panel. in the 1970s one of the characteristics of it was of negative real interest rates, and some would suggest that that was a driving factor in the inflation of the '70s. after the '70s the bond vigilantes said, never again. and, of course, we're now in another environment of relatively low interest rates. the question is, given where interest -- nominal interest rates are today, if we start to see a resurgence of inflation and some fear, will that lead to a much more rapid and be sharper increase in nominal interest rates as investors try to avoid being impoverished by negative real interest rates? ..

>> the most important element of policy in that respect is make sure you maintain your expectation and price stability will be maintained in the united states. ben bernanke made a strong oral statement about that 60 minutes ago. it was as clear as you could be

about his intentions. there was some skepticism until we proved it was not proper right now but the federal reserve in a timely way to head off inflation and consequences of a very big supply of liquidity. they understand the problem and i believe they will respond at an early date so you don't get the kind of market reaction. >> the critical question, i don't believe they have a coherent plan for doing what they say they are going to do. they have a model which i believe has serious flaws. the hard question is how high the interest rate is going to go or a trillion or more excess

reserves from being used. how rate is going to go. if you do it without a moderate interest-rate, it will still be for. if you go to rates that will be seven, 8 or 9%, that will be a different thing for unemployment has high as it is. not just congress and administration but the business community and related unions or the general public. that will be the real test of whether that policy will succeed in and what is missing as far as i know and i have asked this, how much the excess reserves for every 1% of the interest rates. and i don't believe they will

have studied it closely. that is the critical question. that is always a critical question in monetary policy and how all these other people are going to react to the hy industry in a period of high unemployment. >> alan greenspan in 2002, said you can't expect or no them, this is interpreted as the greenspan, in hypothetical, that this has resulted in asset inflation with respect to at least 3 to equities. do you believe the idea of the

asset inflation is a concept when we were talking equities going down, or oil prices just a relative price change should be called inflation and if you do think it is coherent concept -- federal reserve monetary policy -- >> 1960s and wrote lots of papers in which asset prices so i am a strong believer that it was a mistake to strip those models down and this was something we told jim tobin, there were critical for monetary policy and with monetary policy, they have moved away from that.

i don't believe they should try to control asset prices. they were a piece of information which told them something about the play in which policy is transmitted. and expected returns and inflation. we have ways of sorting that out. we should use the information that says asset prices are piece of information about where markets are going and is a mistake to believe that the short-term interest rate -- the fed has operated on a model in which the short term interest rate is the only interest rate -- it is solved by them. nothing matters except what? what happens to prices and output. it is a flawed way of thinking about the policy and in my book

i make a statement which i think has been proved incorrect but will eventually be correct, that no central bank will ever operate consistently in that model in which asset prices and other things don't have any role at all in the analysis. >> they you have any comment? >> that leads me to ask the question as you were conducting policy how much weight did you put through models and predictions? >> predictions are very difficult for the future. what we demonstrated repeatedly is economists are not very good at predicting the economy at important points. when there is a certain steady

increase in it is hard to miss but when you have a recession, recession or recovery they are not very good. >> next question over here? >> my question in regards -- the liberty movement in regards to the federal reserve. in 2009 congressman ron paul introduced the fed, a bill that would subject the fed to an audit by the comptroller general. i was wondering if a timely move -- >> congress traditionally makes

the mistake of choosing process and outcome. what we should be returned is out, process they should leave to the people who have to make decisions. you want decisions to be unhampered by the fear that someone will walk over your shoulder and say you shouldn't have done that. we don't know enough to be able to say in the short-term whether the decision they made was right or wrong or too much or too little. so let's try to get the process excluded from the discussion and put interest on the outcome. they monitor the fed according to the outcome and press them to get better outcomes. that is what public cares about. i don't think the public cares about what ben bernanke said at

the meeting on october 22nd. it is irrelevant. what they care about is what do you produce? what is our outcome? congress has an oversight role and the oversight role should be focused on the outcomes and they should do a better job with what they do in monitoring outcomes. >> there is a responsibility to be as clear as possible about what their policy is and what their intentions are but revealing all the intro is not very helpful. this business with this wiki leaks business, arguing that transparency is helpful in terms of public policymaking when the

internal communications are public. it is unfortunate. let me return to this forecast, giving you a particular example. when i became chairman of the federal reserve in 79 the federal reserve staff, already in a recession, it would appear in that quarter. i don't think they were alone in that prediction. we went ahead and tightened money. what was surprising is the tight and very strongly, fall and winter of 79/80. it continued to grow. the economy was still growing.

the economy, this is an artificial recession, the economy dropped in what is called a recession in response to credit controls, to put up and that came of the clear sky. he announced one day on credit controls and the federal reserve applied credit controls. we didn't like the idea of credit controls so we rated crandall controls as mild as we could make them and exempted every form of credit except credit cards and single payment installment loans. home credit was exempted. those are the two big sources of credit. the last president of the united states says we will restrict credit, everyone was coming up their credit cards and we pay credit-card balances and of money supply wind and the economy -- so i want to be

patriotic and stop spending. that so-called recession lasted four months until we took off a controls and everybody said ok, off we go again. these are gray areas of recession. then we went into the real recession later. much later. >> i teach economics in the spring and fall. you said -- [inaudible] >> do better than the volatility we have experienced between the euro and the dollar. eyewall under how that will be done. could you comment on that? >> that gets into big questions of international monetary reform and cooperation among major

players and their policies and understanding each other and willingness to make changes in a cooperative way. in the interests of dealing with the problem. in europe and the united states and the rest of the world. arguably the rate artificially has held steady. can't we make some more cooperative arrangement where the adjustment takes place? it is a nice question, very difficult to do in practice. there will be an attempt in the next year or two of ignoring the problem. we ought to consider reforming international monetary system.

no one has used that phrase for a couple decades. that phrase will come back in the next six months. we will probably say something about it with a committee to look at it. there will be an effort to deal with the problem. >> the president of the world bank talks about going back on the gold standard. i have always believed the reason we have a gold standard is not because we don't know about the gold standard was because we do. we know that that doesn't give us the unemployment outcome they want most of all. what would i do? i would say there is a problem of trying to reconcile domestic

and international monetary policy and the way we come up with it is the three leading monetary countries, the euro, japan and the united states all pledge to achieve the same rate of inflation. and they make a strong commitment to do that. third countries pay is that rates. that way they can have price stability and for price stability and exchange rates and the three countries have floating exchange rates so the real exchange rates can adjust. and not cause unemployment that people wish hardly to avoid. the whole system in my reckoning

would be voluntary. the three countries would voluntarily -- no meetings or discussions. we pledge to keep 2% or zero. i would prefer zero but i don't think that is going to happen. so the zero to 2% inflation rate would remove part if we did it. and persist in it and leave room for countries to make adjustments within that band when they have unemployment and so on so as to satisfy domestic urges and provide more stable international environment and i believe that is a way of doing better. is it absolutely optimal? i hesitate to answer that. i doubt it. it may be the best we can do and

certainly better than what we do do. >> i don't disagree with what he is saying. we should do exactly what he is saying but the hope that will produce -- not in accord with experience. we have been reasonably close to what he says in the last ten years and the exchange rate has gone up and down. the euro has gone up and down and that the end, you have got to do something. that ought to be the foundation. that will produce reasonable stability. >> at noaa meetings requirements because we have too many undersecretaries and assistant secretaries not to have international meetings. [talking over each other] >> next question right here.

>> i want to -- sorry. i want to ask the panel about the fact that what the fed calls macro potential, what ever. let's call it financial stability. it will be part of monetary policy. all three division directors are seeing a committee that looks at top fingers and it will be more a part of that, is it a good thing or a bad thing or a distraction? >> organizations do their best with a limited number of objectives. given multiple objectives they have a hard time achieving any of them. this talk about macro potential, avoids what is the most significant thing that they can do, and that is raise the

capital. in the 1920s banks had 20% of their assets into capital and there were no large bank failures. we need to go back in that direction and we don't need a lot of people telling banks not to take these risks for those risks. market economy requires people to take risks. isn't clear at all to me that moving risks out of the banking system into some intermediary if that were to happen would be desirable from the standpoint of society. i would like to see the banks have more capital. i testified to that three times. i worked with members of the legislature, banking committee to get legislation. i got one to introduce it but it went nowhere. why does it go nowhere? because they fight like mad against the idea of more

capital. bailouts are wrong. wrong from the standpoint that society rocks the standpoint of the banks. it just leads to taking advantage of too big to fail and taking risks which they should not undertake. increase the capital, put the onus on the stockholders and management and that is the way you get financial stability and you don't need regulation. i have three laws of regulation. the first law is lawyers and bureaucrats make regulations and market circumvent them. the second law is regulation is static and markets are dynamics of they don't circumvent the mend the beginning they will learn to do it.

regulation works best when it changes the incentives of the people who are regulated so they have an interest. >> after those last remarks, have different rationale for macro potential surveillance. bob bartlett but so things that go on -- there's no question that they're more comfortable -- i would like legislation and regulators around the world to have authority to control as they use their authority but i don't think that is the end of the story and i would like to wave away too big to fail and bailouts of all these institutions too. when push comes to shove the

majority is between the collapse of the system and entry into the system. regulators around the world have to take action to avoid that but that is why we need more regulation in some areas. i can think of several pieces of regulation i strongly support. >> what about the question from the other direction? which is do you worry about the focus on the setting of monetary policy? federal reserve officials spend a lot of their time but riding the -- >> the bottom of my list of words. i wonder what most members of the federal reserve do within meetings. there's a limit of the amount of

time you can worry about what monetary policy should be. they don't spend enough time on regulation. one of the interesting and important things in the legislation was to say there will be a governor who will be vice chairman of the board who will be nominated by the president and approved by the senate with the responsibility, principal responsibility of maintaining a oversight of the regulatory work of the federal reserve. that is off and on about the interest of the chairman and often that interest has to have particularly been there. i think the federal reserve should be the principal regulator but if it is going to be organized that way somebody ought to be responsible for it.

there is the overwhelming argument that it complement's monetary policy, suppose of monetary policy. there is some danger if the federal reserve becomes all powerful, people are wondering in this great democracy as to whether any agency should have that breadth of responsibility and not be subject to control if you can avoid that but at some point i think the federal reserve take on too much. >> the present solution is an absolute abomination. it puts a regulator into the federal reserve. not responsible to the board or market committee, still the authority to take budgetary money from the profits of the federal reserve to do what they

decide. i think that is absolutely the wrong way to go. that should be on the budget. if there is going to be a regulatory authority, its budget should be voted by the congress, congress should have a much heavier hand in oversight of what they do. talking about the redistribution of wealth in society, not questions of monetary policy. >> and you are talking about -- [talking over each other] >> so now is the time for the last word. if you have anything to say, he wrote the book. >> i am happy to book is finished. it is likely monetary policy

that paul talked about. i didn't have the slightest idea it would take 15 years to finish this book. if i thought it would i would never have done it. now i am glad it is done. many people have said are you going to write another volume on the period after 1986? my answer is no. >> i didn't know it had been 15 years of effort. two volumes or three volumes. life went on after 1986. life goes on after today. >> a continuous process to launched the model. >> i am sure we will be better informed. those two volumes, how many words. >> 1312 volumes in volume 2.

>> they are getting longer and longer. you will have to have a successor. thank you for doing this one. [talking over each other] >> thank you for coming and particularly -- [applause] >> paul volcker was chair of the federal reserve from 1979 to 1987. alan meltzer his political professor at carnegie-mellon university. to see this and other programs about the federal reserve online visit booktv.org and search federal reserve in the upper left corner of the page. >> best-selling titles for this week are as follows. loren helen brand's story of survival during world war ii,

unbroken. the second is cleopatra by stacy shift. number 3 on the list is battle hymn of the tiger mother. and account of raising children with traditional chinese values. autobiography of mark twain is four and keith richards's biography life is number 5. the four our body by timothy ferris is sixth on the list. the immortal life of henry at lax comes at number 7. and parallel universes and the because of the cosmos by brian green is eight. karen armstrong's 12 steps to a compassionate life is ninth. gordon murray and daniel goldin wrote a call to book titled the investment answer that completes the list of number 10.

>> the reinvention of the kgb. andrei soldatov irina borogan, co-founders of the news web site discuss the reinvention of the kgb during vladimir putin's tenure as russian's president... . >> we have to get started. i will send a limo out for anybody that couldn't get here and the metro. i am david hoffman. i am a contributing editor of foreign... >> in terms of numbers, the kgb -- >> we're interested in more and more visitors speaking here. it did a lot to help us put this together in a short period of time. in an earlier period i was a moscow correspondent for the washington post. those of us who remember when it was like to be a correspondent

even before me in times of soviet union will recall correspondents were prohibited from going 25 miles outside of moscow without permission from the authorities. it was a very difficult environment and i know peter osmosis is with us today, was a correspondent in that time and remembers it more vividly than i do. and after the soviet collapse when i was a correspondent, there were all so many risks to being a correspondent. since 2017 russian journalists have been killed including many who foul sometimes on their own and sometimes under coercion to the new authoritarianism. today we have a chance to talk to two journalists working in today's russia in this

environment. what makes them special is they are real digging investigative reporters and they are determined to ferret out fact to judge them, check them and they're doing this in one of the most difficult fields. i know from my own experience that security services are very secretive. andrei soldatov and irina borogan are co-founders of their own web site that i would mention they are nice and easy to navigate new english version of this web site. go and see a lot of their work. it is a new media way to carry on their investigation when they write some of their articles which are published in russia and post them. people have access to what they found as they pursue their

investigations. andrei soldatov worked -- both of them have told me that -- both of them -- also both worked at other russian newspapers as well as well as the long lamented newspaper started by vladimir kosinski after the collapse. they posted information about the security services and their work has also been featured in many other western publications and noted that the new york times in a headline called in a website that came in from the cold, russian secrets. we are here today to talk about the new book. is is it so everyone can see the nice looking cover and the picture on the front. the new nobility, restoration of

russian security state with the kgb and i would like to introduce the book briefly. there are a lot of -- they are eager to address whatever you would like to ask of them. in 1994 the journalists published a book called the state within a state. her work was finished as the soviet union was collapsing. she intended her book as a wake-up call that even though the soviet union had collapsed the kgb was still surviving. not only surviving but thriving. the best evidence that her alarm about this was to be taken seriously is the work that andrei soldatov and irina borogan present to us today. it was the first major investigation into the impact of

these activities. for most of the last decade particularly under vladimir putin it has been an eventful time. the new nobility tells us how the head of the federal security service main successor agency refers to his associates and their service, the new nobility from which the title of the book was taken. one thing we talk about today is what did the security service do with these resources and prestige and responsibility? how did they respond to the challenge of terrorism and what role have they had in enforcing new authoritarianism? and have the security services widened operations for overseas killings? what else have they done?

a brief word about acronyms. the kgb is familiar to you from soviet times. the main successor to the kgb supposedly was the federal security services. the russian initials are fsb. we will talk a lot about the fsb. and of course you see that they have grown greatly in stature and were not entirely the domestic successor but there's a foreign intelligence agency also with the initials as be are. they are a successor to the kgb and other agencies which i hope andrei soldatov and irina borogan will tell us about. so i hope we have a really fun and interesting and productive our. a little bit more than an hour with them. we are taping and filming. everything is on the record.

please state your questions clearly but we are a small group has so if you have a follow-up, if you want to follow-up please let me know and i will try to be an honest broker and fair moderator. i will be the guy who starts us off. and i will turn it over and open it up. and would like to ask both of you, one of your basic arguments in this book and for your findings is that the fsb didn't become a small shrivelled piece of the kgb. it became bigger and in some ways more powerful than the kgb. can you explain how did this happen and why? >> in terms of numbers, the kgb was a security service of the soviet union and the soviet union was much bigger than russia but if you look at the

influence and how it changed the culture of russia and controllable by the society and permanent -- it is more thoughtful mostly because the kgb is an organization that was always a kind of a tool for soviet communist party and at the same time communist party and soviet union fully controls the kgb because there was a department, lace section of the kgb. in 1991 the soviet union collapsed, the idea was to replay a section of budget control. and to create -- inside the intelligence community and

rivals and today -- communication agency, comparable to u.s. national security agency. one important thing. it is possible for social and political situation, has that ability to compare the foxes director. and competed with military intelligence. in this competition, the possibility to compare information provided by the security services. and the impression of control over this system of intelligence services. what was done by vladimir putin, the federal security service of

russia, and it was part of the kgb. the significant part of the old dialogue and communication agency for the troops and even when the agency had some secret services, vladimir putin to get more power and create the department responsible for intelligence abroad. 7 now the fsb is comparable to the kgb but at the same time more powerful because there's no mechanism to control this big service because another problem with the fsb is they cannot compare -- it is not just personal based in moscow but the original structure and every russian agent to pursue a very

important department to arrange and not enough to control these people. it is quite striking. fsb people love to talk about the longest chief of the kdp and became chief of russian state and she is a kind of hero for the fsb. never a trained kgb agent. she was an official sent overseas for the kgb. at the same time vladimir putin trained the kgb as an agent that accounted for the president and not the prime minister. >> let me ask a follow-up. did this begin with vladimir

putin or did it begin sooner? >> it began in the 1990s. the reason for this department was 1995. and the director in 1998. was long before vladimir putin became permanent. >> we have some questions and i will keep interjecting if i can. we have a microphone. will everyone speak into the microphone? and please give your name. >> i am a consultant of economic development. could you talk a little bit about your sources? how do you two as independent journalists find out what is

going on in these agencies? >> it is very difficult. the way it is right now in russia. it is the secret services. in 1996, so open as a journalist, exists, this issue -- in -- so at that time you can find a lot in russian sauces. there's a difference between secret services in the u.s. and russia because you can take some official documents and official information from leadership in the american secret service but impossible in russia or very

difficult. to the journalists in the case of official requests, you should walk hard with a lower ranked officer and middle ranking officer. they might be very useful. you should use that information. the question is you should do a double check because sometimes they want to use journalists and why we send for journalists. [talking over each other] >> in 2002, a big piece, criminal investigation to the secrets and the moscow

department, was all emergency power and official but when he started to propose the function, the ideas for if you can stop them from talking, understand he is always under control but today, it started to change again because there is a fear that it might be impossible to get new services but three four years, the important thing is -- an internal crisis. it is a problem between low ranking officials and generals. low ranking officials are so depressed, they have -- not so protective. they are not given this privilege that generals have been granted. they started as a leadership.

we have some complaineds that occurred with officers against leadership. at least one case was decided in february that it would be -- and now this officer -- 14,000 euros because they found she was writing against the leadership. >> i am from georgetown university. i wanted to thank you for the book. it was very nice to find it. thank you so much. i have two questions. first question, it seems what you were talking about happening to support a major part of the russian population, what should

happen if their support shouldn't weaken? the second question regarding your profile on open source center and it says that if you operate with relative freedom in russia with hot topics you're covering. they also point out that in 2008, the deputy communications minister. >> why russian populations, first of all, more selective than the kgb is to be.

some people with -- some for example want to create a horizontal structure to come -- to -- some local initiative. all of these people, all of these initiatives considered to be quite suspicious. and these people, there would be under control by the fsb. they might deal in terms of -- the minister of corruption but the thing about this -- very skillful public opinion. it has happened in 2000 to,

2003. it is more effective not to answer questions of journalists but to produce events to the public. hoping to produce not just, enters but explained terrorist attacks. then this should go down. and the point of this is to tell about the actions in moscow. in 2002 -- in the movie you can see when she resisted the officer, and russian who leaves in london. it is understandable and what

was not secret was watched by the director of the fsb. your second question, my father in the 1990s was adviser responsible for creating the kind of save internet for government communications. it was not about intentions. in 1998 -- in 2008 he was appointed as deputy of communications. the problem is since 2006, is company is supported since 2006, i learned about this appointment and the respondent called me.

i am not responsible and i am not responsible for that. and about my personal -- interrogated many times by the fsb. i don't think i have to feel sorry that i am not cured. >> i want to ask you both to grab the microphone. r. m. the publisher of the book. i am very interested in how -- i have for gotten how old you are. >> 35 and 36. >> so you are old enough to

remember the old soviet union. i often wonder what young people like you imagined would happen. when the soviet union in imploded. and what you think of this world. whatever anybody may think it wasn't ronald reagan and margaret thatcher who took down the soviet union. it ended on its own and wonder what your generation believed you would find in 2010 and where you think it is going. you can take communism out of

russia. communism was sort of between the old russia and the new russia which were quite similar. i wonder what you think russia will become. what did you think it would be -- teenagers, rebellious. and what you think will happen next. say 15 years from now when we next meet in this room. all right? >> in 1991, to the moscow -- so

a great about this. and you see all of these times, two days afterward. i was still in school but it was very important. the fine people and friends, thought it would be something that we were very naive and our parents were very naive. by -- there were signs that was not like we have to do

something, something similar for the united states because it is kind of a sign off of freedom and open war. in the late 1990s especially after 1998, i remember very well because i carried financial things. i was a financial journalist. financial journalists hall spoke and looked for that as an example. all of a sudden so depressed and disappointed and disillusioned, it looks like -- how it should be. now it -- this model.

maybe this western model -- we need to invent something russian. most people just forgot about it. to replace all types -- they are russians. the selection from 1999, it was a feeling in the middle of the trail. it was strange to see all of these supported by the population. someone might come to say that we need someone who might be similar and became very popular.

vladimir putin is not divorced in 1999 and weekend understand maybe the -- many of us fought in the 1990s but always what we really wanted and private freedom to make money, freedom to go abroad, to have apartments in spain but not public freedoms. for many it was not very important. really create -- didn't deserve this.

to be frank and nobody was expected to read these papers. in the 1990s, after word, it was the same figure. we increased middle-class but the same number of readers for the only one -- professional newspaper in the country. not very interested to read it. i think that i don't understand how to create for the people but you need public freedoms. for many they are quite happy and there are some ideas that may be the big economic crisis and a round the country might

change. oil prices might change and provoke to think and act but for me, they are more active but maybe they can -- maybe we can decide if we need more. maybe we can decide not to go to the web but to go to china because the idea of china is quite popular in the 2000s. must have forgot about china. i am not a very big optimist. >> because of the investigative journalism, what happens in russia, many are not