'm sure. But I think ending the Fed is probably a necessary precondition for ending our addiction to debt our addiction to spending is what will happen once all this money that the Fed has created with quantitative easing in the last several years. So I think it's a first step. It is a necessary step. It's not the only step and it's not a panacea. Thank you very much. I'd like to thank both of our speakers here. You did a great job. Let's give them a round of applause. Thank you again and congratulations to Calvin College, to everyone in our audience and we are not responsible for the actions of future Calvin College students after Mr. Rotman's recommendation. Thank you.