questions. let me skr these. the debt people they can about. the federal debt is, you know, the difference between what the federal government spends and what it takes in in taxes. it is 3%. it is not a terrible thing for the government to borrow a little more than it spends each year. it borrowed a lot more during the crisis. and that was a good time to be stimulating and spending more and getting it out there. that is fiscal policy and what the treasury does. we are talking about monetary policy. what the federal reserve in effect prints and stimulates. you talked about two directions. one is the hardships they face.

one is the lack of jobs and all of that. and the other is if the federal reserve hands out too much money the money would not be worth anything. it is not so easy to say we should print unlimited amounts. greenspan may have said that but he didn't mean it. he may have printed more than he should have. it is not an easy job. it is not the question of printing unlimited amounts because that will not help the people you are talking about. there was a lot of pressure on the government to make housing loans cheap and easy in the early years of the 2000s. that was a nice idea but at the end of the day loaning money to people who can not pay it back palpable as bankers that reckless were doing. loaning people hundred percent of the purchase price didn't end

up helping them or helping the banks or helping anybody. we had the crisis. so these things, i think, involve a fine line and a lot of co compromise. >> i was wondering if you believe the federal reserve is instrumental in nationalizing the debt in the investment banks in the last housing bubble? if so and passing that debt on to us, and if so is it fair to question the constitution ality of allowing that to happen. >> the constitutionality was questioned between the supreme court in 1919 and they say it was constitutional. the actions of the federal

reserve say in loaning money to aig congress answered the federal resever resistance in the 1930s loosened up the terms in which the federal reserve could lend money to mon-banks such as aig. they did that because the federal reserve effort during the recession was not effective. we had the unemployment go up and people thought if we were going to have a federal reserve it should be more proficient. the dodd-frank act passed after the crisis and it restricts the feds from doing that. it is not clear if we had a future crisis and there were an aig about to go down and whether

the federal reserve make that loan. you don't want fire departments using too much water. but to tell them ahead of time if there is a fire it is the fault of the people who were reckless with matches and they should learn not to start the fires that is a tough process. you know, you have to know about this. there is a saying that there is no atheist in fox holes. it is easy to be hung on a point when you are on a nice night in seattle. but in the middle of a crisis

and bank after bank is going down and there is a run on the money market and unemployment is above 10% and going who knows where and 20 million americans are up over their neck in mortgages they cannot pay back. >> the federal reserve isn't a public agency, though. >> it is a public agency. >> not according to the corurts. >> the federal reserve in washington is very much a public agencies. the reserve banks are under the dominion of the federal reserve and play divdeneds to the private banks. but the federal reserve is an organization and its leadership is every bit a public agency.

>> it is appropriate to engage in a fundamentally political discussion. >> this is going to be it was we have getting into a debate but anything that any political body does is political. the people on the federal reserve were appointed by one president or another. the same way people in any agency were appointed by people at the fcc or whoever you want to name. the reason we have an agency structure is to create a level between them and the people running for office so you don't have congressmen running for office and people with cheap interest rates and money as way to get elected.

in 1913, we didn't have public agencies. so the idea of subjecting a private industry to public super vision was very radical. the first draft of the federal reserve act it bankers in the federal reserve board chosen by bankers and william james brian who really had gotten wilson his nomination and was secretary of state because of that was very poplar among democrats said that was wrong. he said the people on it ought to be public servants and all of them should be appointed by the president and threatened to resign and that would have taken down the bill but the wilson administration because brian was poplar. wilson went to a famous advisor

later, lewis brandice, and he said i am in a pickle. and he said you have in a pickle. brian is right. this is a public entity and he said you should nominate them and that is what happened. >> thank you for the time this evening. this is more personal than professional. but as someone who has been steeped in the federal reserve and the history current, present and future. do you have any book reviews as a student? something that you have read other than your own publication that you think would be a wise read for the current political and economic crisis or situation? what book would you recommend? what is on your book stand? >> if you want books on

financial crashes or so on i really like the great crash. if you want a book that explains how world trade works and detentions between people who want to put up barriers and people who would like to see trade be liberalized as much as it is and more so there is a wonderful book by an italian economist who works in washington called the travels of a t-shirt. reads like a novel believe it or not. but those are two i really like. >> thank you so much. >> good evening. when did we come off the gold standard and what were the effects? >> so, after answering these other questions, i would love to here the difference between

glass siegel and dodd-frank. >> we came off the gold standards in stages. the issue with the gold standard was that the federal reserve u.s. government was promising to back every dollar with gold. that meant it could not issue more dollars than it had gold. to attract gold it began to raise interest rates in the heart of depression and that had a punishing affect on the economy at the worst time. britain went through the exact same process. they won the gold standard as well. in 1931, they went off the gold standard which put pressure on us to go off it at as well. and franklin roosevelt took us partway off because he closed the gold window to citizens.

so people could no longer take a gold note down and turn it in for funds. the gold system didn't operate during the depression or the world war ii but he had a half gold system in the '50s and the '60s and the idea was we printed whatever we wanted but the asians and europeans could come over and switch for cold. that worked until the 1960s and we had inflation. the french didn't want the dollar to be king of the hill and they began shipping us dollars and demanding gold. and nixon stunned the world one day saying the window is closed.

you can use dollars or not but if you come here and say federal reserve note we will turn it in and give you the same federal reserve note right back. that is all it is worth. and secretary john connelly at that point put a nice twist on it saying the dollar is our currency and your problem. the expectations were that the dollar would lose credence and nobody would want it. we have been humilitated and it would be replaced by the mark, then the yen, and then the euro. this was during the ben bernanke era creating uncertainty. but the dollar maintained purchasing power and more so on world markets. really the reason the people

have faith in the dollar really two reasons. it has friction power in the united states and because it is based in a country where the laws and legal systems are trusted and the transparency, for instance, some people suggested that the chinese currency will be the new reserve currency but no one knows how much chinese currency is out there and no one knows the debts of the banks are. they don't have that transparency. the dollars' strength rest on the strength of the american economy and system and the lack of the gold back hasn't affected that. class carter stegal separated banks from investment banks. that was eroded and done away

with in the 1990s. dodd-frank doesn't really touch that. it is a series of regulations that try to restrict banks and tries to stop what happened and the mortgage crisis from happening again. dodd-frank was passed in 1910 very recently. >> thank you very much. very insightful. a couple questions. in the 32 years following 1913, we had two world wars, we had great depression, social security drop of '35. and how do you think american history would have changed if we didn't have the federal reserve in that question? the other question is given the lessons of the 32 years across

the board in terms of public policy and what happened across the globe what do you think or how do you think the act might have been amended or changed if the creators had been able to foresee all of the changes? >> i cannot look at what would happen in a hundred years without it. but one act, i think is they were so concerned with not offending people who didn't want a central bank and also wanting to achieve warburg's purchase that they struck it halfway by having these banks around the country and the federal reserve bank around san francisco and all 12 of them. they were vague about where the power would reside in the system and when the act was passed and became law, immediately there was a struggle between three

parties. the individual federal reserve banks led by there strongest one which is the one in new york. the board in washington. and the treasury secretary who for the first couple decades had an automatic seat on the federal reserve board. it was clear as we went into the depression who was responsible for policy. some people felt that after all the federal reserve bank the banks were the banks around the country and the board in washington was just supervisory. others thought the board should be the engine of the decision making. and others thought the treasury. if you read the notes from that period you see some of the bank presidents were lowering rates, some were not. atlanta was dubish and they did much better than the rest of the country during the depression. but no one person, such as ben bernanke in 2008, who said we

have a real problem, something has to act in a concerted way and that someone is going to be me. over time the battle kept going on as late as during the wars. the government wants cheap financing and the feds tend to go along with it during war. thit this happened after world war one into about 1951 the rates were very low. 2%. it became clear the feds thought it was time to let the rates go up. harry truman was just a gast. he didn't accept the feds being an agency and when he could not get his way in private he announced publically the fed agreed to keep the rates at 2% which they had not done. he fired one of the board members, appointed someone else

from the treasury who he thought would be his pigeon on the federal reserve board. but then the fed insisted and they would not back down. from then on it has been a more independent agency and powers have been more based in washington. i will say that one effect of the recent crisis is the federal reserve worked cloche closer with the treasury. yellen and ben bernanke meet more often and they are coordinating with the government more so which might be appropriate for a crisis but i think at least until and at some point janet yellen is going to have to say she is running the feds or the feds independence will be compromised.

>> do you believe the zero recognize in interest rates is leading to inflation and if so could that have negative repercussions? >> it is just hard to tell. if it is it will have negative repercussions. it is hard to sell how distorted they are. there is a lot of capital out there. so if you said let's have rates at a more natural level what would that be? they have to be up to 6%. there is a lot of capital and not a lot of people who want to go out and build, borrow and invest. we are not in a swift economy. it is possible. but it is really hard to know these things. to me there are not any obvious bubbles as with the real estate criss,