Comments

• So they extend the period of accommodation by a little more than a year.  Sends financial markets flying, and especially TIPS prices, but will have little impact on the economy.  (Do they want the yield on 30 year TIPS to go negative?  Looks that way.)
• GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.  Inflation has moderated, but whether it will stay that way is another question.
• In my opinion, I don’t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself.
• Also, the reinvestment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
• The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.  As a result, the FOMC ain’t moving rates up, absent increases in employment, or a US Dollar crisis.  Labor employment is the key metric.
• The Fed is out of good policy tools, so it will use bad policy tools instead, and for longer than before.

Questions for Dr. Bernanke:

• Why do think extending the period of accommodation by a little more than a year will have any significant effect on the economy, aside from stock and bond prices?
• Is it possible that you don’t really know what would have worked to solve the Great Depression, and you are just committing an entirely new error that will result in a larger problem for us later?
• Discouraged workers are a large factor in the falling unemployment rate. Why do you think the economy is doing so well at present?
• Why do you think that holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself?
• Why will reinvestment in Agency MBS help the economy significantly?  Doesn’t that only help solvent borrowers on the low end of housing, who don’t really need the help?
• Couldn’t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets?
• Isn’t stagflation a possibility here?  I mean, no one expected it in the ‘70s either.
• Could we end up with another debt bubble from keeping short rates so low?
• If the Fed ever does shrink its balance sheet, what effect will it have on the banks?

Eddy Elfenbein wrote a good post recently on the stock market versus inflation expectations.  When I read it, I said to myself, “Wait, is the relationship between nominal and real rates really 1:1, or is it more complex?”  Though it is not certain, the regressions that I ran indicated that 1:1 was not falsified by the data.  The regression:

Inflation expectations determined the much of the value of the S&P 500 for the last nine years.

And you can see the relationship here as well:

The short answer is “yes, inflation expectations have driven stock valuations for the last nine years.”

I’ve been spending time on issues like this for a variety of reasons, and I’ll try to explain them in the near term, but that’s all for now.

This is one area where I would like feedback from my readers.  My view is that the repeal of Glass-Stegall had little impact on the crisis.  Most of the crisis occurred as a result of ordinary failures in investment banking, and commercial banking, with little change from combining them.

I would argue that the overall model for investment banking failed.  No major investment bank survived the crisis intact.  Goldman Sachs and Morgan Stanley had to seek banking charters to survive and receive help from the Treasury/Fed (one entity, but like Janus, two faces).  Everyone else needed help from the Feds, or failed, or merged.

I would also argue that the overall model for commercial banking failed, with many making loans that were horrendously underwritten.

So, what aspects of the crisis stemmed from the repeal of Glass-Stegall? Remember, the Fed was chipping away at it for some time.  Feel free to comment below, but if you don’t want to do that, email me.  Thanks.

What I write here will not be rigorous.  We’ve heard about “peak oil.”  We’ve heard about other resources, and how production will decline over time.

But what of credit? It isn’t that hard to create, but it is hard to create well, particularly when debt levels are high, as in this environment.

It’s not just the US, debtor-friendly as it has been for most of its existence.  Most of the rest of the world has debt problems.

China has indebted municipalities and banks, and debts to many projects from Party members that will not pay off.  The EU is  overly indebted everywhere, not just the PIIGS, and finds its overall borrowing rates rising as lenders wonder what a Euro will be worth if the Eurozone dies.

In the US, government debt rises more than corporate and consumer debt falls.  We’ll pay the government debt off later.  Don’t worry.

The simple solution to every problem is to say the it is a liquidity problem, not a solvency problem.  How do does one solve a liquidity problem?  Get a loan.  If the assets are really worth more than the liabilities, there should be some unencumbered assets that you can secure a loan with, and pay off the liquidity squeeze.  But absent that, it’s insolvency, regardless of what notional price one places on the assets.

But what if the problem is really a solvency problem?  Will a loan help cure that? No.  You can’t solve a debt problem with debt.

There are generally few liquidity problems relative to solvency problems.  As an example, most corporate bonds don’t default on principal payments, but on interest payments.  For individuals, balloon payments on loans might be relatively more of a problem, but since most people finance their homes, etc., on relatively thin ratios of income to debt service, interruptions of income lead to insolvency more often than balloon payments.

Consider for a moment that every liability is the asset of someone else, but not vice-versa, because some assets are owned free and clear.  Now pretend that we take everything in the world (the same could be applied to a nation), and put it on a single balance sheet, but we don’t net out the liabilities that would cancel out.

Which system would be more stable?  One where the liabilities are roughly equal to the net worth, or one where they are roughly five times the net worth?  The former, of course.  Now, not all liabilities are the same — long-dated claims like pensions only claim a little bit of the assets of the world at a time, whereas a large number of short-dated liabilities would make the system less stable, or perhaps lead to inflation.  Many dollars chasing few goods, or assets, or both.

I’m not sure exactly where the boundary line is for “peak credit.”  It would depend on the structure of the liabilities in question.  But once the fuzzy limits get exceeded:

• Growth can slow.  (Think of the book, “It’s Different This Time.”)
• Debt deflation may arrive. (Extend, Compromise, Default)
• Inflation may arrive for assets, goods, or both, depending on the propensity to save versus consume.
• And, if the debt gets high enough, and immediate enough, any entity may hit the “tipping point” where the market concludes that it is no longer possible for the entity to pay off its debts.  Short-term rates skyrocket, and the prices on long debt discount expected recovery levels.  For countries with their own currency, it may involve a lot of inflation, though a negotiation with creditors might be simpler.

In general, if we were starting over again, there are a lot of things that we should have done differently:

• Dividends would be deductible, and not interest.
• This would apply to all personal and corporate interest, including mortgages.
• We would eliminate the GSEs, and all government lending programs.
• We would run balanced budgets as a nation, and live with the modest volatility that induces.  We would not engage in fiscal stimulus.
• We would eliminate or constrain the Fed, such that it could never let the difference between ten and two year Treasury yields exceed 1.5%, or be less than -0.5%.  We would let recessions do their work of eliminating bad investments, because if you don’t, you end up with the debt deflation we are facing now.
• Or, go back to a gold standard, after analyzing what the proper value for the dollar would be, so as to avoid inflation or deflation.
• We would constrain banks to match assets and liabilities, and not engage in maturity transformation.

Banks would be a lot less profitable under such an arrangement, but it would prevent debt bubbles.  Besides, the banks would make up for it by charging for deposit/checking accounts.

Summary

We may be near “peak credit” at present, and that is true of much of the world.  Better we should have had a smaller financial sector, and avoided the financialization of the economy.  As it is, we face many years of slower growth ahead as we bleed debt out of the economy, or a number of years of inflation ahead, as we inflate away debts.  I suspect the former, but I can’t ignore the latter.

Comments

• The more I read the Fed statements, the more I think that they are paid to be Pollyannas.  The rose-colored glasses are glued to their faces.  There is never any criticism of their actions; blame always goes elsewhere.  They are similar to modern teenagers that lack talent, but have incredible self-esteem.
• GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.  Inflation has not moderated significantly, either.
• They point to the risks coming from global financial markets.  The Fed is the lead regulator in the US of banks and SIFIs; if trouble abroad leads to trouble here, they have no one to blame but themselves.
• In my opinion, I don’t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy is located.
• Also, the reinvestment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
• The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.  As a result, the FOMC ain’t moving rates up, absent increases in employment, or a US Dollar crisis.  Labor employment is the key metric.
• The Fed is out of good policy tools, so it will use bad policy tools instead.

Questions for Dr. Bernanke:

• Discouraged workers are a large factor in the falling unemployment rate. Why do you think the economy is doing so well at present?
• Why do you think that holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy is located?
• Why will reinvestment in Agency MBS help the economy significantly?  Doesn’t that only help solvent borrowers on the low end of housing, who don’t really need the help?
• Couldn’t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets?
• Isn’t stagflation a possibility here?  I mean, no one expected it in the ‘70s either.
• Could we end up with another debt bubble from keeping short rates so low?
• If the Fed ever does shrink its balance sheet, what effect will it have on the banks?
• Is it possible that you don’t really know what would have worked to solve the Great Depression, and you are just committing an entirely new error that will result in a larger problem for us later?

Eddy Elfenbein is a clever guy; he put together a model of gold prices that fits the data very well.  Tonight, I will share my own variation on the model, and try to give an intuitive explanation of why it works.

Ask yourself this: where does investor put his money if he wants to stay safe?  Most people are savers not investors, so ideally they would want to put their money on deposit and earn a real return with the ability to access their money at any time.  Then there is the alternative asset, gold.  Gold is a hedge against inflation, but it throws off no interest.  But at some level of real return, savers begin to conclude that they aren’t earning all that much, so they may as well hold gold.  Vice versa when real rates rise.

One more thing: gold doesn’t benefit from productivity increases, as stocks do.  Rapidly increasing productivity makes gold less attractive than stocks.

Eddy’s model boils down to this (in my implementation):

Percentage change in gold price = Multiplier * Percentage change in (Deflator Index / Real return Index)

where the Real Return index compounds three month T-bill yields less inflation via the 12-month CPI-U in arrears.

Here is how well the mode works, since 1970:

The first model attempts to minimize absolute dollar price differences between actual and model.  The second attempts to minimize the ratio between actual and model prices.  Both have R-squareds over 90%.

The deflator return is constant in percentage terms.  For the two models it is around 2.3%/yr, which is not far from productivity gains.

As for the multiplier, it is near six.  The multiplier is like a duration figure with bonds.  What this means is that the percentage change in real interest rates, three-month T-bills less CPI-U inflation, is projected to persist for six years.  Six years is a reasonable figure, because monetary policy changes slowly, but not glacially.

Now, at present levels of real interest rates, with T-bill yields near zero, and the CPI above 3%, it implies a gold price rising at 3% per month.  If inflation stays where it is and the Fed holds good on its promises, that means a gold price in the $3000s in mid-2013.

Do I believe this?  Partially.  I own lots of oil stocks, but nothing in metals at all.

Eddy’s model helps to clarify the value of gold.  It is a store of value, as its price anticipates the degradation and strengthening of the dollar, because changes in real rates will persist on average for six years.

I wrote about the thoughts of others Wednesday as I took notes on their talks.  I don’t type that fast, so my notes gives synopses of the talks given.

Now for my own thoughts.  I have a sympathy for anyone that wants to take monetary policy out of the hands of the government, because they don’t do it well.  Some sort of hard money standard is necessary, whether gold, silver, or a commodity basket.

Ideals

I have one major ideal here, and I don’t care as much how it is accomplished: get the government out of the monetary policy business.  My secondary ideal is regulating banks properly.

A gold standard could do the job, but I am not wedded to the idea.  Gold standards can be inflationary or deflationary.  It depends on the price at which you link the currency to gold.  Post-WWI, Britain pegged it too high, and got deflation.  France pegged it too low and got inflation. Getting the right level would be important.  Fortunately, we know where it trades now relative to the dollar, and that would be pretty close to the right level, if the stated gold levels of the Fed and the Treasury are accurate.

Practical

A full audit of the Fed is a minimum, as is an audit of the gold at Fort Knox.  Do it once, so that all doubts can be dispelled.

I think that bank regulation for leverage and asset-liability management is more critical than monetary policy itself. Banking crises stem from inadequate asset-liability management.  As James Grant pointed out from the historical example that he gave, deposits should back only self-liquidating assets.  Longer term assets must be backed by matching funding, or equity.

Unseasoned asset classes (i.e., asset classes for which we have no real loss statistics because they have never had failure as a group) should be disallowed as investments for banks except against surplus.  After that, risk based capital should be based off of strict actuarial studies, with a significant provision against adverse deviation, and no credit for diversification.  And, don’t allow banks to score their own riskiness, a la Basel.  That is ridiculous; the fox guards the henhouse.  If a bank has superior risk control, they will earn the results over time; they should not as a result lever up more.

Now, I really don’t care if it makes banks unprofitable, or earn less than their cost of capital.  In that case, we will get fewer banks, the margins of the remainder will rise, and you end up with a genuinely stable system with occasional bank failures that don’t threaten the system as a whole.

There was one idea that I thought could be put into practice immediately, Treasury Trust Bonds optionally backed by gold.  If nothing else, like TIPS, it would give the Fed another indicator on how credible their monetary policy is.

Conference Zeitgeist

The Taylor Rule got some respect.  Many suggested that if it had been followed, we would not have gotten into this crisis.  I’m a little less optimistic there, because bank regulation was co-opted allowing for too much risk to be taken relative to liquidity and capital.

Most felt that the Fed was the major player in causing the crisis, with the GSEs playing a lesser role.  The overpromotion of home ownership, and the constant provision of liquidity to the markets led borrowers to become reckless amid asset price inflation.

Incentives also played a role. Managerial and shareholder liability at banks would help prevent reckless behavior.  Wall Street worked better when it was a bunch of partnerships, rather than limited liability corporations.

Most thought that things are worse now than the ’70s.  The debt levels are higher, which makes demand punk, and businessman more skittish to expand and hire.  Government policy is less predictable as well.

The speakers largely expect more inflation; more debt monetization is the path of least resistance.  Politicians get what they want without a vote being taken.  On the question of where to invest, everyone was an inflationist.  Gold, silver, TBT, were trotted out.  Personally, I’ll stick with my stock investing.

People

Jeffrey Lacker showed courage in coming to the conference.  He made a really good point that the Fed should focus on its liability policies, and limit itself to investing in Treasuries.  The Fed gets bad press and popular dislike when it uses its assets for special lending programs and bailouts, leading to charges of favoritism.

Zoellick was a reasonable guy regarding the problems in the Eurozone.  Germany has to figure out what it wants.  To me, it boils down to this:

1. You can have a suboptimal euro that is not a good store of value, and bail less well-disciplined governments out via the ECB sucking in their debts, or,
2. You can have a smaller Eurozone en route to no Eurozone, or,
3. You can have a Federal Europe, and dissolve Germany into Europe as a state of the whole, as the 13 colonies did after the Articles of Confederation.

Personally, I would choose #2, because people in Europe identify themselves with their nations, not as Europeans.  Political and economic systems must derive from cultural systems or they will not work in the long haul.

It was fun seeing my old professor, Dr. Steven Hanke.  I reminded him of nine years earlier, when he gave a talk to the (then called) Baltimore Security Analysts Society, and we discussed why we thought the Euro would have a tough time surviving.  Most of that discussion is now taking place.

Ron Paul was Ron Paul.  He doesn’t change much — that’s one of his apolitical virtues.

John A. Allison was entertaining; he argued that capital levels are too low, and regulation too high.  He thinks that you can’t expect much, and don’t get much from regulation.  Especially interesting were the discrimination in lending allegations by the regulators that BB&T fought and won twice.

Conferences like this attract cranks.  Lots of people with odd political agendas hoping to get noticed, others with odd business propositions.

Other

As a final note, the concept of free banking and/or competitive currency issuance, I think invites more problems than it solves.  Think of it this way: people aren’t very good at evaluating financial promises.  The fewer the better, and the lower level of complexity, the better as well.  There has to be some monitoring of financial promises, some intelligent regulation of banks, or things can go badly wrong.  US history backs such an idea up, regardless of whether we have a gold-, silver-, or commodity-backed currency, or a fiat currency as we do now.

Update — thanks to Eddy Elfenbein for catching a typo/thoughtless mistake in paragraph 4.  For France, it was inflation, not deflation.

CLOSING ADDRESS

John A. Allison
Former Chairman and CEO, BB&T, and Distinguished Professor of Practice, Wake Forest University

Problems primarily caused by government policy, loose Fed policy, GSE policies.

Fed jobs: payment systems, bank regulator and monetary policy

Payment system monopoly benefits inefficient small banks.

Regulation: FDIC insurance destroys market discipline.  Financing using FDIC-insured deposits to make real estate loans.

Fed failed to oversee other regulators.

Private deposit insurance a la Bert Ely was possible. (?!)

Now-discredited study Boston Fed on discrimination in lending.  Loosened loan standards as a result.

BB&T fought it and was found not to discriminate.  Still fought it, until Republicans were elected and the investigations was dropped.  Same under Obama administration, until Republicans were elected and the investigations was dropped.

CRA eliminate redlining — banks don’t do well with low-quality lending.  Worked so long as home prices were rising, but gave the rating agencies the wrong loss factors that blew up when the bust happened.

Grossly misregulated during Bush, Jr. Administration — Privacy, Patriot Act, etc.  Only Spitzer caught.  Wasted a lot of management time which lead to less true risk control.

Would eliminate regulations before taxes. (DM: of course, taxes are easier to fuddle)

Regulators don’t catch things proactively.  No surprise, because regulators don’t act during the boom phase because everything is going well.  Describes a junky bank that BB&T passed on, until it went bankrupt.

In the bad times, regulators irrationally tighten.  BB&T no longer will make good loans that they used to.  FDIC was worse now than the early 80s & 90s.  Affects small banks most.

Price controls: no one at Fed believes in it, yet the FOMC triues to regulate interest rates.

Greenspan most regularly ran policy with negative real interest rates, helping to create a bubble, until he finally began his last tightening.  Bernanke inverted the yield curve, banks took more credit risk to compensate, worst loans were made then.

Fed held prices up in the ’20s by holding prices up when they should have been falling.  Hidden asset bubble.  Prices should have been falling in the 2000s with the addition of new labor to the capitalist system from China and India.  The process of inflating incented jobs overseas, aside from home construction jobs.

Fed policy today is destructive and lowering productivity.  Private equity guys he talked to are not changing their hurdle rates.

Current policy robs savers for borrowers.  Humiliating many older savers (DM: makes them take too much risk also).

If Congress can print money via the Fed, they will do so.

Who do enslave via regulation?

Short-term versus the long-term, we pick the short run… leading to inflation away of debts, and loss of responsibility.

Life, liberty and the pursuit of happiness… takes a dig indirectly at the gift and estate taxes… free to give it away.  (DM: perhaps it should have been pursuit of virtue, or serving Christ, but that wouldn’t have fit the Founders)

Self-esteem mainly comes from work? (?!)  An encouragement to do your best.  Welfare lowers self-worth.

Q&A

Why should intervention not have occurred in the credit markets?

After making so many mistakes creating too much credit and a pseudo-boom, it was required after that. After that, the bailouts were not predictable.  The losses were not going to be so big.

Makes a mistake saying the insurance industry would not have been affected by the failure of AIG.

Disses Paulson (investment bank unsystematic), Bernanke (Academic) and Geithner.

Should bank executives have personal liability?

No. Thinks capital ratios should be 25%.

Why did they bail out Bear Stearns?

No good reason, thought it would be one-time.

Big rise in the monetary base?

Inflation, Stagflation coming.  No unemployment in a truly free economy. (?!)

PANEL 4: A PROGRAM FOR MONETARY FREEDOM

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.

Q&A

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

PANEL 3: TRANSITION TO A NEW MONETARY REGIME

Moderator: Steve H. Hanke
Professor of Economics, Johns Hopkins University

DM: Steve Hanke was a professor of mine when I went to Hopkins.

Targeting NGDP — Cato Institute — 2003 — Nominal Gross Domestic purchases or final sales

Richard H. Timberlake
Emeritus Professor of Economics, University of Georgia

Why did we go off the gold standard?

Dual Mandate is the main problem at the Fed.

Fed very different animal than at its inception.

Legal tender laws — goes back to the Civil war, 2.5x inflation afterward.  Debts paid off with depreciated greenbacks.  Tested by Supreme Court — Salmon Chase, Lincoln’s Treasury Secretary in 1864, was the Chief Justice at the time in 1869, and he changed his mind, on the ability to pay off pre-1862 debts with the greenbacks.

Rankled Grant administration — appointed 2 new justices, and a new case reversed the ruling. 1871

1884 — Congress can issue any currency it likes because it has sovereignty.

1913 — System needed a lender of last resort, thus Fed creation.

1922-1929 — Stabilized the price level, amid a gold standard…

Benjamin Strong dies, and power shifts from the NY Fed to the Board.  New leader opposes speculation; banks needing liquidity could not get it if they had been lending to the stock market. 1929-1933 huge contractions and bank failures.

FDR abandons the gold standard; devalues; collects gold; eliminates gold clauses.

Supreme Court relies on legal tender laws saying that Congress could define money as it chose.  He thinks the precedents should have been re-argued.

Judy Shelton
Author, Money Meltdown

Ruble collapse — Why back to gold standard?

Thinks all candidates should be talking about monetary reforms.

Money should be a stable unit of account and should be liquid.  It should allow us measure value well.  Convey the price signals of the market accurately.

Jefferson wanted a hard currency defined in terms of precious metals.

Offer Treasury Trust Bonds with a an optional conversion feature to gold.  Would receive par back or an ounce of gold.  Priced initially with par of an ounce of gold, no interest paid.

Argues for a balanced budget amendment.

Thinks other nations would mimic the ideas if a US Government gold bond would be issued.

Greenspan proposed this idea 40 years ago.

Lawrence H. White
Professor of Economics, George Mason University

How to go back to the gold standard?

A lot is calculating the proper initial parity with gold.

Treasury owns enough gold to re-establish a gold standard at $1600/ounce.

“At least I assume it is there, Fort Knox hasn’t been audited in a while.”

1) Eliminate excess reserve by eliminating interest paid on reserves.

2) Redeem reserves at Fed with gold.

Back M1 100% with gold — $8000/oz, Inflationary, reduction in wealth, etc.  Warehouse notes w/storage fees.

Central bank?  No monetary policy needed.  People would buy and sell gold daily.

Single mandate has not worked well for the ECB.  Inflation there running at 4% or so.

Competing private banks worked better than with central banks.

Or, the Fed could become a currency board in the short run.

Q&A

Taxation of Tsy Trust Bonds?

Shelton: Would confuse some of the issues.  Just get this out there so it can be tried.

Will the gov’t take action?  Guesses as to when?

Shelton, White: No idea.

Would would trust the Treasury w/Treasury Trust bonds?

Shelton: They would be collateralized.

Why is monetary reform important?

Hanke: because the Fed ran a reckless monetary policy, and did not regulate leverage of banks well.