 Our next speaker is also someone who's a journalist in many senses. It's interesting to me that both Nomi Prince and Danielle Booth are journalists in the sense that they're chronicling what's going on in a way that, in my opinion, our overly credulous financial press does not do. You'll see Danielle on a variety of Bloomberg shows. She has degrees in both business and journalism, but perhaps most importantly for our purposes, she spent 10 years working at the Dallas Federal Reserve Bank under Richard Fisher, or with Richard Fisher, who by today's standards at any rate qualifies as a Fed hawk. And she's also the author of a fantastic book called Fed Up, which will really explain in great lay terms what central banks, what the Fed does, and why it's harmful. So please, a big round of applause for Danielle. Good afternoon. How was everybody? Good. See, now you know you're in Texas. I'm going to share a funny story with you about Nomi, if you don't mind Nomi. So I live in Dallas, and I come over here about five or six times a year. We have eight season tickets to the TCU games that I'm dragged to kicking and screaming since my husband is a hornfrog and I am not. And in any event, that's when I come to Fort Worth. So Nomi reached out to me. She said, I'm going to be in town and we'd never actually met in person. She wrote on the back of my book jacket. I wrote on the back of her book jacket. We were able to check off a demographic, you know, a woman who thinks about money, check, check, made our publishers very happy. Anyway, I'm coming to town. Be great to meet in person. I said, great. That's all I knew was that I'm coming to town. So not cow town, town. So I said, well, great. Well, let's have dinner at this wonderful institution called Javier's. And she said, well, that sounds like a great idea. I said, great, wonderful. So she's coming in from Austin yesterday. And she reaches out to me and she said, it shows that Javier's is an hour and 20 minute drive from my hotel in Fort Worth. And I emailed her back and I said, did you say Fort Worth? And she said, she said yes. I said, oh, she's like, maybe we need to exchange cell phones at this point. So I ubered over here last night. I said, well, just meet me at Joe T's because I couldn't think of any place to go in Fort Worth. And it was approximately 100 and something degrees at dinner time. And the line looked like it was about 110 degrees long. So I got back with her really quick. And we both had a lovely dinner on 4th and Throck Morton at Taverna. And I have to tell you, for somebody who only sees that stadium, you guys have a really nice downtown. So I ubered back last night and I just ubered back over today and then I'll uber back over here. The Uber and Lyft drivers right now are making a lot of money. It's all good. In any event, I would like to thank Jeff for having me here today. My remarks will be a little bit more in the style that I learned from Richard Fisher. And my font has actually gotten to be as big as his. So that's really scary. That's a sign of my eyesight. But hopefully you'll come with me on this journey and come away equally enraged. I listened to Nomi and I listened to this idea about this collusion. And she takes it one step further than me because she goes global. I, on the other hand, was on the inside. And I would never have been on the inside if it wasn't for the man who pulled me in. So with that, I need to make sure. I actually spoke to the European Parliament a few days ago in Brussels and there were actually central bankers in the audience. I need to make sure. We don't have any former central bankers reformed central bankers in the room. Good. Okay. They don't really like what I have to say. So I was just making sure. I actually got a few hands in Brussels. A bit of background. I followed Richard Fisher into the Dallas Federal Reserve after he was named president of the bank. At the time, the world was on the cusp of the great financial crisis. And I were birds of a feather in one very critical sense. Neither of us were PhDs in economics. We both had backgrounds on Wall Street in the markets. He started off at Brown Brothers Harriman in a year that I can't. I wasn't born. I started off at a firm named Donaldson Lufkin and Jen Rhett. That was sold at the peak of the, of Greenspan's first magical bubble in the year 2000. But we were markets people. We had Wall Street backgrounds, and we both felt compelled to serve our country. Neither of us needed to. That's kind of critical when you think about central bankers in general, because most of them enjoy their pensions. Now, Richard didn't fit in among the academics, nor did I. Perhaps it had something to do with our inability to seasonally adjust our way of thinking. A great friend of mine who is an economist at Wells Fargo, I shared the podium with a few years ago once remarked of himself, bear in mind, I'm taller than he is, and I'm wearing very high heels and he has no hair. But he once remarked of himself, if you seasonally adjusted me, I would be George Clooney. That is what seasonally adjusting does. Now, my friend's self-deprecation triggered a bit of introspection on my part. As I exited my post as a central banker in the summer of 2015, I had weathered the storm of the financial crisis from the inside, and I had plenty of scars to show for it. And yet, as one CNBC anchor remarked, days after I left the Fed, I didn't look anything like any central banker that he had ever seen. Of course, this was way prior to this whole me too thing. So his off-the-cuff remark, which was not well received by his superiors and producers at all, it helped open my eyes to the obvious. And that's that I would never be perceived as a central banker. That was especially the case when I was on the inside looking out. But then I didn't join the Fed to become a central banker per se. That would have required having a preset agenda before I walked through the front door of what I came to know as the most political institution in the United States. In time, I discovered that politics and hubris stopped the Fed from using the financial crisis as an opportunity to reinvent itself. That opportunity, I'm sad to report, was squandered. Now, the outrage that it provoked in me, that became a book. Now, I'm proud to report that Fed Up has been a raging success, and that means two things. One, I will never ever get another holiday card from anyone at the Fed. I once was in... I've made it back inside the Dallas Fed one time, and somebody said, how did security let you through? And two, and curiously, I have become public enemy number one for the conspiracy theorists. The ones who imagine the Fed to be some secretive order of corrupt bankers set out to destroy the world, if only. In this extraordinarily parallel universe that these people occupy, all central bankers' last names are Rothschild, and only one store of value on planet Earth exists, and that is gold, preferably buried in your backyard. In reality, the Fed is a much quieter, I would even say gentile institution, controlled by a silent majority of academics who've largely been trained in the same exact school of thought. The Fed's leaders get along in the most civil way imaginable, and therein lies the problem, because the Fed is anything but powerless. In fact, it is very powerful. I've come to refer to this cabal of unelected, as Nomi explained, unelected officials as the fourth branch of the United States government. The problem is what's missing, and that's the checks and balances that our forefathers put in place to prevent any one arm of the US government from attaining too much power over we, the people. One of the reasons I ended up as Fed up, as I am, is that the overly intrusive actions of those who've shepherded our financial system since Greenspan took office on August the 11th, 1987, have taken a grave toll on our nation's economic well-being. And after listening to Nomi, I'm convinced that they've taken a grave toll also in our position as a sovereign nation in this world. How so? Put your seatbelts on. This is going to be like the only fun part of my comments. I'm just saying. In a normal state, markets function as price discovery mechanisms. I'm going to share a story with you to explain. Ask any woman anywhere around the world, this is universal, and she will tell you that there's nothing as delightful as being on the receiving end of a perfect Robin's Egg blue gift box, the iconic representation of Tiffany's jeweler. As it so happens, a story about Charles Louis Tiffany and J.P. Morgan, the banker, has proved immensely valuable in explaining how financial markets are intended to act to my four children. Being the astute jeweler that he was, Mr. Tiffany knew that Mr. Morgan had an acute affinity for diamond stickpins. One day, Tiffany came across a particularly unusual and extraordinarily beautiful stickpin. As was the custom of the day, he sent a man around to Morgan's office with the stickpin elegantly wrapped in a Robin's Egg blue gift box with the following note enclosed. My dear Mr. Morgan, knowing your exceptional taste in stickpins, I have sent this rare and exquisite piece for your consideration. Due to its rarity, it is priced at $5,000. If you choose to accept it, please send a man to my office tomorrow with your check for $5,000. If you choose not to accept, you may send your man back with the pin. So the next day the man arrived at Tiffany's with the same box in a new wrapping and a different message. In that envelope was a note which read, My dear Mr. Tiffany, the pin is truly magnificent. The price of $5,000 may be a bit rich. I have been close to check for $4,000. If you choose to accept, send my man back with the box. If not, send back the check. He will leave the box with you. Tiffany stared at the check for several minutes. It was indeed a great deal of money and yet, and yet he was sure the pin was worth every penny of $5,000. Finally he said to the man, You may return the check to Mr. Morgan. My price was firm. And so the man took the check and placed the gift wrap box on Tiffany's desk. Tiffany sat for a minute thinking of the check he'd returned and then he unwrapped the box to remove the stick pin. When he opened the box he found not the stick pin but rather a check from Morgan for $5,000 and a note with a single sentence. Just checking the price. Just checking the price that, my friends, that is how markets are meant to operate in a natural state. Today though we trade in the dark. We have done so since 1987. That year may stick in your minds for two very good reasons. A, the stock market crashed. But B, and much more importantly, there was a new sheriff in town. Alan Greenspan had just been named chairman of the Fed. Eventually he would be referred to simply as the maestro for his ability to suspend the business cycle and more importantly the magical way he created mountains of wealth. A skill he passed down to his two successors. How did it all begin? Well in fact there's another story. And yes it does begin on a fateful day in 1987 though it was not the 19th as you may be thinking. On that Monday Alan Greenspan was aboard a plane on a flight from Washington DC into DFW. Is it so happens? He was to deliver a keynote address at a prestigious economics conference that next morning. When he landed a really frazzled Dallas Federal Reserve employee rushed the plane with one of those old-fashioned brick phones. There was somebody on the other end of the line from the Federal Reserve Board in DC informing him that the Dow Jones industrials had crashed when he was in the air. It had fallen 508 points 23% in one trading session which remains to this day the worst in US stock market history. Suffice it to say Greenspan never made it to the podium. First thing the next morning he was aboard another plane back to Washington DC to do damage control. Something he got to be very good at. He directed the Fed to release a statement that said the following. The Federal Reserve consistent with its responsibilities as the nation's central bank affirmed today its readiness to serve as a source of liquidity to support the economic and financial systems. He was not kidding. In the weeks and months that followed Greenspan would go so far as to allow those on the New York Fed's open market desk to leak information to Wall Street bond trading desks ahead of Fed moves to inject liquidity into the system. This is documented. In Wall Street parlance he'd invited those who would profit the most to front run the Fed. As the years went by Greenspan would increasingly impose his will upon financial markets. 1994's double whammy of Mexico's tequila crisis as Nomi just described. Orange County, California's bankruptcy both were met with emergency measures. This was followed in 1998 with the implosion of long-term capital management. An academic run hedge fund that threatened to unleash systemic risk across the global financial system. All of these effective rescues led to the sustainability of the most overvalued stock market in U.S. history. One that collapsed under its own weight as we all remember in March of 2000. Now as a rookie on Wall Street in 1996 the same year Greenspan called out investors irrational exuberance. I can tell you I didn't know what the Fed was but that the Fed's actions gave new meaning to the idea of the invisible hand unleashing untold levels of moral hazard as investors became increasingly brazen speculators knowing their risk of loss would be mitigated if something went wrong. Before there was don't fight the Fed the establishment of the Fed has your back came first. I'll never forget raising my hand at a meeting at DLJ in the morning asking our in-house equity analysts why he refused to lower his price target on a company by the name of Enron despite this big energy firm's clear lack of ability to generate something we call a profit. Now the simple answer is that this analyst who made his mother proud years later testifying in front of Congress he knew what I knew what I did not know, excuse me and that's that his back was covered as long as the music was playing as Chuck Prince famously said that is of course until Enron blew up and he was right Wall Street made boatloads off speculative deals all the way up until the day bankruptcy declared and this is just one example the bottom line is Wall Street knew it would always win even if it required taking Main Street down they've never blinked an eye in that process all the while price discovery got slowly ravaged today we all wear beer goggles and promise you I had to do a full translation of beer goggles to the people in Brussels y'all know what beer goggles are and you know that come closing time they make everything appear a lot more attractive than what they really are just saying I wrote about it this last week it's been a long time since I read those Mickey Gillies you know I thought I was going home with an 8 and woke up with a 1 anyways we won't go there not PC okay all you need to know about those beer goggles is the day that it started and that was not the 19th of October 1987 but rather the 20th of October 1987 the day of the birth of the Greenspan put in the roller coaster years that followed Greenspan would again pull out all stops to prevent creative destruction from taking hold the Fed's extraordinary exertions of course led to the inflation of the housing bubble which eventually culminated in the great financial crisis and the Fed's subsequent reaction that we now know has gone global and viral the reaction of course refers to the zero interest rate policy and quantitative easing years a time that defines the time that I was on the inside the Fed the 24 trillion dollars in wealth created during the housing boom and largely destroyed by the subsequent crisis has today been largely displaced by the 40 trillion dollars in paper gains that have been generated since the stock market bottomed in March 2009 now you may note we've got fire alerts going on all around here you may note that I use the word paper to describe investors gains and that's intentional paper as you know is highly combustible so what do those two eras separated by a decade have in common well in a word valuations no matter how you measure valuations today asset prices have run wild as was the case in the years preceding the last crisis asset price inflation is curiously absent from most of the gauges that the Fed uses to track inflation there's a new one that actually does capture asset price inflation we could spend two hours talking about it mainly because it now gives the Fed license to stay lower for longer in the next crisis they are now going to try and set inflation within a target range that can run above the 2% target that they've never managed to hit in any event I digress the good news is most people at the Fed still don't know how to measure inflation which makes it mighty hard for them to know that commercial real estate in this country has never ever been as richly valued as it is today valuations have long since pierced their former highs I speak privately to people in commercial real estate and they tell me every other day that they've never seen anything like this in their career a lot of it has to do with the money chasing after the asset class it's never even been involved in it as for bonds at over $250 trillion the size of the global credit markets dwarfs that of the stock market moreover the growth of the credit markets has been extraordinary since 2007 contrary to any notion that we've just lived through some era of beautiful deleveraging not true because whether the risk of holding bonds is being adequately rewarded now last year a group of London based Deutsche Bank analysts they're probably on the chopping block I digress again they looked back to the year 1800 it was the best side of cell side research I've ever seen I think maybe somebody got past compliance and produced it in the night because it spoke the truth but what they found was that bonds have never been as overvalued as they are today regardless of what bond you're talking about at least if you're looking back to 120 years if you're looking back any further raise your hand I'm hiring an analyst soon I'd like your abilities as for the stock market you tell me should we be worried well the answer is actually yes or no if we are in the latter innings of a late 1990s style rally there's absolutely no need to stress everything you hear on bubble vision every day is the God's honest truth go long and stay there for the long term and you can kiss that extra 10 years of your career goodbye no they don't put that part in there sorry but if you're not comforted knowing that stocks are more valued at any other time in the history of mankind since 1999 since the dot com bubble then yes you should be worried you should be very worried April of this year marked the second longest economic expansion in US history you have to ask yourself what exactly is going to keep this economy chugging along three more hurricanes two more wildfires folks they produced 300 billion dollars in record insurance proceeds in 2017 that's real money perhaps we could get another Trump administration fiscal stimulus not taking anything away from the fact that our taxes are too high but by the way they have to be financed with debt sugar high it's just awesome in the beginning or maybe it's just as simple as another wave of share buybacks we're about to end the second quarter at the end of this month I think GDP growth is going to come in north of 4% the media is going to go haywire all I can tell you is the hangover is going to be just as brutal the US economy has just been juiced as it's never been juiced by a combination of mother nature panic buying, trade war tariff talk and again share buybacks but don't be too focused on what the rhetoric is surrounding Q2 GDP growth of 4% or more though blasphemy to say maybe the time is upon us to rely less on luck and financial less on luck and financial engineering and more on investments that produce lasting returns maybe it wouldn't be such a bad thing to ask the central bankers of the world who have assumed more power than any politician to step back and allow the business cycle to go back to being cyclical if they did they might realize how very much they're asking of the world's retirees who can no longer be prudent in their investment allocations consider that at the current rate of cash still as Nomi said rate hiking campaign started in December 2015 in the history of the Fed 304 years we have never had a rate hiking cycle that has gone this glacially slow even so at the current rate of return on cash you would have to have 10 million dollars set aside to stay above the poverty line our retirees are not alone nearly half of all Americans have less than 10,000 dollars in retirement savings workers main reason for their lack of savings is they don't make enough to even think about saving imagine how they feel when they read that inflation, the same inflation that is eating them alive is a figment of their collective imagination of course there is a flip side to the lowest interest rates on record the lowest borrowing cost in 5,000 years at least Uncle Sam has benefited right from the Fed's misguided policy that's punished savers please say Uncle Sam has benefited well one thing is for sure the United States counterparts definitely got the memo governments from Austria to the UK to Switzerland and even Canada to our north and Mexico to our south they've all sold 50 and 100 years sovereign bonds we're coming up on the one year anniversary of Argentina which you may note is in the news alongside the IMF not even a year ago Argentina floated a 100 year bond but can you blame these governments? of course not but the question becomes one of where has the United States been? look people Federal Reserve officials they know that foreign buyers of our debt cannot be dependent upon indefinitely China continues to be the largest holder of our reserves but they have also begun to pair back their holdings and reduce the maturity of US treasuries that they hold it follows I hope that Fed officials know that their country's politicians have squandered a perfectly good opportunity to indemnify the balance sheet of the United States extending out the maturity of our treasuries would have helped the country withstand a future crisis of confidence but we didn't go there and yet the US treasuries been downright conspicuous in its absence from the ultra long bond market even as our government's debt has exploded as we know to 21 trillion dollars in counting and I mean counting the United States of America accumulates a quarter of a million dollars of debt every single minute of every single day debt is projected to hit 25 trillion dollars next year now strangely enough the first lesson drilled into my head on day one at the Federal Reserve before they even took my fingerprints was that the only thing that matters in this world is the cost to service your debts service them to that end the country paid about 2% to service its debt in the years preceding Trump's election despite outstanding debt having tripled can you imagine how compromised our fiscal position would be if the Fed did actually manage to normalize interest rates good luck with that this past February the deficit hit the highest level since 2012 and we know that this is just a hint of what's to come meanwhile interest on marketable securities was 23 billion dollars up 10% from a year ago that number is just going to keep growing as for you as households their debt loads are back at record highs Moody's adjusted for initial jobless claims in a recent study and they found that in records going back 15 years that's the only thing they have records for that automobile delinquencies in this country have never been higher than what they are today more technically an expansion FHA mortgages currently delinquencies of almost 10% credit card mortgages credit card delinquencies they have also started to tick up again we don't normally see delinquencies where they are when we are in an economic expansion but that is what happens that's what happens when the one trick pony of Fed policy is deployed over and over again our collective predicament is what happens when a country tries to borrow its way to prosperity these are these are the things that keep me up at night anger me spineless politicians have benefited handsomely thanks to the feds playing along but make no mistake the citizens of the United States will ultimately pay the price many Americans would concur that it's high time that those in congress earning their salaries started to do right by their constituents I hope you too can now appreciate that it's well past time the Federal Reserve stopped enabling congressional misfeasants and in doing so restore the financial markets to their proper function as price discovery mechanisms after all an inhibited price discovery is the bedrock of every free market economy living within our means saving our hard-earned dollars sacrificing today to ensure a better tomorrow these are the disciplines that helped foster a superpower economy but the fact remains lower for longer has ravaged those ravaged those who dare save while richly rewarding those engaged in reckless investments as inconvenient a message as it may be to hear I hope not after what Nomi said the current QE era has outlasted its welcome policymakers may have intended to make debt so cheap for so long that it was impossible to not play along but over 30 years later in the wake of one speculative boom and subsequent collapse after another I'm afraid to say that we have not learned nearly enough I say this to my children every night it is not the creation of debt that makes a lasting impact on economic prosperity rather it's investment in the future investment in the future promises to retain its value for generations to come we have to get back there some way somehow that's why I wrote vet up not only does the book walk you through what's led us to this precarious position it provides a blueprint to get the country's economy back on more stable footing I'm sorry Ron Paul not by ending but by upending the Fed taking the Fed down to the studs and rebuilding it from the ground up starts with cutting its dual mandate in half reduce the Fed's mission to safeguarding the buying power of the United States dollar and return job creation to the private sector where it belongs this will begin to rein in the mission creep that has corrupted the Fed now in the event that you think I'm being too harsh consider this the United States is the only developed country that's suffered two decades in a row of shrinking of a shrinking workforce this is not a demographic story this is not about the baby boomers it is about monetary policy gone wild the Fed has been pushing on that proverbial string for way too long next redraw the lines of the Federal Reserve districts and de-concentrate the power base away from Washington DC away from the New York Fed the economy of 1913 may have justified three Federal Reserve district banks in the Midwest this makes me very popular when I say it but things have changed since then they could be absorbed into Chicago and nobody would blink an eye California is the largest economy in the United States followed by the great state of Texas thank you we're going to get there though after CalPERS and CalSTRS they blow up the state we will be the largest economy in this country after you have redrawn the Fed's map give all district presidents permanent votes on the Federal Open Market Committee California and Texas do not cease to be the largest inputs to US GDP growth year in and year out so why should their votes only count every three years it makes no sense at all now once this logical step is complete ensure that you only install leaders to the Federal Reserve who conform to the original and still valid requirement that those in charge of our currency come from a diversity of industries that does not mean all Keynesian economics PhDs a diversity of industries never again allow those running the Fed to not be on the receiving end of the policies that they make institutionalizing intellectual diversity will reintroduce dissent at the Fed and make sure that the word dissent is never again a four letter word since they started taking transcripts in 1996 there have been two two dissents on the Federal Reserve Board all of the other dissents have come from my former boss Richard Richard no I'm kidding a lot of them came from him but all of the other dissents have come from outside of the Federal Reserve Board this will in turn ensure that policymakers at the Fed have the wisdom and insights here it goes love it to take away the punch bowl just as the party is getting started I love that punch bowl punchline but did you know did you know that it was William McChesney Martin the longest serving Federal Reserve chairman in its 100% history who said it now here's the funny thing Martin was no PhD he studied economics at Columbia University but he didn't even have a graduate degree much less that doctorate he did however get his start at a brokerage firm in New York City just two years after the stock market crashed in 1929 the subsequent groundbreaking work he did at the securities and exchange commission reestablished confidence in the stock market and landed him the presidency of the New York Stock Exchange at the tender age of 31 newspapers nationwide called him the boy wonder of Wall Street but here's my favorite Martin was famous for warning politicians that they should always keep PhDs in economics on tap but never on top that's my kind of street smarts it's safe to say Martin is spinning in his grave as an army of 800 PhDs at the Fed monitor the economy if you were alive today he would no doubt validate my next recommendation that to save taxpayers a ton of money that we should cut the bureaucratic ranks of PhDs at least in half did I mention I don't get invited to the Fed anymore I'll take that streamlining argument one step further why not eliminate the alphabet soup of banking regulators down to perhaps one for a case in point I'll refer to Janet Yellen who gets to the airport two and a half hours early for domestic flights whole new meaning to risk averse in an event on the very same day that one regulatory agency the OCC was closing down a large lender called IndyMac she was running the San Francisco Fed on that day trying desperately to extend them a credit line need I say more now with all the money that you've saved hire the best banking regulators and supervisors that money can buy never again allow the fox into the hen house bring in the brightest minds those who can read even the most complicated Wall Street bank balance sheet that will in turn make it that much harder for those on Wall Street to continue to stay always one step ahead of their regulators one last note it might be wise to reexamine the inner workings of the world's most influential central bank more often than every 100 years just a suggestion if more politicians had acted to keep the Fed independent and apolitical independent and apolitical we wouldn't be in the pickle that we're in today with corporate household and government debt at unprecedented levels and every financial market on the history at nosebleed valuations as for the price that we will pay for this fleeting moment global central banks you've got to fix your math we're off by a trillion global central banks have amassed $22 trillion and counting on their balance sheets that's nearly one half of global GDP never forget that this moment of no return did have a starting point on December the 14th 2008 Fed policymakers voted to take interest rates to the so-called zero bound a move that unleashed quantitative easing and the biggest experiment in monetary policy history that continues to this day the following opening scene from Fed up describes that day were there voices of dissent to be heard in that conference room on that December day in 2008 did anyone argue for the little guy for the cautious investor did someone in the room speak on behalf of pension fund managers now forced to take undue risks what about the leadership of firms and big banks whose incentives are perverted to the extent that they no longer invest in their country's future the short answer is yes I worked for one of those who pushed back against the majority of professors he was the lone member of the FOMC to vote against the professors at that fateful meeting he fought the good but lonely fight and I in my capacity as his trusted advisor waged many a battle alongside him but the sad truth is we lost the people's war in a world rendered unsafe by banks that were too big to fail we came to understand that the Fed was simply too big to fight now I'm happy to report sharp objects down things may be about to change that's how I used to end my speech I'm almost finished but there is a little glimmer of hope a chance to express optimism in the future it all comes down to one man and I fear he's not strong enough I fear no man would be strong enough but he is the first to lead the Fed in over 30 years whose peers do not refer to as doctor what makes Jerome Powell unique to me is a brief conversation I had with Richard Fisher in the fall of 2015 just months after we had both left the Fed it was at the Driscoll Hotel in Austin, Texas I was down to watch my longhorns lose to TCU again in Memorial Stadium but again I digress Richard said, Danielle I want you to pay attention to one person on that committee the only person whose eyes have been on shrinking the Fed's balance sheet for longer than anyone who's left on that committee and that is my good friend Jay Powell now that conversation took place nearly three years ago and this year we're gonna win in Memorial Stadium sorry it's okay it took place nearly three years ago all I knew about Jay Powell at the time was that he was independently wealthy he's worth somewhere between $55 and $100 million after having spent years working in private equity he was a lawyer by training and he had once worked for a dollar salary to educate the Congress on the perils of the United States defaulting on its debt so no he doesn't need the Fed's pension in the years that follow Powell gave me very little to build on Fisher's endorsement he was blessedly quiet compared to many of his peers on the FOMC who cannot manage to ever shut up the faith I had in Fisher's judgment though led me to cheer for Powell when his name was among those being considered for the Fed last year and or I was going to take myself out to a tall ledge and jump off of it if we had to deal with former years of Janet Yellen so in exchange for that blind faith I was finally rewarded when 2012's FOMC transcripts were released in January this year with their traditional and ridiculous five-year lag it was Powell's first year at the Fed and I was relieved to read that he spoke in plain English I'll end with the sampling of his simple and clear logic in his words on the subject of the Fed's misleading and puzzling communication Powell worried that it was confusing to people who spend fewer than 50 hours a week working on monetary policy that is most of the public on theoreticians using mathematical models to make policy Powell spoke of his private equity and hedge fund contacts who were willing to put more than just an opinion on the line on the tricky practice of unemployment rate and inflation rate targeting Powell was concerned that Fed policymakers would quote, own them once they came out there, boy did we he was right the Fed damaged its credibility by lowering that unemployment rate target on multiple occasions effectively moving those goal posts on shrinking the Fed's huge balance sheet Powell was concerned the Fed had accumulated so much debt that when the time came to even stop buying the response could be quite strong I wonder what happened in January of this year when we talked about the potential markets that have finally woken up to the reality that even taking away an eyedropper full of liquidity can be calamitous on quantitative easing Powell worried that quote for very modest benefits we are piling up risks for the future that could be habit forming indeed they were and finally on the dangers of Fed policy in words that central bankers did not heed we are actually at the point of encouraging risk taking he said this in October of 2012 we are actually at the point of encouraging risk taking and that should give us pause investors really do understand now that we will be there to prevent serious losses it is not that it is easy for them to make money but that they have every incentive to take more risk and they're doing so well we look like we're blowing a fixed income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road you could almost say that was our strategy with any luck that strategy is about to change with even more luck the feds global central banking peers will follow in Powell's footsteps and take action to divorce monetary policy from financial market functionality the alternative a continued faith a continued overconfidence in overly intrusive monetary policy making that's long since done more harm than good must be abandoned that alternative must be abandoned once and for all now I'll go back now I'm going to come sit down and go back to my tradition the only thing I took away from me as a central banker and try and avoid all your questions and with that I thank you very much for your attention