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Huge Bank Teller Score! Silver Certificates & More!

**Huge Bank Teller Score! Silver Certificates & More!**



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Silver Certificates found in circulation plus more oldies!
what is up guys we're at Bank of America and a teller has a bunch of cool finds that she was pulled out of circulation we're gonna go ahead and look at these real quick we got a silver certificate right here see what the year is probably 30s and guess nope nope 57 b-series circulated but it's still a really cool find we could another silver certificate this one again is a 1957 silent auction another silver certificate another 57 being that is so crazy Wow there are also certificates another one is the same place 57 B and another 57 be about the same condition and then we have another one in and it's a 57 no star that's on its that would have been really cool to get started we have a two dollar bill here that is from 1963 so that's gonna have the difference style back okay it's in really good shape other than a little bit of lighting right there I've got another one some me from so that's got the let me work style back on it look at that we got a five dollar bill 1950 D that's super cool nice condition another one for 1950 wow these are really really nice condition it's a really nice and crisp on another one another one nineteen fifty d another nineteen fifty D that is insane we got another nineteen fifty nineteen was there we go from nineteen fifty D that's awesome and this nineteen fifties got ski stamp on there what does that stay up saying Wow some sort of a stamp I'm not sure what that is counters think but what a really cool lot of those guys I hope you enjoyed the video be sure to give a like subscribe share post your comments down below we'll see you next time and as always happy honey

FEDERAL RESERVE 100 years of Money for Nothing - film documentary

**FEDERAL RESERVE 100 years of Money for Nothing – film documentary**



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FEDERAL RESERVE 100 years of Money for Nothing
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Money out of politics
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“money saving”;”martins money”;”money saving expert”;”money expert”;”tesco money”;”virgin money”;”money shop”;”money supermarket”;”make money”;”travel money”;”money exchange”
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the dollar is the most remarkable achievement in the history of money think of it this piece of paper cost nothing to produce nothing behind it except the goodwill of Ben s Bernanke and let us not forget the US Congress this piece of paper somehow still commands value and respect how can the dollar be anything except the world's greatest monetary brand the coca-cola of money how could it be anything else but well you just watch since 1971 the US dollar and the global financial system had been based solely upon faith faith in the guardian of that currency and of that system the American central bank the Federal Reserve as the world's reserve currency the US dollar is how we measure our time our products our self-worth ours is a system based on trust and confidence both of which began to disappear in the fall of 2007 plunging interest rates helped trigger the housing boom but with interest rates climbing back many homeowners are having a hard time paying their mortgages 14 million people took a mortgage in the last three years seven million of them will lose their homes this is crazy the Fed thought that this was a small problem and the crisis was first talked about this was a subprime mortgage problem and it just kept growing and growing and growing Bear Stearns unraveling from some big bets on mortgages that have gone awry even officials scrambling to prevent the collapse of the giant investment bank Lehman Brothers American International Group is seeking a forty billion dollar bridging loan from the Federal Reserve we're having an electronic run on the banks the Federal Reserve's estimation was that five and a half trillion dollars would have been drawn out of the money market system of the United States would have collapsed the entire economy and within 24 hours the world economy of collapse it would have been the end of our economic system as we know it Congress could not act in a timely way therefore the Fed felt like it was important to stabilize the economy that we do it that is not the normal role for a central bank nor should it be while politicians debated the Fed acted it used its political independence an unlimited power to create money provide trillions of dollars in loans to corporations of all kinds wharfing the Congressional aid that followed what people on Main Street and most politicians didn't understand is that if we didn't do something the General Electric would have pulled down Berkshire Hathaway would have pulled down General Motors gonna pull down Citigroup would have pulled down Bank America I mean we came to the brink of the abyss and we looked over and it was a long way down the Fed really did have to step in when this is why the Fed was set up in 1913 to provide liquidity to the financial system as a whole at a time when you have a financial panic what do you know about the Federal Reserve not much there is this perception that people have that the Fed is this kind of black box nobody quite understands it somehow regulate the stock market I think we're mysterious to people I think they're not sure what we do it sounds like they're printing money ah one myth that's out there is that what we're doing is printing money we're not printing money is that tax money that the Fed is spending it's not tax money it's much more akin to printing money than it is to borrowing you've been printing money well effectively what exactly is the feds job it does control the money supply set interest rates regulate banks and is supposed to ensure the safety and soundness of the financial system the Fed is supposed to be the guardian of financial stability preventing chaos in markets now usually it can do that in in the summer of 2008 it couldn't do that and we did get chaos but what caused the crisis in the first place what brought the wealthiest nation in history to its knees according to many economists and senior Fed officials it was the Fed itself at the eye of the storm I'm on record as saying that I thought the Fed kept interest rates too low for too long that contributed to the bubble in housing prices this was warned about at the time this was textbook when you take rates that low you're gonna have a boom and a bust is likely to follow the Fed failed to prevent the housing bubble the predatory lending scandal and utterly failed to prevent the financial crisis so we fail to regulate the most important part of our financial system and I don't think any of us who've ever worked at the Fed and take any comfort from the fact that somebody screwed up but I think it's important we recognize there were some big mistakes made didn't the Federal Reserve System fail I know my time is run out but I really fundamentally disagree with your point of view and I think there is a natural inclination that things are fixed but things are not fixed everybody wants to go back and say things are fine now look we solved our problem we're just asking for another crisis this is an experiment we've never done this before we've never been here before the Federal Reserve is really operating by the seat of their pants now the other side of that is that these are smart people hardworking people who are trying to do the best that they can so I think we need to look very carefully at what the Fed did and perhaps even more important than looking back and blaming people is the issue of what role should the central banks play going forward as we start thinking about this is a mess and we don't want to do this again this isn't the first time the central bank we created to protect our economy as instead led us to the brink the real currency of the world is trust as that slips away can the Fed learn from the past and can it do it in time we haven't had big countries going down unable to save this system and and collapsing that's the crisis we have to worry about you have what degree of confidence in your ability to control this hundred percent before the Federal Reserve System we didn't have a government Bank the banking system was very fragmented and we experienced these panics in which monetary conditions would change a shock would hit the economy the banks fail and then other banks would fail bank customers would become suspicious and they would want to pull their money out of that bank and then some other people would be afraid that their bank would go and so they people would want to pull their money out of deposits and withdraw the money as currency the banks would not have the currency to pay out and they would just close their doors there was no lender of last resort okay you didn't have a central bank like the Bank of England that could provide reserves to the New York banks 1907 was a sort of a watershed panic the panic of 1907 was the straw that broke the camel's back the u.s. is the biggest economy in the world Americans are saying gee other countries with central banks are not having so many financial crises why are wait it said wait a minute the US government couldn't deal with this crisis what's wrong with us the Brits have the Bank of England and the Germans have the Reichsbank something has to get done here in 1910 senator Nelson Aldrich summon New York's most powerful bankers to an island off the coast of Georgia to secretly negotiate plans for an American Central Bank traveling under false names in a private railroad car the great secrecy of this expedition would foster conspiracy theories for decades to come later on when people got wind of this they said oh it's the same old story of the rich guys creating something that'll be good for them and not so good for all of us different parts of the country were suspicious of some proposals that left New York or Wall Street or Washington too much in control it was actually Woodrow Wilson who proposed what I consider to be an ingenious compromise which we have today lay decentralized central bank 12 reserve banks that would be owned by the member banks as central coordinating authority in the Federal Reserve Board in Washington over the next century the feds problems didn't come from its structure which divided interest rate votes between publicly appointed board members in Washington and privately appointed regional bank presidents and sent any profits to the US Treasury what would plagued the Fed instead in each of its three major crises was its reluctance to abandon old ideas even in the face of mounting danger trying to overturn an intellectual consensus and forged amongst this reputed best economists in the world as not so easy it's not so easy Congress created the Fed to forge a better monetary system but in the feds first crisis it failed to recognize that the world around it had radically changed if a gold standard centuries old system the Fed had been created to manage was on the verge of collapse they used to be a country called Great Britain now we call it the UK or Britain and Great Britain was this little tiny place that had this wonderful world beating banking system and a currency that passed for good money in the world over this currency was backed by gold you could not that many people felt they had to walk into the Bank of England and exchange your banknotes for gold at a certain rate so the gold standard making your money tied to a precious metal as a way of stabilizing its value and restricting the ability both of banks and the government's to create too much paper money but that world came crashing apart in the summer of 1914 when World War one to print the money needed to finance the war the great powers of Europe abandoned the gold standard with Britain bankrupt in German society destroyed by hyperinflation the us its new Federal Reserve and a gold-backed currency emerged preeminent the United States rose up and supplanted Britain and look how is demoted from being the world's great reserve currency the u.s. becomes the financial leader of the world almost sort of overnight while the world economy struggled America's boomed and the Fed realized it could use its influence not just in times of panic monetary policy the power the Fed is still struggling to manage to this day was born the Federal Reserve has the power to create money if you or I run the printing press in our basement we're counterfeiters when the Federal Reserve runs the printing press the electronic printing press its monetary policy monetary policy is when the Fed uses its power to create or destroy money to lower or raise interest rates if it creates more money in the system money becomes more available and interest rates fall so we're more likely to borrow and spend if the Fed takes money out of the system we borrow and spend less and are more likely to save if you're raising rates if you want to slow economic activity to cool inflation when you lower rates you want to stimulate some economic activity the change in rates by the Fed is really a question of gas pedal versus brake in the 1920s the Fed reached beyond its original mandate and began to use this newfound power to steer the US economy the Fed moved into managing the overall macro economy now unfortunately its first foray into that was the Great Depression did not do a great job the roaring 20s cellar first instance of a Fed induced boom and bust at first the feds low rates unintentionally helped fuel stock market and debt bubbles saw speculators borrow more money and the entire amount in circulation an alarmed Fed then clamped down raising rates aggressively in 1928 and setting the stage for a recession and stock market crash right after the crash the New York Fed did exactly the right thing it provided liquidity to the New York money market it prevented a banking panic now the board in Washington wasn't too happy about this they were worried the expansionary policies that the Federal Reserve was falling would lead to readmission of speculation and an inflation so the Fed stopped its easing policy well then trouble hit the banking system and the Fed did nothing as banks began to fail peoples withdrew deposits and stuck him under the mattress now banks didn't have money to make new loans and the economy spiraled down because we were still on the gold standard we had trouble figuring out what to do we tried to protect our gold position which required raising rates at exactly the wrong time my grandfather for example went on vacation two weeks down to Kentucky came back and their bank had been closed and they lost $3,000 worth the savings and so instead of providing enough money to prevent prices from falling the Fed allowed the money supply to collapse and that's what turned what would have been a garden-variety recession into the depression it wasn't that the Fed deliberately created the Great Depression they desperately wanted to fix what was going on they just had the wrong diagnosis that's a view that is widely shared now the current Federal Reserve Chairman Ben Bernanke has said we did it we being the Federal Reserve we caused the Great Depression and we won't do it again they were wrong they learned by the pain and suffering that we all felt as a result of that first great mistake was the Great Depression the other great mistake was the Great Inflation 30 years after World War one tore apart the gold standard a new system was finally created to replace it in 1944 the US dollar would be linked to gold and the rest of the world would link their currencies to the US dollar the Fed would be the banker to the world but shortly after agreeing to the Bretton Woods system Congress passed the Employment Act of 1946 the country decided to add to the feds mission stabilizing employment over the business cycle no one wanted another depression people were afraid of another depression but that conflicted with what they had agreed to at Bretton Woods because Bretton Woods told him they had to control inflation well they weren't about to do that the best things they live for free in the next great crisis the problem wasn't too little money but too much fear of unemployment was the new ideology which like the gold standard the Fed would abandon only after great social cost the middle of the 1960s was very nice period there was no inflation no unemployment and a lot of self-congratulation in washington DC they find they finally had got it fiscal policy would be just so monetary policy just so and we would have the kingdom of heaven right here in the United States of America in 1965 President Lyndon Johnson announced a sweeping vision to transform the country into what he called the Great Society however beneath the surface of things there was trouble Johnson's Great Society programs and his massive escalation of the war in Vietnam drastically increased government spending and caused prices in the US to shoot higher the war in Vietnam was like all wars the cause of a governmentally orchestrated inflation to protect the value of the dollar Fed Chairman Bill Martin needed to raise interest rates as he had done since 1951 but Lyndon Johnson was a different kind of President Johnson said no we don't want it just rates to rise we don't want to derail the Great Society we don't want to create a recession we've got a war to fight and the Fed caved in he knew that he shouldn't be doing that but he believed it wasn't his responsibility to tell the Congress they couldn't run deficits I've talked for a long time about the Independence of the Federal Reserve that's independence within the government not independence of the government so if there was a big private investment boom he could raise interest rates to stop it but if there was a big public expenditure boom that was not his responsibility to stop that was the Congress the results were disastrous Vietnam and then Johnson's Great Society programs on top of that was too much demand for the economy created this immense inflation at Bretton Woods the u.s. had promised to be the world's reserve currency backed by gold but the Fed had created far more dollars than it could ever redeem in gold and now the US could no longer keep that promise and by 1971 it was clear the dollar could no longer be exchanged into gold finally President Nixon in front of a television camera pumping I think Gunsmoke off the air use Bonanza bonanza will be shown he after a special report from NBC News I have directed the Secretary of the Treasury to suspend temporarily the convertibility of the dollar into gold or other reserve assets and that began the modern age of inflation for the first time in history the dollar was just a piece of paper backed only by faith in the Federal Reserve and its policies now what does this mean for you your dollar will be worth just as much tomorrow as it is today that promise was only as good as the Fed actions behind it but bowing to pressure from Nixon and clinging to flawed economic theories the Fed refused to raise rates over the next decade the cost of living more than doubled the dollar lost more than half its value they would tell each other we're not gonna let the inflation get out of hand this time and then the unemployment rate would rise all that would be forgotten because the political pressures would grow where did they come from came from Congress he came to the administration came to the business community came from labor unions and it was just very hard to resist the whole climate of opinion was against them and Arthur burns chairman of the fitt he did not do what a good central banker should do and raise rates to break them inflation and by the time the 70s ended it was a total mess prices went up infamously during the Carter presidency inflation was increasing and unemployment was increasing at the same time that wasn't supposed to happen inflation hits everybody unemployment even at its worst it's only about 10% of the population at any one time and so the public shifted its concern from unemployment to inflation in a massive way people began to say we don't want it we won't stand for policies that create ongoing inflation I really hated because you paid so much good-evening crisis in the United States during the first three months of 1979 went up at an annual rate of 13% the question is how long will this go on inflation running out of control the answer probably four years President Carter found himself on the defensive because inflation was becoming very unpopular inflation is our friends and that's when Carter appointed Paul Volcker we're always appointed by Jimmy Carter he was kind of up against it it was a very difficult period I told him we're gonna have to adopt tighter policies and I felt very strongly about the independence of the Federal Reserve and that's the way I thought we should act Burns said in a speech after he left the office we knew Meany we central bankers that we had to reduce money growth back in 1964 or than have inflation and he lists all the reasons why he couldn't do it it was that meeting that Paul Volcker left to do what Burns said couldn't be done people don't like to raise interest rates it's not very popular and there was some resistance and fear of creating a recession and so forth it was a closed thing for Volcker even to pull it off internally he had a substantial battle within the Federal Reserve Volcker had tried to get the Fed governors to nudge interest rates upward without success so he tried a different tack persuading them to focus on controlling the money supply it was a sleight of hand because the two are essentially the same it was a politically palatable tactic and it worked and when he slowed the money growth rate predictively the interest rate went way up neither he nor I nor anyone else had any idea of how high the inners been going to be 8% to 9% to 10% 15% 18 19 20 percent 21 percent really the highest levels in American history he told me I never thought we'd have to go to 20 percent but he did that took courage Paul Volcker was villainized for his inflation suppression it was a very tough period and there's a lot of opposition and no doubt about it and then somebody got the idea of sending you know these sort of two-by-fours builders would throw two by fours and the steps of the Fed to protest the Volkers policies draw the criticism that people forget there was a lot of support two people wanted some leadership to get something done now the Fed was aware that it would almost certainly produce a recession and Volcker says I'm gonna stick with my policy even though the recession that begins in 1981 was the longest recession in post-war history in that period of a couple of years the world's view the political view of the role the federal serve and its importance in the country changed dramatically and I don't believe it would've been possible without a man of Paul Volcker stature who understood the business of central banking from soup to nuts who understood the costs of not dealing with inflation had those decisions been left to politicians it's inconceivable that they would have quote voted for such a deep recession to bring the inflation rate down that's sort of a generic flaw of political systems ask members of Congress to vote for things that cause short-term pain for long-term benefits and it's pretty hard it's pretty hard to get the votes it's nice that we have leaders who step up and do the right thing now and then take a long term view we could use more all Volker has advised me of his decision not to accept a third term as a member and chairman of the Federal Reserve Board with inflation tamed Volcker was expendable President Reagan would not reappoint him to a third term but Volcker had restored faith in the dollar and in our central bank and he laid the foundation for an era of unprecedented prosperity it would be up to the next Chairman to keep it alive and for many years it looked like he had it's morning again in America the period from about the mid-1980s till about 2007 was an era characterized by mild recessions and measured expansions and by seeming limitless visibility the economists called it the Great Moderation it reflects the idea that the Fed is on top of things and the feeling that the Fed deserves the credit you know they kind of took credit we had a pretty good run from the 1980s into the early 2000s so the economy did very well we had rising stock market the Cold War came to an end most of the world became interested in market economies the economy was growing unemployment was low but surprisingly at the same time we had very little inflation and result of that this was a golden age for the Fed and I think there was a change in the public attitude toward the role of government government is not the solution to our problem government is the problem in the last 25 or 30 years the view that the market usually gets things right and that the government only messes things up became more and more dominant now the Vice President will swear Alan Greenspan in as the thirteenth chairman it was in this atmosphere of faith in markets and a lack of faith in government that Alan Greenspan a free-market advocate to mistrusted government was chosen to lead the government's most powerful agency Greenspan is widely known was in the day a disciple of the radical individualist Iran I am for an absolute let's say fair free unregulated economy if you separate the government from economics you will have peaceful cooperation and harmony and justice among men one of the great ironies of his career and of our national life Greenspan the so called of ein Rand a guy became the chief price fixer of money Greenspan's first test would come immediately in the last five years the US stock market had more than tripled in value the result of falling interest rates low inflation and a rediscovered faith in American capitalism point is ladies and gentlemen me for lack of a better word is good though greed wasn't new to Wall Street remains for satisfying it word for the first time the market was making widespread use of complex financial products like derivatives some like portfolio insurance we're supposed to protect investors from big losses this was the early use of mathematics in the stock market dumbest thing anybody ever believed that everybody could sell at once but this was what the mathematics said you could do of the New York Stock Exchange the Dow off more than 500 points paper losses more than five the market suffered its largest one-day drop ever and held its breath wondering if the Fed and its new chairman were about to repeat history there was a point in time before lunch that looked like the gates of hell were about to burst open again and we were going you know another 20-25 percent down the fear in the market quickly spread and so the Federal Reserve lowered rates very rapidly provided liquidity very openly alan greenspan we handled that event very successfully reassured the markets eased monetary policy you say this is really good this is why you want this monetary policy to be awareness and so there was a lesson there you can't intervene you can in the crisis it was a historic moment nearly 75 years after its founding the institution created to prevent banking panics had succeeded in doing precisely that but it came with a dangerous precedent from now on the Fed would be expected to lower rates based not just on problems in the real economy but in the stock market as well and you end up with a Fed whose original narrow mission expanded dramatically Fed Chairman Alan Greenspan didn't want to see any regulation of banks of markets and on the other hand he's pulling switches and moving levers and you know more than any Fed Chairman before a sense having cast aside his ideals to rescue the market Greenspan would soon master the art of intervention in Alan Greenspan's case I think it's important to understand no one but Alan Greenspan had ever engineered what we call a soft landing that interest rates low the economy is accelerating you then raise rates you're slowly economy down without letting inflation go to control or without throwing the economy back into a recession so the plane is supposed to come in and just barely touch the ground as it lands that's what you always shoot for usually you get a bump 94 95 Alan Greenspan chairman of the Fed raised rates very rapidly punched the bond market in the nose in 94 because he wanted to cool the economy down the economy keeps growing inflation doesn't accelerate and we get an investment boom in the middle years of the 90s that was really amazing it hadn't been done before what followed was the longest economic expansion and largest stock market boom in US history an economist with no prior banking experience had become the [Applause] well I was on the Fed from around the middle of 1994 until 1996 I was vice chairman now that's not as high a job as it sounds when Alan Greenspan is the chairman it's not quite right to call him dictatorial that was never his demeanor but he ran the show we all know that when chairman Greenspan talks the world listens so by the time all those things had happened Alan Greenspan was about as close to God as one can come and still be on this earth first of all nobody should ever be deified because none of us is God that did happen the Greenspan and one corollary of deification is people think you know and people think you'll always get it right the concrete manifestation that inside the Federal Reserve is that it became very hard to criticize Greenspan in any way I mean who wants to stand up the god but playing God with the business cycle had consequences and the Fed soon faced a new challenge and a new kind of inflation by the time the 1990s have rolled around inflation of things inflation of the checkout counter was rather receding memory but it was succeeded by the kind of inflation that we have learned to call asset inflation that is price is not of goods going up but of stocks bonds real estate and other investment assets going up on Wall Street that is known as a bull market everyone is for we've never heard in this country a period when the stock market was going down 15% a year for a sustained period of time and people thought that was going to continue everybody loves a boo who's there he dislikes it but Greenspan was concerned that the boom was really a bubble so he raised a red flag in 1996 Alan Greenspan gave a speech and characteristically multisyllabic formulation he didn't say this market crazy no might there not be irrational exuberance how do we know when irrational exuberance has unduly escalated asset values which then becomes subject to unexpected and prolonged contractions as they have in Japan over the past decade Japan was a cautionary tale of what can happen when stock market and real estate bubbles explode in a frenzy of speculation they did in Tokyo in the 1980s creating a bubble and having it break is utterly dangerous in fact there has never been a Great Depression a very severe recession but that was not preceded by an asset bubble in the entire 20th century at the peak of the bubbles a three square mile area in Tokyo is worth more than the entire state of California but in 1989 the stock market collapsed followed by real estate the Japanese economy has experienced deflation and slow growth ever since the Japanese are essentially in their economy where they were seventeen years ago they've had two decades of going nowhere Greenspan had responsibly waived the warning flag the markets refused to listen and instead turned on the messenger financial world drew in its breath in shock and disapproval over the feds stepping over the line people were saying have your chairman stay out of our business don't talk down the stock market so Greenspan who likes to be liked almost above almost all other things gave this up this idea the stock market was too high and instead began to cheer it on Greenspan would never again lean against the wind of popular opinion a stock soared to record Heights he refused to use his power to cool overheated markets and would instead intervene aggressively at the first sign of weakness investors were walked by the near collapse of a huge financial operation run by Wall Street's version of a dream team the long-term capital management was a large hedge fund run by some very smart people but they guessed wrong and they were in deep trouble and it turned out that they had borrowed a lot from major financial institutions in New York and if they went bankrupt might bring the system down the US Federal Reserve arranged for a three and a half billion dollar bailout by long-terms creditors in what was to become an all too familiar pattern an institution considered too big to fail had been protected from the market that was the dress rehearsal for this current collapse you had a lot of leverage theories that have proven to be false hard to value derivatives and a tremendous wasted opportunity to impose some lessons some discipline on those banks the bailout also saved Wall Street firm Lehman Brothers which was at risk of bankruptcy after firing the one man who saw the crisis coming Tyrande derivatives at Lehman Brothers and I was actually fired because I did not want to do these trades with the long-term capital management the comment I got fired for was you know I'm an expert on derivatives but my bosses don't really understand the risk that I'm taking Lehman's CEO never did learn about risk by 2008 he borrowed six hundred billion dollars to become the biggest mortgage player on Wall Street the biggest bankruptcy in history confident to the end the Fed would never let a firm four times larger than LPCM go bust so this alleged libertarian was presiding over the socialization of risk in our economy is perfect so we're not a free market then there is an invisible there's a benevolent hand that no that's the way it comes out but that's six days after rescuing long-term capital in the middle of the largest stock bubble in US history the Fed backed the bailout with an interest rate cut it would cut rates twice more in weeks to come and cutting interest rates exacerbated the boom in retrospect Greenspan was acting in ways his predecessors never had so much so that Wall Street gave it a name the Greenspan put so the brief and put is the idea you can take any risk and you can in effect put it to the Fed look if the market gets too far out of hands I'll rescue you that's essentially how traders interpret it in other words it's a backstop it's something under you that supports you in adverse times and it encouraged a whole lot of excess trading and more leverage and you know that's what moral hazard is when you rescue people from their own behavior well then they're more likely to engage in risky and riskier behavior the Fed thought it could protect the market with easy money but its promise of a safety net unleashed a surge of borrowing debt and risk did not just transform the economy but distorted during Greenspan's reign the financial sector would double its share of the economy companies at once sold products would now sell loans General Electric essentially was a hedge fund General Motors and cetera car companies they didn't make money selling cars he made money financing cars and firms that had once worked in service to their clients would now make enormous profits trading for themselves engineering ever more exotic financial products like derivatives which unlike traditional assets were bought and sold in secret and left completely unregulated financial derivatives we have grown at a phenomenal pace despite the concern these complex instruments have induced they have contributed to the development of a far more flexible and efficient financial system despite the fact that derivatives lay at the heart of both the 87 crash and the LTCM bailout Greenspan resisted any attempt to regulate them even leading the charge against Brooksley born when she tried to monitor this exploding market under existing laws I am very concerned that we will put in place new forms of government regulation of all sorts which will not work I see no evidence to suggest that this is a troubled market what are you trying to protect we're trying to protect the money of the American public which is at risk in these markets if you're gonna let companies write this form of insurance against extreme events and someone has to figure out whether it's innovation or whether it's a scam so someone's got to police that the mistake I made in my own thoughts at the end of the 90s was assuming that would take place and it didn't Greenspan's ideology one out and ten years later the US taxpayer would spend over one hundred and eighty two billion dollars bailing out insurance giant AIG 'he's unregulated derivatives unit Greenspan also repeatedly declined to enforce the glass-steagall Act which separated traditional banks from Wall Street the message was clear the nation's most powerful banking regulator considered regulation itself obsolete coming out of the 1970s under Paul Volcker's leadership the strength of the banking system was very high up on the agenda but there was then a generation of monetary economists who were taking the banking system for granted and it was while supervision will take care of itself there is a presumption that that regulators will have a better insight into the nature of the problems than the markets themselves now I know most of the people who would be in charge of making the types of judgments that would be required for that and I will tell you that they don't have a clue as to what to do and that was to be hubris that was infecting us because of the Peter of Great Moderation so the ideology became very strong and the smart folks that run the financial markets are so skillful that they can take care of all these problems themselves that sounds like a caricature but people really believe that lots of people really believe that and some of them were running major regulatory agencies such as Alan Greenspan the Fed was offering the markets an amazing deal no regulation to prevent you taking risk but if your bets went wrong lower interest rates to rescue you US stocks soon became more overvalued than at any other time in history stocks got to just astronomical levels people were forming new companies without any business plans and investors were giving money and say build your website build your reputation we don't care the faster you spend it the better I mean it was it was absolutely ridiculous we weren't worried about that at the Fed and we talked about it a lot should we raise interest rates in an attempt to prick the bubble before it got too bad or not and we decided not bubbles generally are perceptible only after the fact to spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong Greenspan said Who am I to interfere with thousands of investors in other words the markets efficient despite the fact that I'm manipulating it so he let it go it was only the June meeting from 1999 where everybody looked around at each other and said this is unsustainable there was a unanimous agreement this was not going to end well and then people say well I guess what we should do is just move interest rates up gently and wait for the bubble to burst this is something I think that general public doesn't really realize when times are good in equity prices are moving up people want to believe prices whether they're in housing or equity when they're on their way up they're on the way up because the general public has a feeling of buoyancy of optimism some might say delusion at the Millennium people still believed believe that we had entered a new era of prosperity in the be it indeed created a new kind of economy like those monetary experts of the 60s we thought we'd found the perfect formula and we were supremely confident that Alan Greenspan as he had done in 87 and 98 could easily save us again one earlier Fed Chairman famously said the role of the Fed is to take away the punchbowl this when the party gets rolling Alan Greenspan's attitude was a hundred and eighty degrees away from that Greenspan came to the idea that the Fed could not identify a bubble as it was inflating now many of us would disagree with that rather vigorously it couldn't identify really if the market has gotten ahead of itself was too high let alone whether it was crazy so the role of the Fed is simply to wait till the bubble breaks and then pick up the pieces while bubbles that burst are scarcely benign the consequences need not be catastrophic for the economy that was Greenspan's view and it has been subsequently ravaged by experience the Fed has no such power three months after the ball dropped so did the stock market the dot-com collapse a 9/11 attacks put to the test Greenspan's view that bubbles could be cleaned up afterwards and he quickly responded with a series of interest rate cuts to soften the blow there was a big fear after 9/11 that we were headed for a huge recession that didn't happen so I think the people who held this view coming through the 2000 bubble collapse felt very vindicated that it was a reasonable approach if this is the bust the boom was sure as hell worth it you agree with that right certainly it looked like Greenspan had done it again but there was a catch the Fed had softened the dot-com crash with aggressive interest rate cuts and now those same cuts set off another boom the Federal Reserve created so much money had to go somewhere we actually found that it was kind of interesting and stimulating to put it into houses lower rates mean lower mortgage payments the cost of money was less so the next guy who came along could afford to pay you more which created an unsustainable bubble in housing in today's struggling economy many Americans have taken refuge by investing in the real estate market the Fed says the housing market is solid but others say there's reason for caution the ongoing strength in the housing market has raised concerns about the possible emergence of a bubble in home prices however the analogy often made to the building and bursting of a stock price bubble is imperfect the national housing market is scarcely tender for a speculative conflagration housing doesn't easily bubble homeowners are not looking to speculate anywhere near the degree stock investors so you have to try and the Fed did precisely that the extraction of equity from homes has been a significant support to consumer spending were not for this phenomenon economic activity would have been notably weaker so he ended up encouraging a housing boom we being the Federal Reserve ended up encouraging a housing boom I will continue to defend those decisions because we had no employment growth after the bottom of the recession the Fed got hit into his head that we were on the precipice of deflation a state in which prices generally fall even though house prices were soaring globalization and new technology were keeping Goods prices low but what was great news for shoppers set off alarms at the Fed we're still falling stock prices conjured fears of a Japan style collapse the Nasdaq was down almost 80 percent and we had Fed Chairman Alan Greenspan come along and say I don't want to be the guy that goes out with a period of weak growth it will be my legacy although that's the normal business cycle that's what's supposed to happen so instead of suffering the hangover he went for the hair of the dog that bit us chairman Greenspan who's an old friend invited me down to talk to him about deflation but I told him that I thought the chance of deflation was very small I can tell you that I left the meeting knowing that I had not made a sale by 2002 quite serious people including Ben Bernanke who subsequently became chairman of the Federal Reserve we're talking about the dangers of deflation why we didn't want to wind up like Japan and what we might have to do to avoid that Ben Bernanke through on professor who had just been hired by the Fed said we're not gonna let prices fall we are going to create enough dollar bills to lift the prices of everything by a little so because of this fear of deflation we didn't have a deflation the Fed continued to follow an expansion airy policy and the Fed proceeded to press down this rate of interest of controls the so-called federal funds rate all the way down to 1% you could scarcely see it was so tiny I really think that was looking at the wrong thing but all of that led to is you know the bidding boom and a big boss if you allow interest rates remain unusually low for a long period of time you are creating the environment in which in a bubble or in which rapid credit expansion can't occur deep down monetary policy screws around with our heads and it influences the amount of risk you and I are prepared to take if we think interest rates are gonna be low for a long time we're comfortable borrowing money if we think interest rates are gonna be very high for a long time that induces us to feel like leaving that money in the bank we're gonna lower interest rates to find speculators who said well let me take a shot at building condos and a higher rate they may not take that chance and part of that was intentional on the part of the Fed to get us all to take more risk than we would otherwise take I love that house plus the schools the kids are three and one they're gonna grow up what ok thank you and as the housing bubble built up cheap credit sort of sustained it the fuel for the subprime mortgage crisis was the accommodative monetary policy by the Fed the Federal Reserve stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance Greenspan had been hitting home runs for so long that he thought he couldn't fail determined to get growth at any cost his plan was to swap one boom for another and juice the economy with low interest rates but far from solving the problem he would trap the Fed in a vicious cycle from which it is still not escaped who took grates down really low and they hadn't been that low for 46 years and they never stayed that low that long by lowering the price of money the Fed was raising the prices of things bought with borrowed money we favored real estate for example because we didn't want to see people out of jobs well intentioned but the consequences are we created the incentives to borrow and we brought households to Dad's levels that no one would have imagined 20 years ago not just 50 years ago and when you looked at it that way you would say oh but Greenspan was theory bound his theory said you didn't get nationwide processions in housing the Fed thought its policies were safe provided inflation remained low but had it been measuring inflation the way it did during the volcker years inflation would have been far higher not only were exploding house prices excluded from the feds new calculation but rising food and gas costs as well so the Fed kept filming up the punchbowl and as opposed to going into inflation of good prices it went into an inflation of asset prices that's inflation that in the same way but it's not called inflation so if the stock market goes up in doubles we don't say oh my god there's been inflation or if housing prices double we don't say oh my god there's been this enormous inflation we say oh how much richer we are but the problem is were not richer it's simply an illusion of richness President Bush signed a housing Village was part of his ownership Society and he said how good it wasn't people have housing new home construction the highest in almost 20 years home ownership rates the highest ever but they didn't have any investment in the house they didn't have any equity in the house so what did they own they don't anything they own the mortgage which if things got bad they could default and they did now there are a lot of people who want to criticize the American household for being dumb Americans borrowed too much in part because they did not understand how to save prudently how to borrow responsibly and they did not understand fully that pension values and house prices will not always rise I think that's mistaken I think I would never short the intelligence of the American consumer sort of the collective wisdom I think is usually pretty good we gave them a really low interest rates in 2003 2004 guess what they borrowed a lot of money so it looked like the Fed had done a great job and they were kind of patting themselves on the back our strategy of addressing the bubbles consequences rather than the bubble itself has been successful it was not a good year for optimistic predictions Greenspan had kept rates so low for so long but he turned an overheated housing market into the greatest credit bubble in history it would alter the course of the American economy for decades to come you know the way a healthy economy grows is people earn money and they go out and spend it the way an unhealthy economy grows is people borrow money and they go and spend it the u.s. in oh three oh four oh five or six was phantom recovery was all borrowed money so instead of building factories that produce income you wind up building condos that really don't produce anything and then we built too many condoms so this Great Moderation has only been keeping the economy going keeping the economy going keeping economy going at the same time as making it less and less productive less and less productive told there was not enough income supporting that debt and it uploads on itself I think there are several strands to understanding how we got in this deep of financial mess and I like to be clear I'm not a subscriber to what I call the great coincidence theory that every individual facet of our financial system seems to have fallen apart at the same time as part of a great coincidence the accounting was all wrong the bonuses were all wrong the capital was all wrong the risk management was all wrong the regulation was all wrong each and every one of these things was all wrong I think when a boiler explodes that's a little like blaming each individual rivet now something fundamental connected all of these things monetary policy was just way too easy and the concepts underpinning financial regulation were flawed and I believe markets and capitalism have been unfairly criticized because it's been bastardized by the government and the Federal Reserve skewing things so that we have these massive imbalances the feds low rates help spur a doubling of mortgage debt turning the American dream into a tragedy for millions of families but the real borrowing spree didn't happen on Main Street seduced by the same low rates the world's biggest banks jumped at the chance to multiply their profits with massive borrowing of their own or as they say on Wall Street with leverage and this is where the real egregious nough sin interest rates manifests itself the Federal Reserve's main policy interest rate that was only 1% now the inflation rate was more like 2% we had negative real 2-year interest rates that means that to borrow money for two years is free now this is a problem the big banks lend that money out on a mortgage at 5 or 6% now if I can borrow money at 1% and lend it out at 6% I'm gonna make a tremendous profit from them that was the problem with the low interest rates financial institutions borrowed too much became careless and the lending they did able to borrow money for nothing and earn huge fees for lending it out Wall Street began simply giving money away you know firms like Lehman Brothers borrowed that those low interest rates made mortgage-backed securities on the base of it and spread it around the world and then we look back at the overall effect and say gee we don't like this there's something wrong with the market but they're actually following the incentive structure the Fed have set up banks at the peak of this crisis were levered from 30 to 50 to 1 so 2 percent equity 98 percent debt that kind of leverage its money for nothing chicks for free it's as good as it gets capitalism really doesn't work very well if money's free and when it's free for too long we corrupt the system just remember that this thing isn't as black as it appeared all of us remember the movie It's a Wonderful Life with Jimmy Stewart and the Bailey building and Loan well the Bailey building and Loan made mortgages borrowing money from depositors and lending it out in this case into homeowners and the bank doesn't have it it's not stuck in the vaults well that meant that the Bailey buildings and loans of the world had a very big vested interest in knowing to whom they lent that money and knowing that those people had the ability to repay it except from 2002 to 2007 and that's where the borrower's ability to make the payments became irrelevant it was the lenders ability to sell it to Wall Street securitizers that was what mattered I mean the whole system was perverse and that's how you end up with all the insane stories we heard about lots of subprime loans interest only 0% down and we'll give you 10% back ninja loans no income no jobs and no assets and that was a Ponzi scheme it was a Ponzi scheme connived in by federal agencies we certainly don't want there to be a fine print preventing people from owning their home we can change the print it was the furthest from the Bailey building alone you could possibly get American consumers might benefit of lenders provided alternatives to the traditional fixed-rate mortgage a growing family with a lot of debt a young couple with no downpayment a business owner whose income was hard to document every one of them was turned down for a home loan by three different lenders I was countrywide and I got them all approved now the Fed didn't do that the banks did that but the Fed could have and should have prevented these crazy mortgages from being granted I have a lot of faith in workers however I still need rules and I still need a referee because otherwise you get a chaotic environment and very bad outcomes the Fed could have cut off his speculation quite easily but the atmosphere in Washington then was quite the opposite we have an excessive concern about home ownership and its role in the economy this is not the dot-com situation homes that are occupied may see an ebb and flow in the price but you're not going to see the collapse that you see when people talk about a bubble to set standards for mortgages would have been going straight against the political environment the Federal Reserve would have been pretty brave they should have in retrospect despite being the only agency charged with protecting the financial system the Fed remained on the sidelines later claiming it lacked the authority to regulate Wall Street's mortgage machine but in 1994 Congress had passed the homeowner ownership and equity Protection Act which gave the Fed and the Fed alone specific power to prevent unfair and deceptive mortgage lending the Fed had unique authority to regulate all mortgage lenders it finally used it in 2008 they could have stopped the subprime unit of laman you had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis you were advised to do so by many others and now our whole economy is paying its price they could not believe that it was a nationwide problem okay they just didn't get it nobody in the entire Federal Reserve System only one guy ground liqu was the only one and they didn't listen to him my late colleague Edward Graham like known as Ned was very worried about the subprime crisis and he did want the Federal Reserve to police lakhs lending standards but Alan Greenspan did not push forward with what Ned was recommending as Alan Greenspan's term drew to a close his transformation of the American economy was complete a financial sector of outsized proportions housing bloated by borrowing a dismantled regulatory system and a collective delusion that all was well you know there's tragedy in what's happened now but I think the boom that our economy had and the millions of people who got jobs who wouldn't otherwise have them in the 90s is something we owe to Alan Greenspan – where do you think you made a mistake then I made a mistake in presuming that the self-interest of banks and others were such is that they were best capable of protecting their own firms they just assumed that this is what the private market was doing and the people in the private market knew what they were doing that still leaves open the question which I think historians are gonna be looking at for a very long time suppose Greenspan and the Fed had this belief why did not the events as they were transpiring shake that belief one of the president's most important appointments is chairman of the Federal Reserve my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years as a Fed governor Ben Bernanke had spent the peak years of the housing bubble promoting his mentor's easy money and lacks regulation taking over the helm he had no idea he would reap what he'd sown we have so many economists coming on our air and saying oh this is a bubble and it's going to burst what is the worst-case scenario if in fact we were to see prices come down substantially across the country well I guess I don't buy your premise it's a pretty unlikely possibility we've never had a decline in house prices on a nationwide basis so what I think is more like what Bernanke should have said is it has never declined because it's never had a bubble before Robert Schiller's data shows a hundred years of incredibly flat price series followed by suddenly a Himalayan mountain by going up very rapidly Bernanke is the perfect academic he's not looking at house prices he so profoundly believed in market efficiency that there can't possibly be a housing bubble so why bother to look for the Bernanke Fed really blew it they just they just didn't see it coming both Bernanke and Greenspan would later maintain that only a tiny group of experts foresaw the crisis but there were many who did and rather dismissed as alarmists or ignored there were some of us that were writing back them guys this is absurd this can't happen it's going to end in tears in the case of housing I started to detect bubble proportions in 2002 that forecast was met with derision we worried that encouraging people to borrow money in the interests of spending it would come back and haunt us all you had to do was crack a history book every bubble breaks it's not that I saw something that wasn't there to see it was all there for other people to pick up but I think there was this sense of comfort that it wouldn't happen and even if it did happen we knew how to deal with the problem so you have to understand academic economists live in an island unto themselves these four people trained in mathematics not trained in markets and trying to apply the mathematics democracy and to human emotion basically they stumble in the academic models used by the Fed debt is not a source of danger in fact in most of these models dead isn't even there in the academic models the financial sector isn't even there so if it wasn't there it couldn't do any harm and because their intellectual framework didn't allow for a big crisis to happen there were no efforts made to prevent the crisis when they got into it the whole idea was that we'd soon be out of it the problem the subprime market seems likely to be contained so the magnitude of what was to come down the road was completely discounted and then at some moment people realized they really overextended themselves so that what looks like the Great Moderation has within it the seeds of its own of its own end this is a funk it's driven by fear Alan Greenspan told everyone to take a teaser rate and Bernanke is being an academic he has no as the crisis unraveled the Fed only dimly perceived its true dimensions it was a bank run the one that bore no relation to those of the past involving not just the banks the Fed was created to protect but the hedge funds investment banks and insurance conglomerates the Fed had allowed to hide from its oversight it was a run provoked by the excessive derivatives leverage and loans that had flourished in the dark government officials scrambling to prevent the collapse of the giant investment bank Lehman Brothers so women brothers wasn't necessarily you know a culprit in and of itself it was more a symptom of an endemic way of doing business the bill from the Great Moderation was at last coming do a decade of easy money and lacks regulation that created a system only the Fed could stave companies called AIG and it's in big trouble they need money which nobody has to give right about now the failure of AIG would have meant a run on the 50 largest banks in the world they would not have survived the Capitol Hill we saw what happened when one or two large firms came close to failure imagine if 10 or 12 or 15 firms have failed which is where we were almost worth you have to have credit to operate whether we have braves too low for too long that's history confronted with the situation where the heart stopped pumping we had to be the pacemaker and make it work again American taxpayers woke up this morning to learn their money makes up a bailout package the Federal Reserve slammed together to save AIG over the course of the crisis Fed would pump fill yinz of dollars in emergency loans to banks corporations and governments around the world though the moves were a logical extension of the feds ideology they were unprecedented are you committing in this interview that you are not going to let any of these banks fail that no matter what their balance sheet actually looks like they are not gonna fail they're not going to fail bernanke single-handedly stopped the run but when his bailout failed to jumpstart recovery the fed up the ante with interest rates already at zero the feds only way to juice the economy was to print more money the technique called quantitative easing or QE beginning in 2009 the Fed purchased over 1.3 trillion dollars of mortgages and debt from failed lenders Fannie Mae and Freddie Mac it was a temporary nationalization of the mortgage market followed with the single biggest stock rally since 1932 the markets faltered in 2010 the Fed announced a second round qe2 if the Greenspan put had been whispered the Bernanke push was now loud and clear hedge fund heavyweight David Tepper raked in a record 7.5 billion dollars by investing in financials how did you do it a no.9 what did you see is easy the government told you what they were gonna do so cute I can work it up ok so what am I I'm gonna say no Fred I disagree with you so what I got is I got two different situations one that economy gets better by itself the other situation is the Fed comes in with money you know up to the point effect comes in with money the stock market can go down a little bit but not that much because I got to put you gotta level put especially when the government's issuing it Bernanke had saved the system or had he it was still riddled with the same bad loans and institutions too big to fail only now spared from the free markets law of survival of the fittest Bear Stearns was supposed to go belly-up that's their what happens that's the market correcting their excesses and the same thing with AIG and Citigroup and go down the list of everybody that's been bailed out we just threw enough cash at it that we papered over the structural flaws we're at a point now where the consumer is in no position to keep borrowing banks are in no position to lend the banking system is still in my opinion insolvent it's still broken Ben Bernanke has led the Fed through one of the worst financial crises that this nation in the world has ever faced the Great Moderation began as an homage to the free market but today it could not be further from that ideal the two chairmen appointed by both Republican and Democratic presidents created an economy more centrally planned than ever in our history one entirely dependent on ever cheaper credit from our central bank from 20 percent to zero drops and interest rates bailed out investors in any number of transactions every time the response is more debt fueling growth but while this mountain of debt provided rocket fuel for housing and Finers overall growth actually slowed as more of our resources many of our best minds pursued not medicine nor engineering but the zero-sum game of financial speculation creating financial transactions is not production it does nothing your standard of living except for a few people who are able to work at a bank watch their stock price go up sell the stock and then they have the wealth but they have to sell the stock in order to do it so understand what happens when stock prices go up the same with housing it doesn't make us better off it helps those people who own stock and it hurts people who don't home stock no two men distress was created in financial markets we didn't seem to be power allowed by any great improvement in the economy and incomes of other people and so what we see is this increase in wealth is actually just a redistribution to those who own wealth away from those who don't so you have an illusion of wealth certain people at the Fed bought into that I've always believed we underestimate the impact of stock prices on economic activity I don't know where the stock market is going but I will say this that if it continues higher this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about but for all the booms bailouts and easy money since 2000 no net jobs have been created in the US and per capita growth in the private sector has been stuck at zero so it is not working and all one can say with respect to this current crisis is here we go again Ben Bernanke to the rescue the FOMC announced today that it's zero interest rate would be extended through the middle of 2013 two years from now and yes it wound up triggering a massive stock market rally what's going on right now is the most profound coordinated effort in history of mankind to really promote the financial markets promote risky assets give the drunk another drink what the Fed is doing is we push investors into other kinds of investments like the stock market Bernanke still insists that money poured into a broken financial system will trickle down to the real economy and I care about Wall Street for one reason and one reason only because what happens on Wall Street matters to Main Street but can a problem created by money for nothing really be solved by ever more of the same the major banks are racking up profits and yet lending to small businesses actually declined in the third quarter our problem is that we have a very distorted economy high income individuals just had eight hundred billion dollars added to their 401 k's and are carrying what consumption there is Bernanke has been wrong before in 2002 he promised the cheap money would help us avoid a deflation like japan's instead it gave us a mountain of new debt and an economy trapped by 0% rates just like japan's and while the chairman's bragged about rising stock prices sp5 about 20 percent plus and the russell 2000 which is about small cap stocks is up 30 percent plus he's been less eager to discuss the food and gas prices that rose with them inflation falls disproportionately on the poor you know the cost of heating your home goes up and you don't have the money you're in real trouble or the trillions of dollars is 0% REITs are taking from the pockets of savers somebody's paying the price for low interest rates it's you and me who have money market accounts which are earning 0.27% which by the way punishes the elderly and people on a fixed salary I mean I worked to save that money and now in one swoop the Fed decides I get nothing for that money in order to bail out the banks that to me is outrageous so here you have a group instigates movements and asset prices to get the economy going the following year the following look i don't reserve today announced plans to buy forty billion dollars of mortgage bonds a month until further notice these policies bring interest rates down to defect stock prices it affects home prices if people feel better because their 401k looks better in their house is worth more they're more willing to go out and spend they don't try and stop that or moderate it in any way so they have a bigger collapse the next time and a bigger one the time after to see that and then see it all crash and to learn nothing quantitative easing is the last desperate gambit on this game of stimulating asset prices you have what degree of confidence in your ability to control this 100% there ought to be a greater degree of humility on the part of those who are operating or pretending to operate complex systems you know rates can only go to zero and at that point free money doesn't enable asset values to keep growing and the only tool they have left at their disposal now really is psychology people's believe that the Fed can solve problems but mechanically they can't at this point and the Fed effectively reduced long-term unemployment as the situation drags on it becomes really out of the scope of monetary policy at that point stimulating the economy through monetary policy really does almost nothing to contribute to low unemployment rates or high employment in the long term the feds lowered from five and a quarter to essentially zero over the last two years unemployment rates gone from four and a half percent to nine percent so it's clear we can't control unemployment rates with any precision whatsoever which means it should never be given a mandate to worry about the economy to worry about employment because if it has to do that it will manipulate asset prices which is what it does it is no longer just Outsiders who criticize Bernanke's efforts to play the hero for financial markets I don't know what the equilibrium rate of interest yes exactly but I'm very confident that it's not zero printing money doesn't produce goods and services it doesn't hire people it may seem like the right short-term medicine but can the Cure be worse than the disease in some cases I don't think we want to build the next recovery on another housing boom we should be focused on keeping the purchasing power of money as stable as possible over time and doing that keeping inflation low and stable is the best way we can contribute to maximizing growth minimizing unemployment and contributing to the well-being of Americans but if we fail at it we lose credibility we lose trust Ben Bernanke brought our economy to its knees has been reappointed right does this give you hope for being re-elected governor of New York may I remind you he screwed everybody in the Constitution authorizing a central bank which means there should be no Federal Reserve [Applause] ironically if the calls for accountability mount only our independent central bank can protect the dollar from a dysfunctional Congress government debt spinning out of control it's our job to guarantee that whatever happens to the federal deficit and debt that it does not translate into inflation each new bailout comes with a catch this time instead of writing off bad debts and reforming our banking system we simply swap spending households couldn't afford for spending and tax cuts our government can't afford once again financed by ultra low rates from the Federal Reserve we can borrow tons and tons of money at very low interest rates and we can continue to do that for some time the problem comes in the long run how long is this gonna last when does this game are going to end then how is it going to end free of the gold standards restraint the only limit on our government's ability to borrow and print is the confidence people around the world place in our IOUs it's a first in our nation's history cutting the country's top a triple-a rating to double a-plus but how long can a dollar based system last if we take that confidence for granted the United States can pay any debt it has because we can always print money to do that so there is zero probability of default how can the dollar be anything except the world's greatest monetary brand the coca-cola of money how could it be anything else but well if you produce enough of these green pieces of paper if you throw around your weight too far as the world's one and only superpower bad things happen the years a country live beyond its means as a debt crisis that began in Greece now threatens all of Europe it's clear that easy money has been no kinder to governments than it was to homeowners and while the u.s. may not be Greece the lesson is cautionary no nation however powerful is too big to fail and then you get the mother of all crises big country's going down unable to save the system and and collapsing that's the crisis we have to worry about the time to have made good choices was back in the 90s in the early 2000s and we didn't make good choices as a country as an American polity and now we're faced with a number of bad choices but if we failed to make the uncomfortable choice today we're going to create even more uncomfortable choices down the road have you heard someone say if I had his money I would do things my way you know at some point over the last 20 years we seem to have lost sight of who we are and we were more concerned with the types of houses we lived in and the speed of the cars that we drove the United States has consumed more than its produced systematically for at least a decade what country ask yourself in history can do that indefinitely forever the government the Federal Reserve our continuing encourage people to spend their money that is not a stable economy that's the wrong policy for the future what we need to do is concurrent investment and saving now that'll make it harder for our economy to grow the way it has in the past with consumption being the engine so in other words the US economy probably won't grow as fast as possible but that's fine if we can learn to be happy with what we have as opposed to the system fully designed around getting people to want more than what they have and they're unhappy unless they have that more one rich man in ten with the satisfied mine my generation the baby boomers basically participated in intergenerational theft we've borrowed from our children and in some cases from our grandchildren I hope you don't go as far as our great-grandchildren and I don't know one parent who's willing to say well let me enjoy my life at the expense of my children but that seems to be what's happening now the interesting question is when you've been on that path that long and the imbalances have grown up that big what's the process for getting off the bad path onto a better one you got to create something the world wants and that's what we've got to get back to in the United States what drives long-term growth is the real world education capital spending the quality of your workers they're the things you should worry about there's a myth that's grown up that the United States is a weak Tiger and that it can't produce goods that people want to sell far from the truth was still the largest exporter in the world we have the human capital but knowledge we need to just have the incentives somehow we need to go to an economy that is using its resources operating at full employment but doing so in a way that isn't reliant on bubbles anyplace that is a solid responsible use of resources that means you need to have interest rates that don't discourage savings less subsidies for housing and debt and domestic consumption price is closer to what they more naturally should be so you can get the growth going again in a healthier way then the burden of the debt gradually gets less and less of us but of course the transition is bound to be painful and then the question becomes how much short-term pain for how much long-term gain the end of inflation that happened because the public wanted it to happen it's a democratic country what do we want the Federal Reserve to do for us for the citizenry we want them to provide low inflation and relatively stable growth they can't smooth out all the bumps from the road and we can't expect them to do that we can expect them to do a better job over the future than they have on average in the past it's tempting to believe the crisis is over but we may be simply passing through the eye of the storm to break free of the cycle of booms and busts the Fed must find a new way forward so it's a very important crossroads for us will we be willing to support the central bank as it raises interest rates to levels where savings comes something that you value again so that our society can really begin to build easy for me to sit here and say this is how we need to do it but very difficult to implement for anyone for the Congress for the President and for the central bank of the United States more than ever in its hundred year history the Federal Reserve holds the future of our economic system in its hands can the Fed help foster an economy that's built to last one not based on stock or housing bubbles on sensible productive investments that will enriched not just some of us but all will it continue to offer the empty promise of money for nothing you the dollar is the most remarkable achievement in the history of money think of it this piece of paper would cost nothing to produce nothing behind it except the goodwill of Ben s Bernanke and let us not forget the US Congress this piece of paper somehow still commands value and respect how can the dollar be anything except the world's greatest monetary brand the coca-cola of money how could it be anything else but well you just watch so since 1971 the US dollar and the global financial system have been based solely upon faith faith in the guardian of that currency and of that system the American central bank the Federal Reserve as the world's reserve currency the US dollar is how we measure our time our products our self-worth ours is a system based on trust and confidence both of which began to disappear in the fall of 2007 plunging interest rates helped trigger the housing boom but with interest rates climbing back many homeowners are having a hard time paying their mortgages 14 million people took a mortgage in the last three years seven million of them will lose their homes this is crazy the Fed thought that this was a small problem when the crisis was first talked about this was a subprime mortgage problem and it just kept growing and growing and growing Bear Stearns unraveling from some big bets on mortgages that have gone awry and officials scrambling to prevent the collapse of the giant investment bank Lehman Brothers American International Group is seeking a 40 billion dollar bridging loan from the Federal Reserve we're having an electronic run on the banks the Federal Reserve's estimation was that five and a half trillion dollars would have been drawn out of the money market system of the United States would have collapsed the entire economy and within 24 hours the world economy collapse it would have been the end of our economic system as we know it Congress could not act in a timely way therefore the Fed felt like it was important to stabilize the economy that we do it that is not the normal role for a central bank nor should it be while politicians debated the Fed acted it used its political independence an unlimited power to create money provide trillions of dollars in loans to corporations of all kinds wharfing the Congressional aid that followed what people on Main Street and most politicians didn't understand is that if we didn't do something the General Electric would have pulled down Berkshire Hathaway would have pulled down and General Motors gonna pull down Citigroup would have pulled down Bank America I mean we came to the brink of the abyss and we looked over and it was a long way down the Fed really did have to step in when this is why the Fed was set up in 1913 to provide liquidity to the financial system as a whole at a time when you have a financial panic what do you know about the Federal Reserve not much there is this perception that people have that the Fed is this kind of black box nobody quite understands it somehow you know regulate the stock market I think we're mysterious to people I think they're not sure what we do it sounds like they're printing money now uh one myth that's out there is that what we're doing is printing money we're not printing money is that tax money that the Fed is spending it's not tax money it's much more akin to printing money than it is to borrowing you've been printing money well effectively what exactly is the feds job it does control the money supply set interest rates regulate banks and is supposed to ensure the safety and soundness of the financial system the Fed is supposed to be the guardian of financial stability preventing chaos in markets now usually it can do that in in the summer of 2008 it couldn't do that and we did get chaos but what caused the crisis in the first place what brought the wealthiest nation in history to its knees according to many economists and senior Fed officials it was the Fed itself at the eye of the storm I'm on record as saying that I thought the Fed kept interest rates too low for too long that contributed to the bubble in housing prices this was warned about at the time this was textbook when you take rates that low you're gonna have a boom and a bust is likely to follow the Fed failed to prevent the housing bubble the predatory lending scandal and utterly failed to prevent the financial crisis so we fail to regulate the most important part of our financial system and I don't think any of us who've ever worked at the Fed and take any comfort from the fact that somebody screwed up but I think it's important we recognize there were some big mistakes made didn't the Federal Reserve System fail I know my time is run out but I really fundamentally disagree with your point of view and I think there is a natural inclination that things are fixed the things are not fixed everybody wants to go back and say things are fine now look we solved our problem we're just asking for another crisis this is an experiment we've never done this before we've never been here before the Federal Reserve is really operating by the seat of their pants now the other side of that is that these are smart people hardworking people who are trying to do the best that they can so I think we need to look very carefully at what the Fed did and perhaps even more important than looking back and blaming people is the issue of what role should the central banks play going forward as we start thinking about this is a mess and we don't want to do this again this isn't the first time the central bank we created to protect our economy has instead led us to the brink the real currency of the world is trust as that slips away can the Fed learn from the past and can it do it in time we haven't had big countries going down unable to save this system and and collapsing that's the crisis we have to worry about you have what degree of confidence in your ability to control this hundred percent before the Federal Reserve System we didn't have a government Bank the banking system was very fragmented and we experienced these panics in which monetary conditions would change a shock would hit the economy the banks fail and then other banks would fail bank customers would become suspicious and they would want to pull their money out of that bank and then some other people would be afraid that their bank would go and so they people would want to pull their money out of deposits and withdraw the money as currency the banks would not have the currency to pay out they would just close their doors there was no lender of last resort okay you didn't have a central bank like the Bank of England that could provide reserves to the New York banks 1907 was a sort of a watershed panic the panic of 1907 was the straw that broke the camel's back the US is the biggest economy in the world Americans are saying gee other countries with central banks are not having so many financial crises why are wait it said wait a minute the US government couldn't deal with this crisis what's wrong with us the Brits have the Bank of England and the Germans have the Reichsbank something has to get done here in 1910 senator Nelson Aldrich summon New York's most powerful bankers to an island off the coast of Georgia to secretly negotiate plans for an American Central Bank traveling under false names in a private railroad car the great secrecy of this expedition would foster conspiracy theories for decades to come later on when people got wind of this they said oh it's the same old story of the rich guys creating something that'll be good for them and not so good for all of us different parts of the country were suspicious of some proposals that left New York or Wall Street or Washington too much in control it was actually Woodrow Wilson who proposed what I consider to be an ingenious compromise which we have today lay decentralized central bank 12 reserve banks that would be owned by the member banks central coordinating authority in the Federal Reserve Board in Washington over the next century the feds problems didn't come from its structure which divided interest rate votes between publicly appointed board members in Washington and privately appointed regional bank presidents and sent any profits to the US Treasury what would plagued the Fed instead in each of its three major crises was its reluctance to abandon old ideas even in the face of mounting danger trying to overturn an intellectual consensus forged amongst this reputed best economists in the world as not so easy it's not so easy Congress created the Fed to forge a better monetary system but in the feds first crisis it failed to recognize that the world around it had radically changed at four gold standard centuries old system the Fed had been created to manage was on the verge of collapse they used to be a country called Great Britain now we call it the UK or Britain and Great Britain was this little tiny place that had this wonderful world beating banking system and a currency that passed for good money the world over this currency was backed by gold you could not that many people felt they had to walk into the Bank of England and exchange your banknotes for gold at a certain rate so the gold standard making your money tied to a precious metal as a way of stabilizing its value and restricting the ability both of banks and the government's to create too much paper money but that world came crashing apart in the summer of 1914 when World War one to print the money needed to finance the war the great powers of Europe abandoned the gold standard with Britain bankrupt in German society destroyed by hyperinflation the us its new Federal Reserve and a gold-backed currency emerged preeminent the United States rose up and supplanted Britain and look Alan's demoted from being the world's great reserve currency the u.s. becomes the financial leader of the world almost sort of overnight while the world economy struggled America's boomed and the Fed realized it could use its influence not just in times of panic monetary policy the power the Fed is still struggling to manage to this day was born the Federal Reserve has the power to create money if you are I run the printing press in our basement we're counterfeiters when the Federal Reserve runs the printing press the electronic printing press its monetary policy monetary policy is when the Fed uses its power to create or destroy money to lower or raise interest rates if it creates more money in the system money becomes more available and interest rates fall so we're more likely to borrow and spend if the Fed takes money out of the system we borrow and spend less and are more likely to save if you're raising rates that you want to slow economic activity to cool inflation when you lower rates you want to stimulate some economic activity the change in rates by the Fed is really a question of gas pedal versus brake in the 1920s the Fed reached beyond its original mandate and began to use this newfound power to steer the US economy the Fed moved into managing the overall macro economy now unfortunately its first foray into that was the Great Depression did not do a great job the roaring 20s saw the first instance of a Fed induced boom and bust at first the feds low rates unintentionally helped fuel stock market and debt bubbles saw speculators borrow more money and the entire amount in circulation an alarmed Fed then clamped down raising rates aggressively in 1928 and setting the stage for a recession and stock market crash right after the crash the New York Fed did exactly the right thing it provided liquidity to the New York money market it prevented a banking panic now the board in Washington wasn't too happy about this they were worried the expansionary policies that the Federal Reserve was falling would lead to readmission of speculation and an inflation so the Fed stopped its easing policy well then trouble hit the banking system and the Fed did nothing as banks began to fail peoples withdrew deposits and stuck him under the mattress now banks didn't have money to make new loans and the economy spiraled down because we were still on the gold standard we had trouble figuring out what to do we tried to protect our gold position which required raising rates at exactly the wrong time my grandfather for example went on vacation two weeks down to Kentucky came back and their bank had been closed and they lost $3,000 worth the savings and so instead of providing enough money to prevent prices from falling the Fed allowed the money supply to collapse and that's what turned what would have been a garden-variety and recession into the depression it wasn't that the Fed deliberately created the Great Depression they desperately wanted to fix what was going on they just had the wrong diagnosis that's a view that is widely shared now the current Federal Reserve Chairman Ben Bernanke has said we did it we being the Federal Reserve we caused the Great Depression and we won't do it again they were wrong they learned by the pain and suffering that we all felt as a result of that first great mistake was the Great Depression the other great mistake was the Great Inflation 30 years after World War one tore apart the gold standard a new system was finally created to replace it in 1944 the US dollar would be linked to gold and the rest of the world would link their currencies to the US dollar the Fed would be the banker to the world but shortly after agreeing to the Bretton Woods system Congress passed the Employment Act of 1946 the country decided to add to the feds mission stabilizing employment over the business cycle no one wanted another depression people were afraid of another depression but that conflicted with what they had agreed to at Bretton Woods because Bretton Woods told him they had to control inflation well they weren't about to do that the best things they live for free in the next great crisis the problem wasn't too little money but two months fear of unemployment was the new ideology which like the gold standard the Fed would abandon only after great social cost the middle of the 1960's was very nice period there was no inflation no unemployment and a lot of self-congratulation in Washington DC they find they finally had got it fiscal policy would be just so monetary policy just so and we would have the Kingdom of Heaven right here in the United States of America in 1965 President Lyndon Johnson announced a sweeping vision to transform the country into what he called the Great Society however beneath the surface of things there was trouble Johnson's Great Society programs and his massive escalation of the war in Vietnam drastically increased government spending and caused prices in the u.s. to shoot higher the war in Vietnam was like all wars the cause of a governmentally orchestrated inflation to protect the value of the dollar Fed Chairman Bill Martin needed to raise interest rates as he had done since 1951 but Lyndon Johnson was a different kind of President Johnson said no we don't want it just rates to rise we don't want to derail the Great Society we don't want to create a recession we've got a war to fight and the Fed caved in he knew that he shouldn't be doing that but he believed it wasn't his responsibility to tell the Congress they couldn't deficit I've talked for a long time about the independence of the Federal Reserve that's independence within the government not independence of the government so if there was a big private investment boom he could raise interest rates to stop it but if there was a big public expenditure boom that was not his responsibility to stop that was the Congress the results were disastrous Vietnam and then Johnson's Great Society programs on top of that was too much demand for the economy created this immense inflation at Bretton Woods the US had promised to be the world's reserve currency backed by gold but the Fed had created far more dollars than it could ever redeem in gold and now the US could no longer keep that promise and by 1971 it was clear the dollar could no longer be exchanged into gold finally President Nixon in front of a television camera pumping I think Gunsmoke off the air he was Bonanza Bonanza will be shown he after a special report from NBC News I have directed the secretary of the Treasury to suspend temporarily the convertibility of the dollar into gold or other reserve assets and that began the modern age of inflation for the first time in history the dollar was just a piece of paper backed only by faith in the Federal Reserve and its policies now what does this mean for you your dollar will be worth just as much tomorrow as it is today that promise was only as good as the Fed actions behind it but bowing to pressure from Nixon and clinging to flawed economic theories the Fed refused to raise rates over the next decade the cost of living more than doubled as the dollar lost more than half its value they would tell each other we're not gonna let the inflation get out of hand this time and then the unemployment rate would rise with all that would be forgotten as the political pressures would grow where did they come from came from Congress he came to the administration came to the business community came from labor unions and it was just very hard to resist the whole climate of opinion was against them and Arthur burns chairman of the fitt he did not do what a good central banker should do and raise rates to break them inflation and by the time the 70s ended it was a total mess prices went up infamously during the Carter presidency inflation was increasing and unemployment was increasing at the same time that wasn't supposed to happen inflation hits everybody unemployment even at its worst it's only about 10% of the population at any one time and so the public shifted its concern from unemployment to inflation in a massive way people began to say we don't want it we won't stand for policies that create ongoing inflation I really hate it because you paid so much for so little good-evening crisis in the united states during the first three months of 1979 went up at an annual rate of 13% the question is how long will this go on inflation running out of control the answer probably for years President Carter found himself on the defensive because inflation was becoming very unpopular inflation is our friend and that's when Carter appointed Paul Volcker when I was appointed by Jimmy Carter he was kind of up against it it was a very difficult period I told them we're gonna have to adopt tighter policies and I felt very strongly about the independence of the Federal Reserve and that's the way I thought we should act Byrnes said in a speech after he left the office we knew meaning we central bankers that we had to reduce money growth back in 1964 or than have inflation and he lists all the reasons why he couldn't do it it was that meeting that Paul Volcker left to do what burns said couldn't be done people don't like to raise interest rates it's not very popular and there was some resistance and fear of creating a recession and so forth there was a closed thing for Volcker even to pull it off internally he had substantial battle within the Federal Reserve Volcker had tried to get the Fed governors to nudge interest rates upward without success so he tried a different tack persuading them to focus on controlling the money supply it was a sleight of hand because the two are essentially the same but it was a politically palatable tactic and it worked and when he slowed the money growth rate predictively the interest rate went way up neither he nor I nor anyone else had any idea of how high the interest rate going to be 8% to 9% to 10% 15% 18 19 20 percent 21 percent really the highest levels in American history he told me I never thought we'd have to go to 20 percent he did that took courage Paul Volcker was villainized for his inflation suppression it was a very tough period and there's a lot of opposition and no doubt about it and then somebody got the idea of sending you know these sort of two-by-fours builders would throw two by fours and the steps of the Fed to protest the Volkers policies a lot of criticism but people forget there was a lot of support two people wanted some leadership to get something done now the Fed was aware that it would almost certainly produce a recession and Volcker says I'm gonna stick with my policy even though the recession that begins in 1981 was the longest recession in post-war history in that period of a couple of years the world's view the political view of the role the federal serve and its importance in the country changed dramatically and I don't believe it would've been possible without a man of Paul Volcker stature who understood the business of central banking from soup to nuts who understood the costs of not dealing with inflation had those decisions been left to politicians it's inconceivable that they would have quote voted for such a deep recession to bring the inflation rate down that's sort of a generic flaw of political systems ask members of Congress to vote for things that cause short-term pain for long-term benefits and it's pretty hard it's pretty hard to get the votes it's nice that we have leaders who step up and do the right thing now and then take a long term view we could use more all Volker has advised me of his decision not to accept a third term as a member and chairman of the Federal Reserve Board with inflation tamed Volcker was expendable President Reagan would not reappoint him to a third term but Volcker had restored faith in the dollar and in our central bank and he laid the foundation for an era of unprecedented prosperity it would be up to the next Chairman to keep it alive and for many years it looked like he had it's morning again in America the period from about the mid-1980s till about 2007 was an era characterized by mild recessions and measured expansions and by seeming limitless visibility the economists called it the Great Moderation it reflects the idea that the Fed is on top of things and the feeling that the Fed deserves the credit you know they kind of took credit we had a pretty good run from the 1980s into the early 2000s the economy did very well we had rising stock market the Cold War came to an end most of the world became more interested in market economies the economy was growing unemployment was low but surprisingly at the same time we had very little inflation and result of that this was a golden age for the Fed and I think there was a change in the public attitude toward the role of government government is not the solution to our problem government is the problem in the last 25 or 30 years the view that the market usually gets things right and that the government only messes things up became more and more dominant and now the Vice President will swear Alan Greenspan in as the 13th chairman it was in this atmosphere of faith in markets and a lack of faith in government that Alan Greenspan a free-market advocate to mistrusted government was chosen to lead the government's most powerful agency Greenspan is widely known was in the day a disciple of the radical individualist Iran I am but an absolute less a fair free unregulated economy if you separate the government from economics you will have peaceful cooperation and harmony and justice among many one of the great ironies of his career and of our national life Greenspan the so called of ein Rand a guy became the chief price fixer of money Greenspan's first test would come immediately in the last five years the US stock market had more than tripled in value result of falling interest rates low inflation and a rediscovered faith in American capitalism point is ladies and gentlemen me for lack of a better word is good though greed wasn't new to Wall Street remains for satisfying it word for the first time the market was making widespread use of complex financial products like derivatives some like portfolio insurance we're supposed to protect investors from big losses this was the early use of mathematics in the stock market dumbest thing anybody ever believed that everybody could sell at once but this was what the mathematics said you could do of the New York Stock Exchange the Dow off more than 500 points paper losses more than five the market suffered its largest one-day drop ever and held its breath wondering if the Fed and its new chairman were about to repeat history there was a point in time before lunch that looked like the gates of hell were about to burst open again and we were going you know another 20-25 percent down the fear in the market quickly spread and so the Federal Reserve lowered rates very rapidly provided liquidity very openly Alan Greenspan handled that event very successfully reassured the markets eased monetary policy you say this is really good this is why you want this monetary policy to be waves and so there was a lesson there you can't intervene you can in the crisis it was a historic moment nearly 75 years after its founding the institution created to prevent banking panics had succeeded in doing precisely that but it came with a dangerous precedent from now on the Fed would be expected to lower rates based not just on problems in the real economy but in the stock market as well and you end up with a Fed whose original narrow mission expanded dramatically Fed Chairman Alan Greenspan didn't want to see any regulation of banks of markets and on the other hand he's pulling switches and moving levers and you know more than any Fed Chairman before a sense having cast aside his ideals to rescue the market Greenspan would soon master the art of intervention in Alan Greenspan's case I think it's important to understand no one but Alan Greenspan had ever engineered what we call a soft landing that interest rates low the economy is accelerating you then raise rates you're slowly economy down without letting inflation go out of control or without throwing the economy back into a recession so the plane is supposed to come in and just barely touch the ground as it lands that's what you always shoot for usually you get a bump 94 95 Alan Greenspan chairman of Fed raised rates very rapidly punched the bond market in the nose in 94 because he wanted to cool the economy down the economy keeps growing inflation doesn't accelerate and we get an investment boom in the middle years of the 90s that was really amazing it hadn't been done before what followed was the longest economic expansion and largest stock market boom in US history an economist with no prior banking experience had become the [Applause] well I was on the Fed from around the middle of 1994 until 1996 I was vice chairman now that's not as high a job as it sounds when Alan Greenspan is the chairman it's not quite right to call him dictatorial that was never his demeanor but he ran the show we all know that when chairman Greenspan talks the world listens so by the time all those things had happened Alan Greenspan was about as close to God as one can come and still be on this earth first of all nobody should ever be deified because none of us is God that did happen the Greenspan and one corollary of deification is people think you know and people think you'll always get it right the concrete manifestation that inside the Federal Reserve is that it became very hard to criticize Greenspan in any way I mean who wants to stand up to God but playing God with the business cycle had consequences and the feds soon faced a new challenge a new kind of inflation by the time the 1990s had rolled around inflation of things inflation of the checkout counter was rather receding memory but it was succeeded by the kind of inflation that we have learned to call asset inflation that as prices not if Goods going up but of stocks bonds real estate and other investment assets going up on Wall Street that is known as a bull market everyone is for we never heard in this country a period and when the stock market was going out 15 years to send a year for a sustained period of time and people thought that was gonna continue everybody loves a bull who's there he dislikes it but Greenspan was concerned that the boom was really a bubble so he raised a red flag in 1996 Alan Greenspan gave a speech and characteristically multisyllabic formulation he didn't say this is market crazy no might there not be irrational exuberance how do we know when irrational exuberance has unduly escalated asset values which then becomes subject to unexpected and prolonged contractions as they have in Japan over the past decade Japan was a cautionary tale of what can happen when stock market and real estate bubbles explode in a frenzy of speculation they did in Tokyo in the 1980s creating a bubble having it break is utterly dangerous in fact there has never been a Great Depression a very severe recession but that was not preceded by an asset bubble in the entire 20th century at the peak of the bubbles a three square mile area in Tokyo is worth more than the entire state of California but in 1989 the stock market collapsed followed by real estate the Japanese economy has experienced deflation and slow growth ever since the Japanese are essentially in their economy where they were 17 years ago they've had two decades of going nowhere Greenspan had responsibly waved the warning flag but the markets refused to listen and instead turned on the messenger financial world drew in its breath in shock and disapproval over the feds stepping over the line people were saying have your Chairman stay out of our business don't talk down the stock market so Greenspan who likes to be liked almost above almost all other things gave this up this idea the stock market was too high and instead began to cheer it on Greenspan would never again lean against the wind of popular opinion a stock soared to record Heights he refused to use his power to cool overheated markets and would instead intervene aggressively at the first sign of weakness investors were walked by the near collapse of a huge financial operation run by Wall Street's version of the Dream Team the long-term capital management was a large hedge fund run by some very smart people but they guessed wrong and they were in deep trouble and it turned out that they had borrowed a lot from major financial institutions in New York and if they went bankrupt might bring the system down the US Federal Reserve arranged for a three and a half billion dollar bailout by long terms creditors in what was to become an all too familiar pattern an institution considered too big to fail had been protected from the market that was the dress rehearsal for this current collapse you had a lot of leverage theories that have proven to be false hard to value derivatives and they tremendous wasted opportunity to impose some lessons some discipline on those banks the bailout also saved Wall Street firm Lehman Brothers which was at risk of bankruptcy after firing the one man who saw the prices coming Tyrande derivatives and Lehman Brothers and I was actually fired because I did not want to do these trades with the long-term capital management the comment I got fired for was you know I'm an expert on derivatives but my bosses don't really understand the risk that I'm taking Lehman's CEO never did learn about risk by 2008 he borrowed six hundred billion dollars to become the biggest mortgage player on Wall Street the biggest bankruptcy in history confident to the end the Fed would never let a firm four times larger than LPCM go bust so this alleged libertarian was presiding over the socialization of risk in our economy it's perfect so we're not a free market then there is an invisible there's a benevolent hand that no that's the way it comes out but that's not going six days after rescuing long-term capital in the middle of the largest stock bubble in US history the Fed backed the bailout with an interest rate cut it would cut rates twice more in weeks to come and cutting interest rates exacerbated the boom in retrospect Greenspan was acting in ways his predecessors never had so much so that Wall Street gave it a name the Greenspan put so the brief and put is the idea you can take any risk and you can in effect put it to the Fed look if the market gets too far out of hands I'll rescue you that's essentially how traders interpret it in other words it's a backstop it's something under you that supports you in adverse times and it encouraged a whole lot of excess trading and more leverage and you know that's what moral hazard is when you rescue people from their own behavior well then they're more likely to engage in risky and riskier behavior the Fed thought it could protect the market with easy money but its promise of a safety net unleashed a surge of borrowing debt and risk did not just transform the economy but distorted during Greenspan's reign the financial sector would double its share of the economy companies at once sold products would now sell loans General Electric essentially was a hedge fund General Motors and cetera car companies they didn't make money selling cars they made money financing cars and firms that it once worked in service to their clients but now make enormous profits trading for themselves engineering evermore exotic financial products like derivatives which unlike traditional assets were bought and sold in secret left completely unregulated financial derivatives we have grown at a phenomenal pace despite the concern these complex instruments have induced they have contributed to the development of a far more flexible and efficient financial system despite the fact that derivatives lay at the heart of both the 87 crash and the LTCM bailout Greenspan resisted any attempt to regulate them even leading the charge against Brooksley born when she tried to monitor this exploding market under existing laws I am very concerned that we will put in place new forms of government regulation of all sorts which will not work I see no evidence to suggest that this is a troubled market what are you trying to protect we're trying to protect the money of the American public which is at risk in these markets if you're gonna let companies write this form of insurance against extreme events and someone has to figure out whether it's innovation or whether it's a scam so someone's got to police that the mistake I made in my own thoughts at the end of the 90s was assuming that would take place and it didn't Greenspan's ideology one out and ten years later the US taxpayer would spend over one hundred and eighty two billion dollars bailing out insurance giant AIG 'he's unregulated derivatives unit Greenspan also repeatedly declined to enforce the glass-steagall Act which separated traditional banks from Wall Street the message was clear the nation's most powerful banking regulator considered regulation itself obsolete coming out of the 1970s under Paul Walker's leadership the strength of the banking system was very high up on the agenda but there was then a generation of monetary economists who were taking the banking system for granted and it was like well supervision will take care of itself there was a presumption that that regulators will have a better insight into the nature of the problems than the markets themselves now I know most of the people who would be in charge of making the types of judgments that would be required for that and I will tell you that they don't have a clue as to what to do and that was to be hubris that was infecting us because of the Peter of Great Moderation so the ideology became very strong and the smart folks that run the financial markets are so skillful that they can take care of all these problems themselves that sounds like a caricature but people really believe that lots of people really believe that and some of them were running major regulatory agencies such as Alan Greenspan the Fed was offering the markets an amazing deal no regulation to prevent you taking risk but if your bets went wrong lower interest rates to rescue you US stocks soon became more overvalued than at any other time in history stocks got to just astronomical levels people were forming new companies without any business plans and investors were giving money and say build your website build your reputation we don't care the faster you spend it the better I mean it was it was absolutely ridiculous we weren't worried about that at the Fed and we talked about it a lot should we raise interest rates in an attempt to prick the bubble before it got too bad or not and we decided not bubbles generally are perceptible only after the fact to spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong Greenspan said Who am I to interfere with thousands of investors in other words the markets efficient despite the fact that I'm manipulating it so he let it go it was only the June meeting from 1999 where everybody looked around at each other and said this is unsustainable there was a unanimous agreement this was not going to end well and then people say well I guess what we should do is just move interest rates up gently and wait for the bubble to burst this is something I think that general public doesn't really realize when times are good in equity prices are moving up people want to believe prices whether they're in housing or equity when they're on their way up they're on the way up because the general public has a feeling of buoyancy of optimism some might say delusion at the Millennium people still believed believe that we had entered a new era of prosperity in the be it indeed created a new kind of economy like those monetary experts of the 60s we thought we'd found the perfect formula and we were supremely confident that Alan Greenspan as he had done in 87 and 98 could easily save us again one earlier Fed Chairman famously said the role of the Fed is to take away the punchbowl this when the party gets rolling Alan Greenspan's attitude was 180 degrees away from that Greenspan came to the idea that the Fed could not identify a bubble as it was inflating now many of us would disagree with that rather vigorously it couldn't identify really if the market has gotten ahead of itself was too wide let alone whether it was crazy so the role of the Fed is simply to wait till the bubble breaks and then pick up the pieces while bubbles that burst are scarcely benign the consequences need not be catastrophic for the economy that was Greenspan's view and it has been subsequently ravaged by experience the Fed has no such power three months after the ball dropped so did the stock market the dot-com collapse and 9/11 attacks put to the test Greenspan's view that bubbles could be cleaned up afterwards and he quickly responded with a series of interest rate cuts to soften the blow there was a big fear after 9/11 that we were headed for a huge recession that didn't happen so I think the people who held this view coming through the 2000 bubble collapse felt very vindicated that it was a reasonable approach if this is the bust the boom was sure as hell worth it you agree with that right certainly it looked like Greenspan had done it again but there was a catch the Fed had softened the dot-com crash with aggressive interest rate cuts and now those same cuts set off another boom the Federal Reserve created so much money it had to go somewhere we actually found that it was kind of interesting and stimulating to put it into houses lower rates mean lower mortgage payments the cost of money was less so the next guy who came along could afford to pay you more which created an unsustainable bubble in housing in today's struggling economy many Americans have taken refuge by investing in the real estate market the Fed says the housing market is solid but others say there's reason for caution the ongoing strength in the housing market has raised concerns about the possible emergence of a bubble in home prices however the analogy often made to the building and bursting of a stock price bubble is imperfect the national housing market is scarcely tender for a speculative conflagration housing doesn't easily bubble homeowners are not looking to speculate anywhere near the degree stock investors so you have to try and the Fed did precisely that the extraction of equity from homes has been a significant support to consumer spending were not for this phenomenon economic activity would have been notably weaker so he ended up encouraging a housing boom we being the Federal Reserve ended up encouraging a housing boom I will continue to defend those decisions because we had no employment growth after the bottom of the recession the Fed got hit into his head that we were on the precipice of deflation a state in which prices generally fall even though house prices were soaring globalization and new technology were keeping goods prices low but what was great news for shoppers set off alarms at the Fed we're still falling stock prices conjured fears of a Japan style collapse the Nasdaq was down almost 80 percent and we had Fed Chairman Alan Greenspan come along and say I don't want to be the guy that goes out with a period of weak growth it will be my legacy although that's the normal business cycle that's what's supposed to happen so instead of suffering the hangover he went for the hair of the dog that bit us chairman Greenspan who's an old friend invited me down to talk to him about deflation but I told him that I thought the chance of deflation was very small I can tell you that I left the meeting knowing that I had not made a sale and by 2002 quite serious people including Ben Bernanke who subsequently became chairman of the Federal Reserve we're talking about the dangers of deflation why we didn't want to wind up like Japan and what we might have to do to avoid that Ben Bernanke threw on professor who had just been hired by the Fed said we're not gonna let prices fall we are going to create enough dollar bills to lift the prices of everything by a little so because it is fear of deflation we didn't have a deflation the Fed continued to follow an expansion airy policy and the Fed proceeded to press down this rate of interest of controls the so-called federal funds rate all the way down to 1% you could scarcely see it was so tiny I really think I was looking at the wrong thing but all of that led to is you know the bidding boom and a big boss if you allow interest rates remain unusually low for a long period of time you are creating the environment in which a bubble or in which a rapid credit expansion can't occur deep down monetary policy screws around with our heads and it influences the amount of risk you and I are prepared to take if we think interest rates are gonna be low for a long time we're comfortable borrowing money if we think interest rates are gonna be very high for a long time that induces us to feel like leaving that money in the bank we're gonna lower interest rates to find speculators who said well let me take a shot at building condos at a higher rate they may not take that chance and part of that was intentional on the part of the Fed to get us all to take more risk than we would otherwise take I love that house plus the schools the kids are 3 and 1 they're gonna grow up what ok thank you to me and as the housing bubble built up cheap credit sort of sustained it the fuel for the subprime mortgage crisis was the accommodative monetary policy by the Fed the Federal Reserve stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance Greenspan had been hitting home runs for so long that he thought he couldn't fail determined to get growth at any cost his plan was to swap one boom for another and juice the economy with low interest rates but far from solving the problem he would trap the Fed in a vicious cycle from which it is still not escaped who took rates down really low and they had been that low for 46 years and they never stayed that low that long by lowering the price of money the Fed was raising the prices of things bought with borrowed money we favored real estate for example because we didn't want to see people out of jobs well intentioned but the consequences are we created the incentives to borrow and we brought households to dad's levels that no one would have imagined 20 years ago not just 50 years ago and when you looked at it that way you would say oh but Greenspan was theory bound his theory said you didn't get nationwide processions in housing the Fed thought its policies were safe provided inflation remained low but had it been measuring inflation the way it did during the volcker years inflation would have been far higher not only were exploding house prices excluded from the feds new calculation but rising food and gas costs as well so in the Fed kept filming up the punchbowl and as opposed to going into inflation of good prices it went into an inflation of asset prices that's inflation that in the same way but it's not called inflation so if the stock market goes up in doubles we don't say oh my god there's been inflation or if housing prices double we don't say oh my god there's been this enormous inflation we say oh how much richer we are but the problem is were not richer it's simply an illusion of richness President Bush signed a housing Village was part of his ownership Society and he said how good it was that people have houses new home construction the highest in almost 20 years home ownership rates the highest ever but they didn't have any investment in the house they didn't have any equity in the house so what did they own anything they owned a mortgage which if things got bad they could default and they did now there are a lot of people who want to criticize the American household for being dumb Americans borrowed too much in part because they did not understand how to save prudently how to borrow responsibly and they did not understand fully that pension values and house prices will not always rise I think that's mistaken I think I would never short the intelligence of the American consumer sort of the collective wisdom I think is usually pretty good we gave them a really low interest rates in 2003 2004 guess what they borrowed a lot of money so it looked like the Fed had done a great job and they were kind of patting themselves on the back a strategy of addressing the bubbles consequences rather than the bubble itself has been successful it was not a good year for optimistic predictions Greenspan had kept rates so low for so long that he turned an overheated housing market into the greatest credit bubble in history it would alter the course of the American economy for decades to come you know the way a healthy economy grows as people earn money and they go out and spend it the way an unhealthy economy grows as people borrow money and they go out and spend it the u.s. in oh three oh four oh five or six was phantom recovery was all borrowed money so instead of building factories that produce income you wind up building condos that really don't produce anything and then we built too many condoms so this Great Moderation has only been keeping the economy going keeping the economy going keeping economy going at the same time as making it less and less productive less and less productive told there was not enough income supporting that debt and it applauds on itself I think there are several strands to understanding how we got in this deep of financial mess and I like to be clear I'm not a subscriber to what I call the great coincidence theory that every individual facet of our financial system seems to have fallen apart at the same time as part of a great coincidence the accounting was all wrong the bonuses were all wrong the capital was all wrong the risk management was all wrong the regulation was all wrong each and every one of these things was all wrong I think when a boiler explodes that's a little like blaming each individual rivet now something fundamental connected all of these things monetary policy was just way too easy and the concepts underpinning financial regulation were flawed and I believe markets and capitalism have been unfairly criticized because it's been bastardized by the government and the Federal Reserve skewing things so that we have these massive imbalances the feds low rates help spur a doubling of mortgage debt turning the American dream into a tragedy for millions of families but the real borrowing spree didn't happen on Main Street seduced by the same low rates the world's biggest banks jumped at the chance to multiply their profits with massive borrowing of their own or as they say on Wall Street with leverage and this is where the real egregious nough sin interest rates manifests itself the Federal Reserve's main policy interest rate that was only 1% now the inflation rate was more like 2% we had negative real 2-year interest rates that means that to borrow money for two years is free now this is a problem the big banks lend that money out on a mortgage at 5 or 6% now if I can borrow money at 1% and lend it out at 6% I'm gonna make a tremendous profit from them that was the problem with the low interest rates financial institutions borrowed too much became careless and the lending they did able to borrow money for nothing and earn huge fees for lending it out Wall Street began simply giving money away you know firms like Lehman Brothers borrowed that those low interest rates made mortgage-backed securities on the base of it and spread it around the world and then we look back at the overall effect and say gee we don't like this there's something wrong with the market but they're actually following the incentive structure the Fed have set up banks at the peak of this crisis were levered from 30 to 50 to 1 so 2 percent equity 98 percent debt that kind of leverage its money for nothing chicks for free it's as good as it gets capitalism really doesn't work very well if money's free and when it's free for too long we corrupt the system just remember that this thing isn't as black as it appeared all of us remember the movie It's a Wonderful Life with Jimmy Stewart and the Bailey building and Loan well the Bailey building and Loan made mortgages borrowing money from depositors and lending it out in this case into homeowners and the bank doesn't have it it's not stuck in the vaults well that meant that the Bailey buildings and loans of the world had a very big vested interest in knowing to whom they lent that money and knowing that those people had the ability to repay it except from 2002 to 2007 and that's where the borrower's ability to make the payments became irrelevant it was the lenders ability to sell it to Wall Street securitizers that was what mattered I mean the whole system was perverse and that's how you end up with all the insane stories we heard about lots of subprime loans interest only 0% down and we'll give you 10% back ninja loans no income no jobs and no assets and that was a Ponzi scheme it was a Ponzi scheme connived in by federal agencies we certainly don't want there to be a fine print preventing people from owning their home we can change the print it was the furthest from the Bailey building alone you could possibly get American consumers might benefit of lenders provided alternatives to the traditional fixed-rate mortgage a growing family with a lot of debt a young couple with no downpayment a business owner whose income was hard to document every one of them was turned down for a home loan by three different lenders I was countrywide and I got them all approved now the Fed didn't do that the banks did that but the Fed could have and should have prevented these crazy mortgages from being granted I have a lot of faith in markets however I still need rules and I still need a referee because otherwise you get a chaotic environment and very bad outcomes the Fed could have cut off his speculation quite easily but the atmosphere in Washington then was quite the opposite we have an excessive concern about home ownership and its role in the economy this is not the dot-com situation homes that are occupied may see an ebb and flow in the price but you're not going to see the collapse that you see when people talk about a bubble to set standards for mortgages would have been going straight against the political environment the Federal Reserve would have been pretty brave they should have in retrospect despite being the only agency charged with protecting the financial system the Fed remained on the sidelines later claiming it lacked the authority to regulate Wall Street's mortgage machine but in 1994 Congress had passed the homeowner ownership and equity Protection Act which gave the Fed and the Fed alone specific power to prevent unfair and deceptive mortgage lending the Fed had unique authority to regulate all mortgage lenders it finally used it in 2008 they could have stopped the subprime unit of laman you had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis you were advised to do so by many others and now our whole economy is paying its price they could not believe that it was a nationwide problem okay they just didn't get it nobody in the entire Federal Reserve System only one guy ground liqu was the only one and they didn't listen to him my late colleague Edward Graham like known as Ned was very worried about the subprime crisis and he did want the Federal Reserve to police lakhs lending standards but Alan Greenspan did not push forward with what Ned was recommending as Alan Greenspan's term drew to a close his transformation of the American economy was complete a financial sector of outsized proportions housing bloated by borrowing a dismantled regulatory system and a collective delusion that all was well you know there's tragedy and what's happened now but I think the boom that our economy had in the millions of people who got jobs who wouldn't otherwise have them in the 90s is something we owed alan greenspan to where do you think you made a mistake then I made a mistake in presuming that the self-interest of banks and others were such is that they were best capable of protecting their own firms they just assumed that this is what the private market was doing and the people in the private market knew what they were doing that still leaves open the question which I think historians are gonna be looking at for a very long time suppose Greenspan and the Fed had this belief why did not the events as they were transpiring shake that belief one of a president's most important appointments is chairman of the Federal Reserve my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years as a Fed governor Ben Bernanke had spent the peak years of the housing bubble promoting his mentor's easy money and lacks regulation taking over the helm he had no idea he would reap what he'd sown we have so many economists coming on our air and saying oh this is a bubble and it's going to burst what is the worst-case scenario if in fact we were to see prices come down substantially across the country well I guess I don't buy your premise it's a pretty unlikely possibility we've never had a decline in house prices on a nationwide basis so what I think is more like what Bernanke should have said is it has never declined because it's never had a bubble before Robert Shiller stay that shows a hundred years of incredibly flat price series followed by suddenly Himalayan mountain are going up very rapidly Bernanke is the perfect academic he's not looking at house prices he so profoundly believed in market efficiency that there can't possibly be a housing bubble so why bother to look for it the Bernanke Fed really blew it they just they just didn't see it coming both Bernanke and Greenspan would later maintain that only a tiny group of experts foresaw the crisis but there were many who did and rather dismissed as alarmists or ignored there were some of us that were writing back then guys this is absurd this can't happen it's going to end in tears in the case of housing I started to detect bubble proportions in 2002 that forecast was met with derision we worried that encouraging people to borrow money in the interests of spending it would come back and haunt us all you had to do was crack a history book every bubble breaks it's not that I saw something that wasn't there to see it was all there for other people to pick up but I think there was this sense of comfort that it wouldn't happen and even if it did happen we knew how to deal with the problem so you have to understand academic economists live in an island unto themselves these four people trained in mathematics not trained in markets and trying to apply the mathematics democracy and to human emotion basically you stumble in the academic models used by the Fed debt is not a source of danger in fact in most of these models Ted isn't even there in the academic models the financial sector isn't even there so if it wasn't there it couldn't do any harm and because their intellectual framework didn't allow for a big crisis to happen there were no efforts made to prevent the crisis when they got into it the whole idea was that we'd soon be out of it the problem the subprime market seems likely to be contained so the magnitude of what was to come down the road was completely discounted and then at some moment people realized but they really overextended themselves so that what looks like the Great Moderation has within it the seeds of its own of its own end today this is a market driven by fear Alan Greenspan told everyone to take a teaser rate and Bernanke is being an academic he has no as the crisis unraveled the Fed only dimly perceived its true dimensions it was a bank run the one that bore no relation to those of the past involving not just the banks the Fed was created to protect but the hedge funds investment banks and insurance conglomerates the Fed had allowed to hide from its oversight it was a run provoked by the excessive derivatives leverage and loans that had flourished in the dark government officials scrambling to prevent the collapse of the giant investment bank Lehman Brothers so women brothers wasn't necessarily you know a culprit in and of itself it was more a symptom of an endemic way of doing business the bill from the Great Moderation was at last coming due a decade of easy money and lacks regulation that created a system only the Fed could stave companies called AIG it's in big trouble they need money which nobody has to give right about now the failure of AIG would have meant a run on the 50 largest banks in the world they would not have survived the Capitol Hill we saw what happened when one or two large firms came close to failure imagine if 10 or 12 or 15 firms had failed which is where we were almost work you have to have credit to operate whether we have braves too low for too long that's history confronted with the situation where the heart stopped pumping we had to be the pacemaker and make it work again American taxpayers woke up this morning to learn their money makes up a bailout package the Federal Reserve slammed together to save AIG over the course of the crisis Fed would pump trillions of dollars in emergency loans to banks corporations and governments around the world though the moves were a logical extension of the feds ideology they were unprecedented are you committing in this interview that you are not going to let any of these banks fail that no matter what their balance sheet actually looks like they are not gonna fail they're not going to fail bernanke single-handedly stopped the run but when his bailout failed to jumpstart recovery the fed up the ante with interest rates already at zero the feds only way to juice the economy was to print more money the technique called quantitative easing or QE beginning in 2009 the Fed purchased over 1.3 trillion dollars of mortgages and debt from failed lenders Fannie Mae and Freddie Mac it was a temporary nationalization of the mortgage market followed was the single biggest stock rally since 1932 the markets faltered in 2010 the Fed announced a second round qe2 if the Greenspan put had been whispered the Bernanke push was now loud and clear David Tepper raked in a record 7.5 billion dollars by investing in financials how did you do it in o.9 what did you see is easy the government told you what they were gonna do so cute I can work it up ok so what am i I'm gonna say no Fed I disagree with you so what I got is I got two different situations one that khana me gets better by itself the other situation is the Fed comes in with money you know up to the point effect comes in with money the stock market can go down a little bit but not that much because I gotta put you got a level put especially when the government's issuing it Bernanke had saved the system or had he it was still riddled with the same bad loans and institutions too big to fail only now spared from the free markets law of survival of the fittest Bear Stearns was supposed to go belly-up that's their what happens that's the market correcting their excesses and the same thing with AIG and Citigroup and go down the list of everybody that's been bailed out we just threw enough cash at it that we papered over the structural flaws we're at a point now where the consumer is in no position to keep borrowing banks are in no position to lend the banking system is still in my opinion insolvent it's still broken Ben Bernanke has led the Fed through one of the worst financial crises that this nation in the world has ever faced the Great Moderation began as an homage to the free market but today it could not be further from that ideal the two chairmen appointed by both Republican and Democratic presidents created an economy more centrally planned than ever in our history one entirely dependent on ever cheaper credit from our central bank from 20 percent to zero drops and interest rates bailed out investors in any number of transactions every time the response is more debt fueling growth but while this mountain of debt provided rocket fuel for housing and Finers overall growth actually slowed as more of our resources many of our best minds pursued not medicine nor engineering but the zero-sum game of financial speculation creating financial transactions is not production it does nothing your standard of living except for a few people who are able to work at a bank watch their stock price go up sell the stock and then they have the wealth but they have to sell the stock in order to do it so understand what happens when stock prices go up the same with housing it doesn't make us better off it helps those people who own stock and it hurts people who don't home stock I know tremendous wealth was created in financial markets we didn't seem to be power allowed by any great improvement in the economy and incomes of other people and so what we see is this increase in wealth is actually just a redistribution to those who own wealth away from those who don't so you have an illusion of wealth certain people at the Fed bought into that I've always believed we underestimate the impact of stock prices on economic activity I don't know where the stock market is going but I will say this that if it continues higher this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about but for all the booms bailouts and easy money since 2000 no net jobs have been created in the US and per capita growth in the private sector has been stuck at zero so it is not working and all one can say with respect to this current crisis is here we go again Ben Bernanke to the rescue the FOMC announced today that it's zero interest rate would be extended through the middle of 2013 two years from now and yes it wound up triggering a massive stock market rally what's going on right now is the most profound coordinated effort in history of mankind to really promote the financial markets promote risky assets give the drunk another drink what the Fed is doing is we push investors into other kinds of investments like the stock market Bernanke still insists that money poured into a broken financial system will trickle down to the real economy and I care about Wall Street for one reason and one reason only because what happens on Wall Street matters to Main Street but can a problem created by money for nothing really be solved by ever more of the same the major banks are racking up profits and yet lending to small businesses actually declined in the third quarter our problem is that we have a very distorted economy high-income individuals just had eight hundred billion dollars added to their 401ks and are carrying what consumption there is Bernanke has been wrong before in 2002 he promised the cheap money would help us avoid a deflation like Japan's instead it gave us a mountain of new debt and an economy trapped by 0% rates just like Japan's and while the Chairman's bragged about rising stock prices sv5 runners up about 20% plus and the Russell 2000 which is about small cap stocks is up 30% plus he's been less eager to discuss the food and gas prices that rose with them inflation falls disproportionately on the poor you know the cost of heating your home goes up and you don't have the money you're in real trouble or the trillions of dollars is 0% REITs are taking from the pockets of savers somebody's paying the price for low interest rates it's you and me who have money market accounts which are earning 0.27% which by the way punishes the elderly and people on a fixed salary I mean I worked to save that money and now in one swoop the Fed decides I get nothing for that money in order to bail out the banks that to me is outrageous so here you have a group instigates movements and asset prices to get the economy going the following year the following the federal reserve today announced plans to buy forty billion dollars of mortgage bonds a month until further notice these policies bring interest rates down to defect stock prices it affects home prices if people feel better because their 401k looks better in their house is worth more they're more willing to go out and spend they don't try and stop that or moderate it in any way so they have a bigger collapse the next time and a bigger one the time after to see that and then see it all crash and to learn nothing quantitative easing is the last desperate gambit on this game of stimulating asset prices you have what degree of confidence in your ability to control this hundred percent there ought to be a greater degree of humility on the part of those who are operating or pretending to operate complex systems you know rates can only go to zero and at that point free money doesn't enable asset values to keep growing and the only tool they have left at their disposal now really is psychology people's believe that the Fed can solve problems but mechanically they can't at this point and the Fed effectively reduced long-term unemployment as the situation drags on it becomes really out of the scope of monetary policy at that point stimulating the economy through monetary policy really does almost nothing to contribute to low unemployment rates or high employment in the long term the feds lowered from five and a quarter to essentially zero over the last two years unemployment rates gone from four and a half percent to nine percent so it's clear we can't control unemployment rates with any precision whatsoever which means it should never be given a mandate to worry about the economy to worry about employment because if it has to do that it will manipulate asset prices which is what it does it is no longer just Outsiders who criticize Bernanke's efforts to play the hero for financial markets I don't know what the equilibrium rate of interest is exactly but I'm very confident that it's not zero printing money doesn't produce goods and services it doesn't hire people it may seem like the right short-term medicine but can the Cure be worse than the disease in some cases I don't think we want to build the next recovery on another housing boom we should be focused on keeping the purchasing power of money as stable as possible over time and doing that keeping inflation low and stable is the best way we can contribute to maximizing growth minimizing unemployment and contributing to the well-being of Americans but if we fail at it we lose credibility we lose trust Ben Bernanke brought our economy to its knees has been reappointed right does this give you hope for being re-elected governor of New York may I remind you he screwed everybody in the Constitution authorizing a central bank which means there should be no Federal Reserve [Applause] ironically if the calls for accountability mount only our independent central bank can protect the dollar from a dysfunctional Congress government debt spinning out of control it's our job to guarantee that whatever happens to the federal deficit and debt that it does not translate into inflation each new bailout comes with a catch this time instead of writing off bad debts and reforming our banking system we simply swap spending households couldn't afford for spending in tax cuts our government can't afford once again financed by ultra low rates from the Federal Reserve we can borrow tons and tons of money at very low interest rates and we can

Accounting - Source Document and Voucher in HINDI/हिन्दी (Easy Method) |PART - 1|

**Accounting – Source Document and Voucher in HINDI/हिन्दी (Easy Method) |PART – 1|**



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Subaru - This Will Save Your Life - How To Buy Car Insurance

**Subaru – This Will Save Your Life – How To Buy Car Insurance**



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How to buy car insurance for your 2011 Subaru WRX.

Remember to get.

1. More then $15,000/30,000
2. Uninsured Motorist
3. Comprehensive with deductible of around $500.

These few things will save you time and money and will help you get better in case of an car accident. Its serious stuff!

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what's up guys it's my today's topic is going to save your life one day so please please watch it all the way to the end and I'll explain why what's up guys it's Mike today I'm going to talk about auto insurance it's really important if you guys listen to me please listen to me please watch it all three to them because a lot of good points it'll save your life one day save you a lot of money save you a lot of headaches and it may give you the ability to walk one day ability to walk around talk to your friends we conscience so it's super important I know you has a lot of new drivers you don't wanna hear about it you're like Mike I don't freaking care about insurance I know in California you only have to have insurance liability only is good it's cheap and I can drive in my car and no big deal right well Rob that's not what you want to do here's the give you scenario right you're driving your car is just like mind your own business you're like a Garden Grove right this is like little little Vietnam down there looks like on and all these agents drives around you and they're like driving driving driving on the phones driving they're like beamers Lexus and everything and you're driving also you just come to a stoplight you stop slowly and boom you get hit real fast if you turn around you're like whoa what the what the who hit me right you get out of a car and go up to the guy like what are you doing like didn't you see me stop itstop sounds wrong to you right and almost in the guy comes out good oh I'm sorry Ming I don't know what happened I can't find the brake I know doesn't culture I have no assurance I gave you cash to go away no call the cops okay hey no collar cops you're like dude really you have no insurance how can you not have insurance it's California you go oh sorry isn't culture different culture I know not having showed it you're like aw dude really and the guy gets in this car and he just drives off and now what you have liability only guy drives off you try to call the cops cops get there like thirty minutes later the guy's gone you calling insurance to come and go hey guys I got into accident today sky rear-ended me and that's pretty much what happened Chinese company goes okay good alright what does your shirt company policy information oh the guy said he doesn't have insurance the your insurance company says oh I'm sorry sir based on your coverage you do not have uninsured motorist you have liability only so unfortunately this accident is not covered by our policy so is there anything else we can help you you're like oh no you need to cover when you shoot my car because I'm paying you every month and how can you do this to me like oh I'm sorry sir we'll based on your coverage you don't have uninsured motorist so we can't help you but thank you for your time and you may be receiving a quick survey in the next few days how would you rate this conversation attend for the good and zero for not you're like uh negative five thanks okay bye seriously you're like hi you're gonna be shocked your car is broken your back hurts and Tommy Tran took off and that's it the cops show up two hours later when they sit there and be there half an hour and you're screwed what are you going to do right your back hurts you can't go into work because your back is messed up and you only have liability only in uninsured motors that is scary because for me if I don't work then I can't have my super I can't have my channel for you guys you know so my policy is really high this is what liability is usually this is what most common people have people have liability only which means it covers only the other vehicle so if you're driving and the other vehicle hits you so you're not at fault there insurance policy will cover you assuming they have insurance now if you're driving you rear-end someone else your liability only insurance will cover the vehicle in front of you but not you because it's your fault your insurance company says I'm sorry you have liability only we're not going to cover you but we're going to cover the dude in front of you because you hit em it's our fault and then your insurance rate goes up right so if you have uninsured motorists along with your liability only you get the bomb you get the ability to have it where if a car hits you and he takes off like Tommy Tran did then your insurance company will cover your car even though time we translate in the picture anymore your current insurance company says you've been paying every month uninsured motorist we're going ahead and cover you if you get the whole package which people refer to as full coverage comprehensive all that good stuff even if it's your fault your trance company will cover you I rear in someone my fault my insurance insurance company covers me no big deal surance rate might go up so make sure you don't hit anyone that's pretty much it right now I know you're like okay I get that like everyone tells me that anyways I don't give a because I want to just have enough so I could drive it no big deal right now let's look at the numbers I know you I see this big number that says 15,000 over 30,000 you're like what the hell Zach doesn't matter to me I'll get the minimum because it's the cheapest it's the easiest and I can save money I get to buy another thirty six pack at Costco but light or Coors Light and play beer pong right it's like 25 bucks or so no 15,000 will say 15 so 15 over 30 15 means that $15,000 up to $15,000 will cover me in an auto accident so my body would be covered up to $15,000 in medical coverage my other passengers will also be covered up to up to $15,000 everyone in the car now the bottom number the $30,000 $30,000 encompasses everyone so everyone inside the car will be covered up to $30,000 altogether so I have two people in the car me and my passenger here $15,000 here for medical $15,000 over there it is maxed out no more coverage after that you're screwed right $15,000 goes like this my cost about $4,000 part appointment cost a couple hundred dollars if you need like a few Terrier a CL is going to cost $25,000 not including other procedures chiropractic treatment costs a few hundred dollars every session and you're after basically screwed at that point right so I'll tell you what my insurance policy is I have 100 thousand over three hundred thousand super paranoid no just cautious eye things I don't want to lose my wife to take care of so if something were to happen each of us will be covered up to $100,000 in medical coverage along with 300,000 come seing everyone in the car with me so about a five passengers each of us will get up up to a hundred thousand but cannot exceed 300 thousand dollars in coverage along with that I have the comprehensive – uninsured motorist and also property damage if you hit a light pole or something it will cover some the property damage that I incurred or the other people did also I have this medical thing where it's $2,000 for medical it covers the initial cost of say if we need to be transported by the ambulance to the hospital it'll be covered right away so I go extreme but I've always been extreme to the insurance policy because I used to work for insurance in an attorney's office so I understand the risk and we've been in a couple of accidents where it has not been our fault so I want to actually do this so we've been covered that way so for you guys you don't need to go to the extreme and less you can afford it please do because it will help you in long run because medical bills stack up real quick and you can do that go between the 15 100 maybe go 25 over 50 or 50 over 100 which means you know if you go 25 over 50 your medical treatments will cover up to $25,000 over the cost of 50 thousand with everyone in the car so me in the middle so he every guys are not watching this video you're like you're blanking out on my rambling just remember you must in California have liability only liability only but you want to also get uninsured motorist you must get uninsured in the comprehensive so that covers in any sort of loss right and up your insurance policy from 15 over 30 to one notch oh I think one notch is going to be 25 over 50 so if you can do the anything higher at least do 25 over 50 because $25,000 will cover you a couple of treatments and a couple other things because if you just you know fork over the extra 25 30 bucks a month for that coverage then you get healthy and you're able to go back to work if you know if you get hurt and you only have minimal covers and you don't have enough to cover your body then you might be losing couple thousand dollars a month because you can't work at all so I mean a super super important that you listen and you take advice of other people that have experienced the issue and I've been in the industry where I understand the insurance and the attorneys aspects of it so it's really important I know this video may be a little bit overwhelming a little confusing but watch it a couple times take a couple points maybe I'll put a few few notes on the them so that way you guys understand it but just remember if someone hits you takes off he's going to take care of you you want to make sure that you can take care of yourself so in that case you're going to have to get a policy that helps you to but I hope that helped guys my last thing to you is get insurance and get some good insurance that way you'll never ever be hurt because the last thing I want to she is one of you guys getting hurt all right well thanks guys for watching and I'll talk to you later you