December 11, 2013; Andrew Huszar: Confessions of a Quantitative Easer

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Kevin: I’m very excited for this interview. David, on November 11th I read an Op-Ed piece in the Wall Street Journal. I was surprised to see it. This was the man was who responsible for the first $1.25 trillion in quantitative easing. He was called in special from the Fed, brought back in from Wall Street, and I’ll tell you what. This article in the Wall Street Journal caused waves. I sent it out to all my clients just as soon as I saw it and we got great response.

David: I agree, Kevin. November 11th, the Op-Ed piece is a must read. If you have not read it, I would go back to the archives and make sure that it is read. And if you are interested in following what Andrew has to say in the future, you can do so. He has a Twitter account in his name, Andrew Huszar.

Kevin: It is interesting, Dave, because he was brought in to save the economy. That’s what quantitative easing was supposed to do. It was supposed to save the banks, but really, stimulate the economy, but he, himself, said in the Op-Ed, this was not supposed to be a life support, long-term fix. This was supposed to come in, powerfully hit the market, try to re-stimulate the market, and then get back out, and his criticism was that the Fed has lost track, or they have lost perspective, and at this point they really are having a hard time extracting themselves.

David: The original language was that of exit. We would exit this program, again, in the classic Keynesian fashion. This is a necessary measure, it’s a short-term stimulus, we’re in and we’re out. Here’s our exit strategy. We’re letting you know, and we’re communicating that ahead of time. And as time has progressed, it is no longer an exit, it’s what they call “taper” or a reduction of the bond purchases which Andrew was, in part, responsible for on the mortgage-backed security side. Of course, there were treasury purchases, as well. This year they purchased close to 75% of all new-issued treasuries and are a significant player in that market, with both of these programs still in operation.

Kevin: Dave, I think it should be stressed that Andrew likes the people at the Federal Reserve, he feels that they are very qualified, but he really does believe that the Fed, itself, because of the mandates, because of the actions that they have taken, have gotten themselves into a position that they can’t extract themselves from easily, and that’s where his criticism comes.

David: If there has been a drift, it’s been in the justification of activism.

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David: Andrew, let’s discuss the quantitative easing program you were involved with during your tenure at the Federal Reserve. Perhaps you could lay the groundwork for your involvement. You were responsible for implementing the purchases of mortgage-backed securities, isn’t that correct?

Andrew Huszar: That is correct. Basically, my Fed career spanned the course of nine years. I joined the Fed in 2001 after graduating Columbia University with a JD/MBA, and I had worked there for about seven years before leaving in early 2008 to go to Wall Street for a year. In April of 2009, I was called by the Fed and asked to return to manage the centerpiece program of Quantitative Easing, and my role generally involved two different things. One was that because the Fed had never actually bought the type of bonds we were buying, the mortgage bonds, we actually had to build out a trading desk at the Fed and that involved a number of different aspects. My job was to oversee the construction and development of that business, so to speak. And then, more principally, and what I talked about in the Op-Ed, my job involved overseeing the trading and actually strategizing how we were actually going to buy what we bought, which was 1.25 trillion dollars-worth of these bonds.

David: While your purchases certainly improved mortgage rates, they did not necessarily increase bank lending activity. Maybe you could speak to that.

Andrew: Sure. In terms of when quantitative easing started, which was almost five years ago, Black Friday of 2008, the economy in the U.S. was really in its worst period, in terms of a free-fall, and we basically had 2% GDP contraction of the 4th quarter of 2008, and two million Americans lost their jobs in those three months, and the Fed launched this bond-buying program so as to do two different things. Basically, the first idea was to buy a bunch of the credit off of Wall Street, the banking sector, so as to help them deleverage, and hopefully make the banks be more stable from a financial perspective. But really, the headline goal, as outlined by Chairman Ben Bernanke, was this idea of stimulating credit, and hopefully, by stabilizing the banks and pumping money into the banks effectively, the Fed was going to be able to have a knock-on effect of more credit getting out to those Americans who were struggling, who needed more credit. In my Op-Ed I talk about the reality, which was that while it was a very viable idea, I believe, at the time, as we were executing the program, quantitative easing, this whole new experimental program, it became increasingly clear that while we were doing a lot to stabilize the banks, the knock-on benefits were not really flowing to the average American.

In my own program, for example, in which we bought mortgage bonds, with the idea of hopefully stimulating new mortgages to Americans for home purchases, or allowing Americans to hopefully refinance their mortgages into more favorable rates so that they would have more money in their pockets, we actually saw a decrease from the first day of trading to the last day of trading, over 15 months, in the actual amount of mortgage lending that banks were making in the U.S. So really, this headline issue, for as much as we were doing, we weren’t really achieving the goal of QE. And in fact, that has continued even beyond QE1 and now the Fed has bought a lot more and we could talk more about that, but really, that’s one of my main issues, one of my main criticisms, that we’re not really seeing the benefits, and in exchange for potentially huge distortion.

David: This has been a surprise to some. We have velocity at six-decade lows. There appears to be very little in terms of lending activity relative to the liquidity provided for the banking sector. Maybe you want to comment on velocity and the fact that this is somewhat unprecedented to actually see very little bank lending activity with liquidity really ample and available.

Andrew: Right, we’ve seen the Fed, basically, over the course of five years, pump more than 4 trillion dollars into the U.S. banking sector. And I think something that people aren’t talking about enough is what the banks are doing with this liquidity. First of all, they’re taking about 2.2 to 2.3 trillion dollars of it and turning right around and banking it back at the Fed. So that money is not getting out into the economy. And then, with the money they are actually using, or actually getting out into the economy, it’s not necessarily being used in the way that the Fed anticipated, and one of the reasons is that banks are not necessarily wholly in the lending business these days. You are seeing banks, basically, still doing a considerable amount of trading, and using the money in that way, so you are seeing money going into the stock market, you are seeing money going into emerging markets outside the U.S. borders, and fundamentally, I think what we are seeing is a structural problem in the U.S., where, for as much liquidity as we are pumping into the financial markets, we have an underlying, and structurally unsound, U.S. economy, where the average American has a median income that is back to where it was in 1995 where the conditions for growth in the U.S. are crumbling. And so, philosophically, I think there is a real question as to how much pumping money into Wall Street is really an effective policy tool for trying to cure, what I believe is a more structural issue.

David: Andrew, I just got back from China within the last 24 hours. They had a banking crisis in the early 1990s. It’s pretty common, in fact, during periods of financial panic, for financial repression to be used as a tool for rebuilding bank balance sheets, redirecting income from households to government and the banking sector. Could you speak to the benefits gained in the banking sector from QE purchases? Maybe that’s commission dollars, or other ways that they can generate income. You just mentioned trading, as opposed to lending. But where is the real benefit for the banking sector in this?

Andrew: Yes, just at a high level, let me be clear, because we haven’t really talked about it. I do, ultimately, believe in the Fed. I believe that the Fed is an important institution. I worked there for many years. I have great respect for a lot of the well-meaning smart people inside of it. What my real issue involves is that I believe the Fed has been going down a path which is increasingly unwise and inefficient. So it is really with a view toward trying to, hopefully, influence the policy-making that I spoke out.

David: Yes, no problem. We look at financial repression as a tool. Again, you lower rates to the zero-bound, and then for the U.S. government that represents sort of a subsidy for the national debt, the interest component. But then, it also helps the banking sector essentially rebuild their balance sheet, and I’m just wondering, what are some of the specific ways that you see current monetary policy, both in terms of the rate side, setting rates extraordinarily low, as well as the asset purchase side, having a helpful benefit to the banking sector, not necessarily Main Street?

Andrew: Yes, thank you for that. There are really three ways I believe that QE has benefitted the banks, and even the more extraordinary low interest rates that we have. First of all, one thing that we saw very clearly when I was at the Fed was the idea that the Fed’s tools, ultimately, what they do is they lower the wholesale funding rates for financial institutions. For example, my program lowered the rate, the funding costs, for banks to make mortgages. Banks, however, were not turning around and correspondingly lowering the wholesale rates that they were offering the customers.

And why is this? Significantly, this is because we have a very concentrated banking sector with very little competition at the top of it. We have four banks alone that basically control the U.S. mortgage lending market. So the banks have really reaped huge benefits in terms of lower funding costs, but whatever lending they actually are doing, they are actually making a better spread off of that lending. So that has generated … McKenzie has talked about potentially hundreds of billions of dollars of profits.

Secondly, going back to the earlier point I made about the trading component of banks, what we saw a lot, and what you continue to see a lot, is rather than banks lending, you are seeing them piling into financial assets for investment purposes. Banks have done basically what you or I or many other Americans may have done the last few years, which is that we have taken our investment portfolios and we’ve ended up buying bonds and stocks, so as to generate capital gains. Again, I don’t fault banks for doing that, but if a policy tool is not working to actually achieve its ultimate goal, I question whether that is really helpful. And again, to your question, it has helped the banks generate, potentially, hundreds of billions of dollars of additional revenue over the last few years.

Finally, and I think this is a much less material source of revenue, but the Fed actually buys the financial assets that it is accumulating through a network of what are called primary dealers. These are the biggest Wall Street banks. They are effectively the supermarkets for the financial system. They stockpile and trade financial assets. If you wanted to buy Apple’s bonds, and you were an asset manager, you would probably go to Goldman and you could buy from there and pay a small commission for doing that. Well, the Fed is basically buying its bonds from the same banks, and so that trading has generated, potentially, hundreds of millions of dollars of commissions for the banks, and added to their bottom lines. So systematically, this has been a very beneficial trade for Wall Street.

David: We have, also, in that idea of financial repression, not just a benefit to the banking sector, but also to government. The White House estimated that for the year 2013, as a budget line item, the interest component on the national debt was assumed to come in right around, I think it was 256 billion dollars, more or less. We had a sharp rise in rates between May and July, and they clearly missed the mark, so for fiscal year 2013, the number came in closer to 415 billion. They missed by about 60% on their original estimate. That 415 billion dollars now represents just under 15% of total revenues. If the end, or the slowing, of purchases of mortgage-backed securities and treasuries occurs this next year, what do you expect to see as a market consequence?

Andrew: I think the issue with what the Fed has been doing, and we saw this already this past summer when the Fed first spoke about the idea of a tapering of the program, which, by the way, that was Chairman Bernanke. When I actually was at the Fed in 2009, there were Federal Reserve presidents, senior officials, already talking about tapering. This has been something on the table for years, but when it actually got to the senior-most levels and was talked about more seriously, we saw that even the mention of a taper led to a pretty dramatic stock market sell-off, by some estimates up to a five trillion dollar global equity sell-off before the Fed back-pedaled. That was before an additional 15% run-up in the U.S. stock market. That was hundreds of billions of dollars of Fed bond purchases ago. You have this issue that the more the Fed buys, and the more it potentially gets the markets addicted to its liquidity, the larger the ultimate sell-off is going to be when the Fed pulls back.

And so, I don’t know if it is this year. I tend to be of the opinion that we keep on over-estimating how proactive the Fed is going to be about pulling back. If you look at the inflation picture, it is actually, at least by the official numbers, pretty favorable. So the Fed has some running room and I think the Fed has actually embraced this idea of trying to do whatever it can to help the employment situation in the U.S. through its extraordinary policies. And so, I do question the timing. However, we have seen some minimal improvement in the employment picture, and obviously some positive signs. So the pressure will come, and I do believe when you see the Fed step back you’ll see some significant volatility in the market. But in my mind, the U.S. remains the only game in town, on some level, in terms of a financial market, so I think people are still going to flock to treasuries. But you are obviously going to see a backup in rates, and that is going to have a lot of knock-on problems.

What I would say is, the longer we wait to do this, the larger those problems will be, so I almost think two wrongs don’t make a right. At some point we are going to need to see a correction. At some point the Fed is going to have to pull back. We can’t have a market where the Fed already owns 30% of U.S. treasuries, already owns 10% of the U.S. housing market, and yet keeps on buying a trillion dollars of bonds a year. We’re just setting the stage for a far more intense volatility in the future.

David: Speaking of Fed independence and thinking of recent activism by the Fed, does the dual mandate erode their political independence?

Andrew: Oh, I think, inevitably. If you were to ask me what is the first thing we needed to change about the Fed, this dual mandate of the Fed, that from 1913 to 1977, you had the Fed focused, some could argue more successfully, others could argue less successfully, on the idea of the stability of the dollar, and that was in line with what every other credible central bank does in the world, which is that they are monetary watchdogs. In 1977 you had this idea of the Fed, asked by Congress, to have a dual mandate, so the idea of now, the Fed not only worrying about monetary stability, but now also worrying about employment. And unfortunately, the employment picture is a shorter-term tactical question. Monetary stability tends to be a longer-term strategic question.

And so the more short-term you get in your thinking, the more you start becoming responsive to the very same things that the rest of Washington is responsible for. I actually would say, to be fair to the Fed, because the rest of Washington, at this point, is so dysfunctional and so gridlocked, the Fed feels as if it is the only game in town and needs to do something to help. The problem is, it doesn’t have the tools, really, to help. It has only the tools to create, potentially, more problems for us, from a larger, strategic standpoint, and it gets itself pulled into, as you suggest, a lot of the political machinations in Washington, which, if you look, historically, at central banks, and there have been a lot of studies around this, but the less a central bank has independence, politically, the higher the prevailing inflation rate is over the long term in such a country.

David: So which is the greater risk? Losing independence to politicians, or losing independence to Wall Street? In some respects it feels like the Fed is following the pied piper of Wall Street. Maybe that’s not fair, but you could certainly shed light on that.

Andrew: One of the risks, the political independence risks, is a known risk. We’ve spoken about it. If you look at the Fed historically, it has always had to worry about its independence from the political system. So I actually worry less about that, because I think the Fed, ultimately, the people inside, are trained to worry about that risk. I think that the Wall Street risk is a far more insidious and dangerous risk, and I think part of that, on some level I would argue that independence has been eroding for the course of 30 years. If you look at the U.S. economy, structurally, from the 1980s until today, in the mid-1980s Wall Street, the U.S. banking sector, basically, represented 20% of corporate profits in America. Today it represents somewhere around 40%. It’s back to where it was before the financial crisis. So we’ve had this huge growth in Wall Street, as a first point.

The second point I would make is that in the mid-1980s, we basically had 87 banks controlling what, today, six banks control. So not only have we had a huge growth in the banking sector, we’ve had a huge concentration of the banking sector into larger banks. These banks have tremendous influence in our economy, just from a day-to-day functioning standpoint of our economy. And inevitably, as we’ve had a growth of the banking sector, and now as the Fed, over the course of several years, has been expanding both the breadth of what it is doing, in terms of the financial assets it is buying and how actively it is involved in the credit curve, as well as just sort of the amount of trading it is doing. You are basically having the Fed, now, having to consult more and more with Wall Street, and actually being married more and more to Wall Street, and so, I think that is a much more insidious cultural issue that we have.

And I’m not even talking about the fact that if you look at more and more of the personnel working within the Fed, more and more you have, unfortunately, a bit of a revolving door between Wall Street and the government, to the point where perhaps the philosophical differences between the two sides, and the fact that being a policy-maker and being a banker are fundamentally different jobs. More and more we are having that division of labor, unfortunately, deteriorate, or disappear.

David: From the early 1950s to about the mid-1960s we had major economic growth in the United States and it was driven by job growth and income growth. The second period of major growth in the last century, 1980s to present, I guess you could say there are three periods, but back to the 1920s, I’m kind of leaving that out. From the 1980s to present, the growth was driven, really, by a leveraging of the economy, and leveraging of balance sheets across the board, whether it’s financial, bank assets, whether it’s individual households, even the U.S. government. It feels like the Fed has implicitly picked up that third mandate, market stabilization. They are now doing direct purchases of assets. In your opinion, is there an expanded list of assets which may be purchased in support of market stabilization?

Andrew: I would just pick up on your first point, if you don’t mind, because I think it’s a really spot-on point, about growth of the economy. I would argue that a lot of the growth of our economy the last 30 years, while wonderful, has not been sustainable. If you look at the average American today versus 30 years ago, the average American is three times more indebted, three times more leveraged than they were. But if you look at the underlying conditions for growth in America, they have been deteriorating rapidly. Forty years ago we were 1st in the world in college graduates, in the U.S., today, we’re 14th. Ten years ago we were 5th in the world in infrastructure, today we’re 25th. Five years ago we were 1st in the world in terms of the competitiveness of our economy in the world, today we’re 7th.

So what I would argue is that we have a structural issue here in terms of an economy that is not really functioning. It doesn’t really have the underlying conditions for growth right. So while this incredible expansion in credit, for example, people who have less and less income being able to use credit cards or other credit means to consume, is sustainable for a while, it ultimately is not sustainable, and I think that is what we saw, on some level, with the financial crisis. There are a lot of factors that went into it, but on some level we have this mismatch between the actual consumption ability of our population versus the actual fundamental picture there.

So what has the Fed been doing more and more? I would argue, since the late 1990s, the Fed has gotten more and more into this role of trying to effectively encourage, proactively stimulate, credit creation, so as to be able to compensate for some of the underlying structural issues in our economy. And QE is just the latest iteration of that in terms of having rates basically as low as they could go and so the Fed went out and started buying things. I don’t necessarily see the Fed expanding the assets it is buying. I think the Fed would have a hard time doing so. It is basically already buying pretty much every type of treasury out there, and it now owns, as I mentioned before, about 10% of the U.S. mortgage market, but I can see the Fed continuing to consume and accumulate bonds and there have been more and more discussions about alternative policy tools.

If we really are going to accept the idea that the government has some sort of magic bullet and can reverse the structural issue, I guess we should think about that, but I am much more strongly in favor of the idea of underlying structural reform in the U.S., which to be fair, is not the Fed’s job. It’s really the job of the Executive and Congress to do something to try to reverse momentum of the evolving decline of the average American’s purchasing power. But, as I said before, I do see the Fed continuing to potentially buy, and this idea of the market being more and more skittish around a retreat of the Fed, unfortunately, enhances the possibility of that happening.

David: When you describe the underlying structural reform that needs to take place, and you are right, that’s not the Fed’s job, there is the observation that Larry Kotlikoff, our friend at Boston University has made. We have this funding gap, and it’s not just a 17 trillion dollar I.O.U that is coming up over the next 20-30 years, the stated national debt, but we also have the long-term liabilities of Social Security, Medicare, Medicaid, these issues, which, over a 20-30 year period, create a funding gap that is the difference between money coming in and money going out, of about 200 trillion dollars. One trillion is a mind-boggling number to me, and you’ve handled that, your 1.25 trillion, maybe you have the capacity to wrap your mind around that. I still don’t. But 200 trillion, maybe that’s something that is even difficult for you to handle. I’m just wondering, coming back from China, how do our foreign creditors look at this? How do they analyze our monetary policy? I realize you can’t step into their shoes exactly, but if you were to guess, how do you think they view all of this?

Andrew: First of all, if you picked it out at 1.25 trillion dollars in one-dollar bills and placed them end-to-end, it would go around the world six times, if that helps put it in some sort of context. We’re talking about an enormous amount of money. If I look at the foreign picture, and again, as you point out, this is not who I am, or the position I come from, so this is all speculation, but I believe there remains tremendous confidence in the U.S. economy among the world. We do have an incredible entrepreneurial marketplace. We have incredible fundamentals still in America, and I think what we are potentially doing here, and I think where a foreign investor or a foreign observer may be a bit puzzled, is that rather than focusing on growth and on ways to actually make the engine work better, we’re basically trying to, literally, paper over our problems. And I agree with you that the long-term entitlements issue is problematic, but the fix is there, while politically difficult, they are doable. But the real issue is, if we don’t get this economy moving again, and we don’t get it growing again, and we don’t keep our eye on the ball, and instead we’re just trying to compensate, tactically, day after day, for our problems, by trying to pump money into Wall Street, for example, via the Fed, then we’re just creating complacency and I think that’s where a foreign observer may be most concerned.

It’s this pervasive complacency we have in America, and that’s not the America that I think people have observed over the post war period. We’ve typically been pretty good about dealing with our issues. Sometimes it takes some time to get there, but we’ve been good. And I just worry that what we’re doing now, in that it’s feeding complacency, to your point about the public debt, through making the U.S. government’s funding costs lower than they should be, that it’s creating complacency around the underlying impaired conditions for growth in America. This is where I think we are just shooting ourselves in the foot and we’re kicking the can down the road, and I could come up with another ten clichés, but the reality is we’re just doing the wrong thing.

David: More and more it’s government’s role, or at least it is presented as such, to determine the course of the economy, and I guess by even bringing that up, asking the question, this raises the past failures of planned economies. A gentleman that we’ve spoken with through the years from the U.K., actually from Scotland, likes to say that what we have in the U.S today is capitalism with the characteristics of a command economy. How do we step back from that and empower a market-driven solution?

Andrew: It’s really interesting, because I wrote this Op-Ed, and it came out the day after Veteran’s Day in November. And then I had a bit of a wild ride through a number of shows in the media, and to be honest, I wasn’t really prepared for what was going to happen. I was hoping to start a conversation with what I wrote, and I was very happy with the fact that there was some response, and I really appreciate you having me on today, and I continue to want to talk about really trying to get this economy working again for what I believe should be all Americans.

But the reality is, a lot of the questions I got were, “Well, okay, so you’re not a fan of QE, we get it. Well, what should the government have done? What was the alternative?” And there was a fundamental assumption in those questions, which was that the government could do something to actually fix the problem, that there was a magic bullet out there. And to be fair, and to be clear, I believe in government. I worked at the Fed for nine years. I very much believe we can fix the problems we have. But the reality is, we have to be serious about what our government can do, and what it can’t do, and I think this idea of the government somehow stimulating the economy over the long-term is problematic. Whether it can fill in in the short-term, and from a Keynesian perspective, to help, I think that’s a very viable question.

But I think it’s becoming increasingly clear, as we are watching what the Fed is doing, that what it is doing isn’t really helping. In fact, it’s creating distortions, whether it’s complacency or a lot of the potential for volatility in the financial system of the future. And where government really excels, I believe, is in helping to, again, focus and improve the underlying conditions for growth, almost like an Adam Smith type of perspective, and what I will point out is that for all the unprecedented activism by the Fed, for all of the incredible deficit spending we’re seeing these days, the reality is, U.S. government investment in the economy as a percentage of GDP is half of what it was 50 years ago in America. So we may be spending more money, but we’re not actually spending the money strategically or correctly to actually get us to the right place to grow over the long term.

David: We appreciate your joining us in the conversation to better understand where we are and where we are going, and with some winsome thoughts about the state of our union, and what individuals should be aware of as they are making decisions. We will look forward to having a conversation with you again.

Andrew: Thanks so much for having me.

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Kevin: Andrew doesn’t disappoint, Dave. He has an academic background. He understands, just like a lot of the people at the Federal Reserve, the academic side, but the thing that they really needed, and the reason they called him back, was because he had an active trading background. He had practical experience.

David: He reminds me of a guest we’ve had on the program before, Michael Pettis, who also combines academic insight, in this case, with an insight both legally, and from a business background, a JD/MBA from Columbia, as well as an active trading background. That’s what he was brought in to do, build out a trade desk and oversee trading of this 1.25 trillion dollar project. This is where, I think, we have a lot to reflect on. What would the world look like without Fed activism? Well, we could be staring directly in the face of something worse than the 1930s, and so we can’t take that for granted.

On the other hand, we have a system which is now dependent on the direct feed coming from the Fed, and that’s not healthy, either. We don’t have a market-driven solution in place today. In fact, we’ve lost the market pricing of assets as the benchmark for risk in the treasury market has been manipulated lower through these asset purchases. And it does distort everything across the fixed income space, and ultimately, as we discussed today, puts people at ease in an environment where perhaps they should be more vigilant in terms of risk management and mitigation.

Kevin: We’ve talked about price discovery being lost, Dave. He brought that up in his own way when you were interviewing him. You have to understand, as a listener, that this is a man who, as he trades – traders try to buy cheap and they try to sell high, and they don’t want to run prices up other than the manipulations we’ve seen every once in a while where someone purposely drives them up or down, but 60% of the mortgages that were sold in the market in 15 months were purchased by the Fed under his direction at that desk, and he had to make sure that those prices were not run up at that time. So there was some skill involved, but he is also saying, you cannot continue this.

David: And what you can’t continue to do, and this is certainly the biggest of all issues, and it is something that we’ve brought up time and time again, is to ignore the structural issues, which beg for change, and beg for reform. What are we handing to the next generation? We’re handing a set of I.O.Us which cannot be paid back. We’re handing not only the obligation to pay back 17 trillion dollars of money that we have used to finance today’s lifestyles, and finance current government budget expenses, but we also are handing over, not only tens, but hundreds of trillions of dollars in long-term liabilities, and I think that is very apropos here in the days following Detroit’s declaration of bankruptcy, and the reality that many of those recipients of long-term liabilities will have the benefits cut. They’ll have to, because there is simply not the money to pay.

So this idea of the good life in America, this idea of growth and prosperity, we need to take it seriously, and not live with the delusion that somehow the Fed can create, or will be the primary source of, growth in the economy, neither the Fed, nor the government. That will continue to come from business leaders and innovative ideas where people are willing to take risk, even in an environment where risk is aptly understood.