Sanity from Volcker and Schiller

The number of participants at today's sessions who discussed the shape of new regulatory agencies and legislation as a foregone conclusion was astounding. There was simply no one who rose to defend free market principles and to speak of the dangers of further regulation. And, of course, the chance that anyone would mention the money supply and the business cycle was near zero.

The only two voices of sanity came from former Fed chairman Paul Volcker and and Yale economist Robert Schiller. Volcker, clearly concerned, spoke in his carefully chosen central banker's moderation, and advised participants that they should go slow and not act in any haste in creating new legislation or agencies. A person close to Volcker privately told me that Volcker was very concerned about these issues and also the way Bernanke was handling the crisis overall and also the money supply.

Schiller spoke openly of the growing fear that the U.S. will default on its debt. He said he did not consider a default likely, but fully expected the fear to increase. He said that the U.S did default once in its history, when FDR went off the gold standard. He said this isn't brought up much, but it will in the future. He said a default was unlikely, in the traditional sense, because the Fed could default by creating enough inflation that the value of current debt outstanding would be minimal. He said that is a great fear.