At the Cato Institute’s 29th Annual Monetary Conference (VI)


Moderator: Alan Reynolds
Senior Fellow, Cato Institute

Stimulus: money away from productive uses and toward the goverment and other unproductive bits of malinvestment like autos and homes.

James Grant

Editor, Grant’s Interest Rate Observer

The cumulative effect of history

Problem in banking not a shortage of capital, but a shortage of capitalism.  Must allow banks to fail.  In old days, unlimited liability made banks more cautious.

Deutsche Bank vs JP Morgan Chase

  1. 15% capital-to-risk-weighted assets
  2. Leverage — also identical
  3. But DB 42x vs JPM 13x assets/equity
  4. 60x vs 17x — tangible assets /tangible equity
  5. JPM has less callable liabilities

1842 New Orleans — divide bank balance sheet in two; movement: self-liquidating loans and gold against deposits.  Deadweight: surplus — could invest anywhere.  Worked for a generation.

Clarity, simplicity and elegance

Kevin Dowd

Visiting Professor, Cass School of Business

Bailouts just another profit center for banks.

Liquidation would have been better than the bailouts — mentions Mellon

Low interest rates just create another bubble. DM: Hair of the dog

Confidence only comes from strong balance sheets.

Quotes Jackson regarding the Second Bank of the United States

Solution is to eliminate the Fed

Endgames: Monetize the debt, or watch interest rates rise.

Solutions? Gold standard, End Fed, personal liability for bankers.  Constitutional settlement because governments and money don’t mix.  Prohibit bailouts, and intergenerational transfer schemes.

Kurt Schuler
Senior Fellow, Center for Financial Stability

Competitive vs Monopoly issue of currency — why the shift?

Easy way for the Government to make money through seniorage.

Four places today where parallel issuance of notes goes on today: Scotland, Northern Ireland, Hong Kong, and Macau.  100% segregation of assets in reserves at the central banks, generally.

Where might issuance of competitive notes be legal?  Mostly teensy places, with the exception of the US & Japan (they aren’t sure) and the 4 mentioned above.


Raising interest rates to improve matters?  Where to invest?

Gold, silver, TBT

Currency transfer schemes talk, no question

DM: There are lots of these schemes around