I am the everyman.

You are.

You are.

So [sighs] s- old school Keynesianism, what was sometimes called hydraulic Keynesianism that had its heyday, like, in the '50s and '60s, let's say, um, if people have heard of ISLM, like, that's partly what that means, and the idea was, hey, we gotta, um, ensure there's adequate aggregate demand to provide full employment.

And so the problem when there's a downturn is there's not enough spending, and so that's why, oh, the g- you know, the central bank should cut interest rates to goose spending 'cause, you know, all other things equal, the lower the interest rate, and more people borrow and invest, and consumers spend more on consumption.

But oh, if the interest rate gets too low, it gets to zero and still that's not enough, then you're in a liquidity trap, but then the, the federal government comes in and runs a budget deficit, right? So that's, like, old school Keynesianism.

And so in that framework, you know, you're trying to stabilize the macroeconomy.

Mm-hmm.

On deck, Fidrich takes a memorable road trip to Tigertown and rises rapidly through the minor leagues en route to the majors.

There were two carpools of people, me, Wayne, Billy, and Fid, and we took him to lakeland

Longtime friend Bob Murphy, who goes by Piggy, remembers it well.

They were too tough.

It was a feat.

Me, Wayne, Billy, and Fid.

And we took him to Lakeland and dropped him off.

... liberal rules-based international order?

Yeah, so I, I could pull on that thread for a bit.

So right, it was like back during the financial crisis in the wake of that the Fed set up, um, like swap lines and stuff with the ECB, the European Central Bank, where, you know, they could post euros and y- and get dollar ba- treasury backing and stuff like that.

And so that was the way we were putting out fires in Europe is this, yeah, 'cause everyone rushed to the dollar, right? Everyone's freaking out.

They want dollars, um, and, and treasuries in terms of assets, right? 'Cause even, like, money market funds and stuff were in question September 2008, like one of them broke the buck is the expression.

And so people were, like, rushing into literal checking account balances.

That's why they, if you remember, they ro- they raised the, uh, FDIC insurance from 100,000 to 250K.

You know, forget about a, a, maybe a, um-

Longtime friend Bob Murphy, goes by Piggy, remembers it well.

There were two cops.

It was the people.

Me, Wayne, Billy, and Fid.

And we took him to...

vacation.

And I think he got there, he was two earlier, and they weren't going to let him in.

Is that what makes money difficult to understand? Is it has this

language like quality? I never thought of it like that.

But yeah, I think you're definitely right.

I did notice when you try to pin down like for the question, I'm sure it comes up a lot on your show is like, oh, is Bitcoin money? And so if I just try to do a real mechanically and say, well, is it a medium exchange? Clearly it is.

Lots of people sell, you know, real goods for portions of or multiple units of Bitcoins.

Not because they're going to eat the Bitcoins or use it to produce something physically, but because they're just going to trade it away.

So clearly it's a medium of exchange, but then you say, is it commonly accepted? And you're right, that's a little bit odd because in one sense, there's millions of people around the world who accept it.

So you get into this other debate about, well, is it market money or political money? So I don't know if you...

So what do you think? What's the rationale you'd use to try to deduce what that would mean for us?

OK, I mean, if that if those studies were correct, then, yeah, you're right.

It would help on certain margins.

But yeah, it wouldn't mean 15 percent boost to GDP.

That's not the way that would.

But I guess I would say to me, I think that that.

That figure is grossly underestimating.

Like what is the place that they're going to go and get to? And does that concern justify government spending through a UBI?

[chuckles] I can't do that sober.

Yeah.

[chuckles] So here, and I don't by any means claim to have, you know, deep knowledge on this, but I, I thought, you know, this is something I do wanna keep tabs on.

So yeah, big picture, I'm just gonna throw some things out about Warsh, Tom.

So he, just for people who don't know, he had been on the board of governors from oh six to eleven and notice that includes, of course, the financial crisis and then all the rounds of QE and everything that immediately followed.

And so it's not merely like a, like a hatchet job, but like everyone kind of concedes that, oh yes, the function of Warsh at the time... 'Cause he, he's not an academic.

He's been in like a position at the Hoover Institution and he's done like monetary stuff at MIT and whatnot, but his degree, he actually has a JD from Harvard Law School, all right? So he's not like a trained economist.

To what extent is that true? And then secondly, w- what do you think we can expect in terms of price inflation in the next couple of years? I mean, it's been trickier to predict that than you would think it would be.

Could you talk about that? Sure.

Yeah, great.

Okay, so there – I do feel for people cause there I was actually, that was tongue in cheek.

I was making fun of economists.

I was making fun of mainstream economists when I said that.

So let me just unpack the different layers of the, the onion of my joke there.

There's economic content folks.

It doesn't mean they're going to predict precisely when it's going to happen, which is obviously different than, hey, if I throw a softball, at 10 meters per second this direction of this parabola it's going to land here at that time you know that's a much more precise process so is that is that the core theme is like we just need to get a little more humility in our predictive our appreciation of the predictive power of certain sciences

They might not be the public facing party, personalities they usually kick that to the academics it seems like bernanke or something like that

can i chime in on this so two points one is it's not like ben bernanke now can't get a speaking engagement anywhere people will say it's a good thing we had him at the helm when this global financial crisis hit because he was an expert in the great depression and it would have been worse than the 30s had he not been at the helm so there's that element where it's like, oh, it's a good thing he was there.

But in terms of just give one element of why I don't just think he's a true believer because the world's so complicated, it's hard to falsify your beliefs in the social sciences.

For example, based on his work, there were a lot of guys, another school of thought is called the market monetarists.

They were very surprised over 2008, September's when Lehman goes down and AIG and all that.

The next month, the Fed began this new program.

They had statutory authority to do it, but they pulled it forward to accelerate it.

Bob, do you agree with the characterization of this complex shifting to be this financial political complex? Like, do you think that is a fair assessment of what's happening to the financial system and why economists have such a hard time actually proposing models that work?

So how do you see this balance between, like, who is controlling the market and is the Fed now working for, you know, the executive branch via the market dynamic?

Well, sure.

So great question.

And I would say for your viewers who haven't seen it, Besson, he, this was, I'm trying to remember the exact, it was definitely last year at some point, but he had this document that he put out where he was like challenging, or he was saying we need to restore the independence of the Fed and in the sense that they need to return to their original calling and that they have too much discretion right now in the sense of they're being able to deviate from these things.

And it was a very well-written document and they made a lot of plausible points.

So, I mean, cynics just dismissed it and said, oh, he's just doing that because the Trump administration wants to tighten the screw.

But regardless of the motivation, what they produced was a very coherent, reasonable critique of Fed policy.

And so how do you as an economist look at the role of stable coins and maybe the pros and cons of them moving forward?