ALL RIGHT.
THAT’S MY RIFF.
NOW LET’S ASK MY GREAT FRIEND
STEVE FORBES, FORBES MEDIA
CHAIRMAN, EDITOR-IN-CHIEF AND
AUTHOR OF THE VERY IMPORTANT
BOOK, SPEAKING OF BEN BERNANKE,
INFLATION, WHAT IT IS, WHY IT IS
BAD AND HOW TO FIX IT.
STEVE, WELCOME BACK.
>> GOOD TO BE WITH YOU.
LARRY: IT IS NOT PERSONAL.
I KNOW BEN BERNANKE BUT I DON’T
THINK HE DESERVED AS THE NOBEL
PRIZE.
NOTHING COULD BE AS BAD AS PAUL
KRUGMAN, MAYBE HE WAS.
WHAT DO YOU THINK ABOUT THE
BERNANKE BUSINESS?
>> WOULD BE LIKE AWARDING JIMMY
CARTER, G WILLIAM MILLER,
PRESIDER OVER THE GREAT
INFLATION OF THE LATE 1970S.
LARRY: WHOA.
>> REWARDING BAD PERFORMANCE.
KEEPING INTEREST RATES LOW, FOR
300 YEARS ECONOMISTS JOHN LOCKE
WOULD DEBATE, SHOULD YOU HAVE
INTEREST RATES.
YOU DEPRESS INTEREST RATES,
DISTORT ECONOMIES, GET BAD
RESULTS.
CENTURIES LATER WHAT HAD BEEN
BASHED CENTURIES AGO GREAT
THINKERS.
THEY SUPPRESSED INTEREST RATES
LIKE RENT CONTROL.
WHAT HAPPENED?
APPLE, BIGGEST MONEY MACHINE IN
THE WORLD, NEXT TO THE PRINTING
PRESS, AND FEDERAL RESERVE,
BORROWS OVER $100 MILLION.
WHY?
BECAUSE THE MONEY IS FREE.
PAY DIVIDENDS, BUY STOCK.
SMALL BUSINESSES GET HURT.
THEY DID IT ALL AROUND THE
WORLD, ALL CENTRAL BANKERS LIKE
SHEEP FOLLOWED BEN BERNANKE.
AS A RESULT YOU HAVE SCORES OF
COUNTRIES WAY OVERINDEBTED, A
LOT OF ZOMBIE COMPANIES WALKING
OUT THERE.
NOW IT IS COMING HOME TO ROOST.
WHAT IS HAPPENING WITH THE
FEDERAL RESERVE AND OTHERS
RAISING INTEREST RATES, YOU WILL
HAVE A DOWNTURN, BANKRUPTCIES,
WILL HAVE DISTRESS AROUND THE
WORLD, EXCHANGE RATES AND THE
LIKE.
WHAT WILL THEY DO ABOUT IT?
THEY DON’T KNOW.
THE FED STILL BELIEVES YOU
TALKED ABOUT IT ON AND ON
BELIEVES THE BEST WAY TO CONTROL
INFLATION NOT BY STABLIZING THE
DOLLAR BUT BY TRASHING THE
ECONOMY, MAKING PEOPLE POORER.
ABSOLUTELY PERVERSE, MALPRACTICE
ON A EPIC SCALE.
LARRY: YOU THINK I’M WRONG TO
SUGGEST THE SAME MISTAKES ARE
BEING MADE?
YOU SORT OF HINTING AT THAT THE.
NOT EXACTLY THE SAME.
WHAT JAY POWELL IS DOING, WAS
DOING WHEN BIDEN CAME IN OFFICE
AND WANTED, JAY POWELL
CHEERLEADED FOR THE BIG STIMULUS
PACKAGE WE DIDN’T NEED AND KEPT
OPENING UP THE MONETARY SPIGOTS
SOMETHING LIKE WHAT BERNANKE DID
POST-9/11 EVEN THOUGH BUSH’S TAX
CUTS WERE QUITE SUCCESSFUL, HE
NONETHELESS OPENED UP THE
SPIGOTS WIDER ANDER, IGNORE, THE
EXAMPLES AROUND HISTORY
REPEATING ITSELF.
>> IT DID.
THE COMMODITIES MARKETS IN EARLY
2000 WERE WARNING BAD THINGS
WERE GOING TO HAPPEN.
THEY DID.
FOCUSED ON THE REAL ESTATE
MARKET.
SOMEWHERE SOMETHING WILL BLOW UP
BIG TIME.
NOW IN 2021 WHAT EXCUSE DID
POWELL HAVE FOR BUYING
$120 BILLION OF BONDS A MONTH,
40 BILLION OF MORTGAGE-BACKED
SECURITIES WHEN CLEARLY THE
COVID CRISIS, THE WORST WAS
OVER, THE ECONOMY WAS BEGINNING
TO RECOVER, HE PRINTED MONEY
GIMMICK OF REVERSE REPOS,
STANDING $2.3 TRILLION.
SO HE GOES FROM TOO LITTLE, TOO
MUCH NOW.
HE IS TRASHING THE ECONOMY.
DOESN’T HAVE TO HAPPEN.
HE WILL BE FORCED TO REVERSE
HIMSELF WHEN THE STUFF STARTS TO
HIT THE FAN.
THE WORLD WILL NOT STAY STILL.
WHAT THEY FORGET AT THE FED,
THEY’RE A GLOBAL INSTITUTION.
WHAT THEY DO AFFECTS NOT JUST
AMERICA BUT THE WHOLE WORLD.
AS ENGLAND GETS IN TROUBLE, AS
EUROPE GETS IN TROUBLE, JAPAN’S
IN TROUBLE, YOU’RE GOING TO HAVE
A REAL BLOWUP.
LARRY: JUST ON THAT POINT
BERNANKE USED TO SAY, HE SAID IT
A A BUNCH OF TIMES THE JOB OF
THE FED WAS NOT FOREIGN EXCHANGE
MARKETS AND NOT FOREIGN
ECONOMIES.
I HEARD JAY POWELL SAY SIMILAR
THINGS, NOT QUITE AS EXPLICITLY
BUT IN FACT IT SEEMS STABLIZING
THE DOLLAR RELATIVE TO FOREIGN
CURRENCY BUT RELATIVE TO
COMMODITIES, TO GOLD, REAL
ASSETS, THE THINGS THAT MONEY
ACTUALLY BUYS, WHY NOT?
WHAT’S WRONG WITH THAT APPROACH?
AND IT WOULD TAKE YOU AWAY FROM
THIS STOP AND GO, OR GO AND
STOP.
>> THE WHOLE FALLACIOUS
THINKING, HUBRIS ON A GRAND
SCALE, IDEA OF MANIPULATING
INTEREST RATES, SOME OTHER TOOL,
JANET YELLEN’S TOOL BOX YOU CAN
GUIDE THE ECONOMY.
THE ECONOMY WILL DO FINE ON ITS
OWN.
UPS AND DOWNS BUT ALWAYS A TREND
LINE OF UPWARD.
THEY DON’T HAVE TO GUIDE IT.
THEY DON’T HAVE TO SAY -- I LOVE
IT TIMES ARE GOOD, THEY SAY
WE’RE ABOUT TO OVERHEAT.
DO YOU GET A PAY RAISE AND START
SWEATING OVERNIGHT, GOSH I’M
OVERHEATING?
TAKE THE MONEY AWAY.
IT IS PREPOSTEROUS.
LEAVE IT ALONE.
WE’RE NOT MACHINES.
LARRY: IF YOU GO BACK MANY YEARS
AGO WE WERE YOUNGER, YOU WERE
RUNNING FOR PRESIDENT.
THE ARGUMENT WAS IT’S YOURS TAX
CHANGES THAT AFFECT ECONOMIC
GROWTH INCENTIVES AS PER LAFFER,
ET CETERA, AND IT’S YOUR
MONETARY STABILITY, YOUR
CURRENCY, YOUR KING DOLLAR
STABILITY THAT WILL KEEP PRICES
STABLE.
NOW I JUST, YOU KNOW, HERE WE
ARE AGAIN, STEVE, 40, 45 YEARS
LATER, ALMOST 50 YEARS LATER,
YOU AND I HAVE BEEN THROUGH IT,
WE STILL HAVEN’T LEARNED THAT.
OR LET ME SAY THIS, THE
ECONOMICS PROFESSION, THE PhD
PROFESSION, WILL NEVER ADMIT TO
THAT.
>> BECAUSE IT TAKES AWAY THEIR
POWER.
LARRY: UH-HUH.
>> IF YOU HAVE SOMETHING LIKE
GOLD OR COMMODITY STANDARD,
WHERE DOES THAT LEAVE THEM?
UBER DRIVERS AND WHICH WOULD BE
MORE USEFUL THAN WHAT THEY ARE
DOING NOW.
LARRY: WOULD BE USEFUL
[LAUGHTER]
>> MONEY IS MEANT TO MAKE
TRANSACTIONS, MEANT TO MEASURE
VALUE.
SO YOU DON’T CHANGE OUNCES INTO
POUND OR MINUTES IN THE HOUR.
YOU WANT A STABLE VALUE SO YOU
CAN MAKE AN INVESTMENT TODAY AND
GET SOMETHING BACK, AND YOU KNOW
YOU GET SOMETHING REAL FIVE
YEARS FROM NOW.
THE GROWTH RATE, WE DISCUSSED
THIS BEFORE, WHEN WE WENT OFF
THE BRETTON WOODS GOLD STANDARD
HAS DECLINED BY A THIRD.
MEANING HOUSEHOLD INCOME TODAY,
70,000, WE MAINTAINED OUR
AVERAGE GROWTH RATES, INCOME
WOULD BE 110,000.
LARRY: FROM YOUR BOOK ON
INFLATION.
>> $40,000 WORTH OF LOST INCOME.
LARRY: AFTER ALL THE UPS AND
DOWNS, EVEN AFTER SOME GOOD
SUPPLY SIDE TAX POLICIES.
NOT ALWAYS BUT SOME GOOD ONCE.
>> THEY SOMETIMES GOT THINGS
RIGHT AND BLASTED IT AWAY.
TALK ABOUT, TALK ABOUT
EDUCATION, WE NEED SOME TEACHERS
TO TEACH THESE PEOPLE, REMEDIAL
EDUCATION ON THE WHOLE
PROFESSION BUT IT IS ABOUT
POWER, LARRY.
LARRY: I AGREE WITH THAT AND
YOU’RE ABSOLUTELY RIGHT.
I THINK IT IS BAD THE ECONOMICS
PROFESSION HAS DETERIORATED.
IT IS NOT UNANIMOUS.
THERE ARE JUST SOME VERY FINE
ECONOMICS PROFESSORS OUT THERE.
>> CANCEL CULTURE.
LARRY: THE PROFESSION MOVED TO
THE LEFT, PHILLIPS CURVE, NOW
MODERN MONETARY THEORY.
SOME SENSE, MY CRITICISM OF BEN
BERNANKE BUT THE PROFESSION AS A
WHOLE WHICH IS SO DISAPPOINTING.
>> YES.
LARRY: BEFORE WE LOSE YOU, I
WANT TO COME BACK TO SOMETHING
YOU SAID ON HARRIS FAULKNER’S
SHOW ON BIDEN’S PREPOSTEROUS
ENERGY OIL POLICY HE CAN’T
DISTINGUISH CLEAN OIL FROM DIRTY
OIL.
JUST SO HAPPENS OF THE DICTATORS
OF THE WORLD HAVE DIRTY OIL,
THAT IS WHAT HE IS PUSHING WHICH
IS AN AWFUL THING.
>> YES.
YOU WOULD THINK THEY WOULD WANT
CLEAN OIL, CLEAN GAS WHICH WE
HAVE BETTER THAN ANY OTHER
COUNTRY.
VENEZUELA IS NOTORIOUS FOR WHAT
THEY CALL HEAVY CRUDE, DIRTY
CRUDE.
LARRY: RIGHT.
>> YOU NEED SPECIAL REFINERIES
TO BE ABLE TO HANDLE THAT GOOEY
THICK STUFF.
WHY GO TO REFINERIESES WHICH
NEED MORE EQUIPMENT TO MAKE SURE
YOU’RE NOT POLLUTING THE
ATMOSPHERE, WHY NOT DO SUCH
CLEAN STUFF AT HOME?
EVEN COAL WE DO BETTER HERE THAN
ANYWHERE ELSE IN THE WORLD.
I THINK THAT IS AN ISSUE.
I HOPE THE REPUBLICANS HIT IT
HARD BETWEEN NOW AND NOVEMBER.
THAT IS A KILLER ISSUE?
WHY VENEZUELA?
WHY PUTIN?
WHY OPEC OVER AMERICA?
LARRY: WHAT YOU SAID ON HARRIS’
SHOW TO WIN A FEW VOTES IN
NOVEMBER ELECTION THEY’RE GOING
TO UNDERMINE THE ECONOMY, QUITE
WILLING TO UNDERMINE THE
ENVIRONMENT, THIS IS THE DIRTY
PART BECAUSE THEY THINK THE
FUTURE IS WITH WINDMILLS AND
SOLAR PANELS AND IT ISN’T, IT IS
MUCH MORE EXPENSIVE.
I DON’T UNDERSTAND.
I KNOW THE FOREIGN POLICY IS
AWFUL.
THERE IS NO ENERGY SECURITY.
THEY’RE RIPPING APART "SPRO" IN
CASE ANOTHER ARAB EMBARGO WE’LL
NOT HAVE ENOUGH PETROLEUM
RESERVES.
IN THIS BASIC THOUGHT, THERE IS
A DIFFERENCE.
NOT ALL OIL IS THE SAME.
NOT ALL OIL IS EQUAL.
GLAD I GOT THAT OUT.
ALL OIL.
NOT ALL OF IT IS THE SAME.
WHY DON’T GET THREAT THAT FOR
HEAVENS SAKES?
>> BECAUSE THEY DON’T WANT TO.
THEY SEE THE FUTURE AS
WINDMILLS, SOLAR PANELS.
THEY FORGET THE MINING THAT GOES
INTO IT RIPPING UP THE EITHER.
I HOPE REPUBLICANS SAY YOU WANT
MY OPPONENT MORE TAXES, MORE
SPENDING HIGHER INTEREST RATES,
MORE REGULATIONS IS THAT THE
FORMULA FOR SUCCESS?
DEFEND THEM.
THEY CAN’T.
HIT THEM WITH IT.
LARRY: WHY I THINK THEY WILL GET
CLOBBERED.