he join -- paul volcker. he joined the federal reserve staff in 1952. >> [inaudible] but i joined in '49 for nine months and then went back to graduate school and then came back permanently in '52. >> okay. [laughter] then bracketed by a stint in the private sector, he was directer of financial analysis in 1962 where he first met alan meltzer and then deputy undersecretary for monetary affairs from '69-'74 he was the undersecretary of the treasury for international monetary affairs, president of the federal reserve bank of new york from 1975-1979 and then chairman of the federal reserve starting in 1979. i'm saying this not because paul volcker needs an introduction to any of you, but rather to underscore that his career is interwoven in the history of the federal reserve that alan talks about in volume two. what i'm going to do this morning is ask a series of questions to alan and chairman volcker including one -- a set for each of the four decades covered by volume two. and then probably by about 10:00, ope

i think of when paul volcker went to -- when i first met paul volcker, he was then an anti-inflationist and a believer in fixed exchange rates. strong proponent came out of the new york fed and had the views of the new york fed which was always in favor of fixed exchange rates. so what i would like to read is that, you know, he was the undersecretary who when events forced you to float the dollar, floated the dollar. and what made the transformation, just the facts? or did he come to the conclusion which is quite relevant now when we think about the e.u. that the very interest international economists like ken rogoff say fixed exchange rate systems don't last more than eight or ten years at the best? be and the reason is because, of course, we're not willing to do the things which put the exchange rate stability above unemployment. and was -- so i'd like to ask in the secret diary whether he believes that a fixed exchange rate system would be the best system for the world and how he would go about getting that or whether he thinks that we're going to have to be in a floating rate world,

as an aside, senator sessions mentioned paul volcker. i was in this room -- before i worked for the reagan administration, i was on the staff of the senate budget committee, like many people here, and i was in this room when paul volcker said "enough is enough." we are at that point where people need to be saying we cannot afford it, even though it might be a good program. if i may, i will go through the first slide. my testimony is broken into four parts. one is the economic outlook, which is for moderate growth. the second is the fiscal outlook, which is for lots more debt and deficit. the third part, i address the risks of this high debt-to-gdp ratio. the question is whether we are at a turning point -- a tipping point where we could see investors turned away from u.s. debt. i am going to address that in some detail. then in my testimony, i get some policy suggestions. in particular, i think we need to start cutting spending now rather than the summit approach, which has been tried so often. i think the goal should be to fight any cut

and over the last -- >> i fear that you mention paul volcker. i don't think he got to it in time. >> after. he came -- >> 2% or less. by time chairman volcker left office can he came with a 13% inflation rate. he left office with 4% inflation rate. >> after it went to -- >> 13% was the highest. then it came down over about eight years under his stewardship to about 4%. then from there under chairman greenspan and to the late '90s it came down gradually to about 2% and it's been there ever since. >> i do think the agency got to inflation on time. as you are proposing. >> it has come it has except in the '70s which, of course, can learn from. >> maybe we will beg to differ there. that banks, there's a lot of government products on the street to support this borrowing that we are doing. doesn't make sense, alisa destiny, that when banks have one of your products to invest in on their balance sheets versus a small business down the straight, they're going to go to your product. and so could you argue to mr. langford's point that my lord, if we just

volcker talks about his experience in office. this event was hosted by the am

difficult actually literally limiting the brits your definition work specially for talk you listen to paul volcker he does what initial work the way terry that he wrestled as i'm sure you want who want to jump in there i totally disagree with alex to see that the lack of regulation in the market is is a is a great thing that would say well we can take that to the absurd and say well then the congolese are the cameroon stock exchange would be would be even better. because when you have absolutely no regulation if you take a look at where where money is in the world a lot of this money is institutional money a lot of this money is sophisticated investors and in a market that's not regulated that under staking out sees words and saying that with the they don't perform due diligence at a certain level on companies then investors investors will even want to get involved in that market because they all know the risks are very high and it's the same kind of market that appeal the private placement sort of investors if you look at if you look at the world you see how many financial global financial center

through i mean the last time gold really had a run up which is in the early eighty's and then paul volcker was the fed chairman at the time and he raised interest rates very aggressor. to basically control inflation us and you saw gold essentially spike and then come crashing down everyone says the same thing's going to happen again of course they've been saying that for the past ten years and it hasn't happened yet it's really all about absolute terms you if you look at gold in absolute terms sort of the relative cost the gold to other commodities it's basically held still you can take a chart of the price of oil in the price of gold price of oil in ounces of gold and you'll see that it's more or less at that relationship pretty stable for over a long period of time so it's hard to say that there's a discrete bubble in the gold space and only go on i think that's that's not true to say it's about what's the best way of investing into gold if you want to basically you know hedge your debts right i mean. one of the biggest problems about gold obviously one of the ways of doing it is simply

i was here when paul volcker said enough is enough. we are at that point where people need to be saying we can't afford it, even though it might be a good program. if i may i'll go to the first slide. my testimony is broken into three -- into four parts. one is the economic outlook which is for moderate growth. the second is the fiscal outlook which is for lots more debt and deficits. the third party i address the risks of this high debt to gdp ratio. the question is whether we are at a turning point a tipping point where we could see investors turn away from u.s. debt. so i'm going to address that in some detail. then in some testimony i give some policy suggestions. in particular, i think we need to start cutting spending now rather than the summit approach which has been tried so often. i think the goal should be to find a cut that you could make tomorrow or late this week and find a process that can actually implement that. you'll have the continuing resolution expiring on march 4th. that gives a very good opportunity to begin cutt

[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

that is why with the help of paul volcker, we passed a set of common sense reforms. the same concept of health insurance reform. we cannot continue to accept the status quo that made our entire economy less competitive. we have paid more for person in health care than any nation on earth. nobody is even close. we cannot accept a system where insurance companies could drop people because they got sick or families went into bankruptcy because of medical bills. i know folks here have concerns about this law, and i understand it. your instinct is if i have more laws, that will increase my cost even more. i understand that suspicion, that skepticism. but the non-partisan congressional watchdogs estimate that health care tax credits will be worth nearly $40 billion to small businesses over the next decade. $40 billion for doing the right thing to their employees. experts suggest that health insurance reform could save large employers anywhere from $2,000 to $3,000 per family. your employees and your bottom line. i have said that i am willing and happy to look at other idea

. >> chairman volcker. >> having some background some balance. there is no question that the banks, to have more capital than they had in years, whether it is being dynamic, i don't know. i don't think you can do it by legislation and regulators around the world. authority to control capital as they lose their authority. i don't think that is the end of the story, and i would like to deal with bailouts and too big to fail. when push comes to shove the choice seems to be between collapse of the system and entry into the system. regulators around the world have to take action to try to avoid that. that is why we need more regulation in some areas. i can think of several pieces of regulation that i strongly support. >> how about the question from the other direction, which is, do you worry about the focus on the setting of monetary policy the federal reserve officials spend a lot of their time writing -- approving financial stability reports and getting into that leads the spending? >> not really high on my list of worries. i wonder what most member

. - and the greater discipline on basic, basic things--well, the volcker rule, collateral, and so on--the old fashioned stuff. if political will ever got behind that, could that not do some good? - yeah, i think it could, but i think the american political system, really, has got a lot of huge problems. just the way the whole constitution is structured, having an election every two years in the house of representatives, the lobbyist system... i think the parliamentary system that we have here is probably a lot more stable--like in the uk and canada. in the us the whole thing is so tremendously politicized, and regulation is fragmented among many different sources, many different places. it's all political--a lot of the people are political appointments that are running it, and i think they should be very non-political. the lobbyists have got way too much power in the united states. - now let me just throw one last one at you, and it is a bit of a zinger. mr. obama, as you know, has got to face re- election; he didn't do so well at the midterms. so you are king for a day. you are the c

that is why with the help of paul volcker, we passed a set of common sense reforms. the same can be said of health insurance reforms. we simply cannot accept the status quo that has made our entire economy less competitive. as we have paid more for health care than any nation on earth. nobody is even close. we could not except of broken system for patients went into bankruptcy because of medical bills. i know there were troubles because of this law. it is going tosn' increase the cost even more. the nonpartisan congressional watchdogs estimates that health care tax credits will be worth nearly $40 billion to small businesses over the next decade. experts not just from the government of those commission by the business roundtable said just health insurance reform should ultimately save anywhere from $2,000 cater $3,000 per family --to $3,000 per family. now i will repeat here today, i am happy to look for other ways to improve the laws including patient safety and medical law practice reform. i want to correct a law that has already placed unnecessary burden on small

that is why with the help of paul volcker, who is here today, we passed common-sense reforms. the same can be said of health insurance reform. we simply could not continue to accept a status quo that has made our entire economy less competitive. as we have paid more per person for health care than any other nation on earth, nobody is even close. and we could not accept a broken system where insurance companies could drop them because people got sick and families went into bankruptcy because of medical bills. i know that folks here have concerns about this law, and i understand it. if you are running a business right now and seeing escalating health-care costs, your instinct is, "if i have even more laws, that will increase my cost more." i understand that skepticism. but the nonpartisan congressional watchdogs at the cbo estimates that health care tax credits will be worth nearly $40 billion for small businesses over the next decade, $40 billion directly to small businesses who are doing the right thing by their employees. and experts not just from the government, but also com

that is why with the help of paul volcker, who is here today, we passed common-sense reforms. the same can be said of health insurance reform. we simply could not continue to accept a status quo that has made our entire economy less competitive. as we have paid more per person for health care than any other nation on earth, nobody is even close. and we could not accept a broken system where insurance companies could drop them because people got sick and families went into bankruptcy because of medical bills. i know that folks here have concerns about this law, and i understand it. if you are running a business right now and seeing escalating health-care costs, your instinct is, "if i have even more laws, that will increase my cost more." i understand that skepticism. that suspicion. but the nonpartisan congressional watchdogs at the cbo estimates that health care tax credits will be worth nearly $40 billion for small businesses over the next decade, $40 billion directly to small businesses who are doing the right thing by their employees. and experts not just from the governme

and over the last -- >> i fear that you mention paul volcker. i don't think he got to it in time. >> after. he came -- >> 2% or less. by time chairman volcker left office can he came with a 13% inflation rate. he left office with 4% inflation rate. >> after it went to -- >> 13% was the highest. then it came down over about eight years under his stewardship to about 4%. then from there under chairman greenspan and to the late '90s it came down gradually to about 2% and it's been there ever since. >> i do think the agency got to inflation on time. as you are proposing. >> it has come it has except in the '70s which, of course, can learn from. >> maybe we will beg to differ there. that banks, there's a lot of government products on the street to support this borrowing that we are doing. doesn't make sense, alisa destiny, that when banks have one of your products to invest in on their balance sheets versus a small business down the straight, they're going to go to your product. and so could you argue to mr. langford's point that my lord, if we just

look at its -- it took several years for the market to see volcker's policy would lead to a decline in interest rates. it could take years for the markets to realize the fed policy is highly inflationary. any comment on that? >> i agree with that concern. i think the fed should stop buying bonds. as far as the risk has been for us of higher inflation, one problem that we run into is people do not focus on the problem when it is distance. it does not to give you the urgency. one of the things we are doing today is tuesday, we do not know what is going to happen next month or year, but we are too close to the brink on the tipping point. please stop spending and try to find procedures that will give us confidence about spending as well. well.

ever since paul volcker conquered inflation and the 1980's, inflation has come down steadily. >> i do not think he got sick it in time. -- he got to it at the time. >> by the time he left office, he came in with a 13% inflation rate and left with a fourth term -- 4% inflation rate. it came down over eight years. from there, under general greenspan, it came down to about 2% and it has been there ever since. >> i do not think the agency got there. >> it has predicte. >> we will beg to differ there. there are elected government projects on the street to support this borrowing that we are doing. when banks have one of your products to invest verses a small business down the street, they will go to your project. k you argued that -- can you argue to stop these products from being offered? you can get a better return on your money. >> we paid 25 basis points. the existence of the reserves is the counterpart to the purchases of securities that we are doing that is making it easier for borrowers to get credit. you cannot look at one side and not look at the other side. i do think it helps cre

working with paul coale -- paul volcker, chairman of the federal reserve, he entaind inflation, which was depriving americans of their life savings. it was a tough course, a tough road, but he saw it through, he stayed on the course and we were stronger as a result and we needed to get on a tough -- we need to get on a tough road and stay the course today. he lowered taxes dramatically, including a reduction in the top rate from nearly 80%, and he reined in a runaway bureaucracy that had trapped innovation and productivity in a labyrinth of regulation and red tape. his faith in the free market was not misplaced. it rewarded us. he created 20 million new jobs, grew our gross national product by 26% and began the longest peacetime boom in our history. conditions improved for americans in every walk of life. the net worth of families earning between $20,000 and $50,000 rose by 27%. reagan's stunning success debunked every myth of those who believed a government -- a bigger government is more compassionate and can do more for more people. the growth and potential productivity of the pri

paul volcker in this room and none 1980's facing the big fiscal deficit said the fed could have a loose monetary policy if the congress would have a tight fiscal policy meeting spined left and we will have a loose monetary policy. we are breaking the school bell in the way you said. we are putting that year's zero interest rate on top of a massive stability of fiscal policy so this is simply not the right mix. .. warren buffett called derivatives in the air timebomb waiting to go off and in some ways that occurred, certainly with aig. so you had a perfect seat red for bubbles to form and void wicked bubbles. we got a housing bubble, a commodity bubble. we got the energy bubble. we went to $100 a barrel. so we didn't just have a housing bubble. we do whole series of bubbles in which we'd really laid the foundation by loose monetary policy, loose fiscal policy, unable to get them at the same time. that's another whammy to the economy. and here we are cleaning up the economic wreckage. >> morgan stanley has a nice report with this very low-interest environment. i'm sure he can send it to y

you have seen the beginnings of the consumer protection bureau, the volcker

working with paul coale -- paul volcker, chairman of theederal reserve, he entaind inflation, which was depriving americans of their life savings. it was a tough course, a tough road, but he saw it through, he stayed on the course and we were stronger as a resul and we needed to get on a tough -- we need to get on a tough road and stay the course today. he lowered taxes dramatically, including a reduction in the top rate from nearly 80%, and he reined in a runay bureaucracy that had trapped innovation and productivity in a labyrinth of regulation and red tape. his faith in the free market was not misplaced. it rewarded u. he created 20 million new jobs, grew our gross national product by 26% and began the longest peacetime boom in our history. conditions improved for americans in every walk of life. the net worth of families earning beten $20,000 and $50,000 rose by 27%. reagan's stunning success debunked every myth of those who believed a government -- a bigger government is more compassionate and can do more for more people. the growth and potential productivity of the private secto

you have seen the beginnings of the consumer protection bureau, the full role -- the volcker rule, a whole list of important policy developments out of that legislation to ensure that that never happens again. the administration believes we have taken a giant step forward in the passage of that to ensure that the impacts to our economy because of regulatory failures are not something that we see again. thank you. >> much of today's white house briefing spent on the protests in egypt, continuing today, despite the announcement by president mubarak that he will not run in the fall election. the white house once that if -- warns that if the egyptian government is instigating any of the violence in cairo, it was called immediately. prime minister david cameron talked about the uk's reaction to the situation in egypt. >> let me ask him about the wider issues on egypt. i think everybody has been moved by the images we have seen in the last few days of hundreds of thousands of people against overwhelming odds demand a more democratic future. with president obama's's statement last night, ca

working with paul coale -- paul volcker, chairman of the federal reserve, he entaind inflation, which was depriving americans of their life savings. it was a tough course, a tough road, but he saw it through, he stayed on the course and we were stronger as a result and we needed to get on a tough -- we need to get on a tough road and stay the course today. he lowered taxes dramatically, including a reduction in the top rate from nearly 80%, and he reined in a runaway bureaucracy that had trapped innovation and productivity in a labyrinth of regulation and red tape. his faith in the free market was not misplaced. it rewarded us. he created 20 million new jobs, grew our gross national product by 26% and began the longest peacetime boom in our history. conditions improved for americans in every walk of life. the net worth of families earning between $20,000 and $50,000 rose by 27%. reagan's stunning success debunked every myth of those who believed a government -- a bigger government is more compassionate and can do more for more people. the growth and potential productivity of the pri

working with paul coale -- paul volcker, chairman of the federal reserve, he entaind inflation, which was depriving americans of their life savings. it was a tough course, a tough road, but he saw it through, he stayed on the course and we we stronger as a result and we needed to get on a tough- we need to get on a tough road and stay the course today. he lowered taxes dramatically, including a reductionn the top rate from nearly 80%, and he ined in a runaway bureaucracy that had trapped innovation and pructivity in a labyrinth of regulation and red tape. his faith in the free market was not misplaced. it rewarded us. he created 20 million new jobs, grew our gross national product by 26% and began the longest peacetime boom in our history. conditions improved for americans in every walk of life. the net worth of families earning between $20,000 and $50,000 rose by 27%. reagan's stunning success debunked everyyth of those who believed a government -- a bigger government is more compassiate and can do more for more people. the growth and potential productivity of the private sector is

paul volcker, a political giant, this is the biggest issue. we need to listen to paul when he talks about those things. >> one more question. >> so i understand there are major differences in the political system in the u.s. and other countries. i also understand why it's often not possible to talk publicly what we may learn from other countries. but are you having conversations with legislators, colleagues in other nations about doing things that might be helpful in this system, whether it be broadly accultureing notion of public service or solutions? >> i appreciate your interest in international comparisons. certainly we can learn from them. but to be honest with you, this is something that our academic friends are going to have to help us with. having worked a lot in health care, the only helpful book in health care, i apologize if you are one the authors of the other books, the only helpful book on international comparisons on health care is t.r. reid "the healing of america." there he did keep it simple. he had a bum shoulder. took it to

volcker talks about his experience in office. this is hosted by the american interviews -- american enterprise institution. it is about an hour and a half. >> good morning. i am vincent reinhart a resident scholar here at the american enterprise institute, and for the next hour and a half, we are going to be talking about volume two in allen meltzer's magisterial history of the federal reserve. as you know, this is a work long in coming and it was a little difficult to know how to summarize 1312 pages of the history of the federal reserve from 1951 to 1986, but then we realized we have the living embodiment of much of that history sitting to my left in terms of paul volcker. paul volcker joins the staff of the federal reserve bank of new york in 1952 -- 52. >> i then went back to graduate school. >> then bracketed by the private sector. you is that the u.s. treasury department has director of financial analysis in 1962 where he first met allan meltzer and then deputy undersecretary for monetary affairs. from 69 to 74 he was the u