Wednesday, April 25, 2012

My Speech Delivered at the New York Federal Reserve Bank

At the invitation of the New York Federal Reserve Bank, I spoke and had lunch in the bank's Liberty Room. Below are my prepared remarks.


Thank you very much for inviting me to speak here at the New York Federal Reserve Bank.

Intellectual discourse is, of course, extraordinarily valuable in reaching truth. In this sense, I welcome the opportunity to discuss my views on the economy and monetary policy and how they may differ with those of you here at the Fed.

That said, I suspect my views are so different from those of you here today that my comments will be a complete failure in convincing you to do what I believe should be done, which is to close down the entire Federal Reserve System

My views, I suspect, differ from beginning to end. From the proper methodology to be used in the science of economics, to the manner in which the macro-economy functions, to the role of the Federal Reserve, and to the accomplishments of the Federal Reserve, I stand here confused as to how you see the world so differently than I do.

I simply do not understand most of the thinking that goes on here at the Fed and I do not understand how this thinking can go on when in my view it smacks up against reality.

Please allow me to begin with methodology, I hold the view developed by such great economic thinkers as Ludwig von Mises, Friedrich Hayek and Murray Rothbard that there are no constants in the science of economics similar to those in the  physical sciences.

In the science of physics, we know that water freezes at 32 degrees. We can predict with immense accuracy exactly how far a rocket ship will travel filled with 500 gallons of fuel. There is preciseness because there are constants, which do not change and upon which equations can be constructed..

There are no such constants in the field of economics since the science of economics deals with human action, which can change at any time. If potato prices remain the same for 10 weeks, it does not mean they will be the same the following day. I defy anyone in this room to provide me with a constant in the field of economics that has the same unchanging constancy that exists in the fields of physics or chemistry.

And yet, in paper after paper here at the Federal Reserve, I see equations built as though constants do exist. It is as if one were to assume a constant relationship existed between interest rates here and in Russia and throughout the world, and create equations based on this belief and then attempt to trade based on these equations. That was tried and the result was the blow up of the fund Long Term Capital Management, a blow up that resulted in high level meetings in this very building.

It is as if traders assumed a given default rate was constant for subprime mortgage paper and traded on that belief. Only to see it blow up in their faces, as it did,  again, with intense meetings being held in this very building.

Yet, the equations, assuming constants, continue to be published in papers throughout the Fed system. I scratch my head.

I also find curious the general belief in the Keynesian model of the economy that somehow results in the belief that demand drives the economy, rather than production. I look out at the world and see iPhones, iPads, microwave ovens, flat screen televisions, which suggest to me that it is production that boosts an economy. Without production of these things and millions of other items, where would we be? Yet, the Keynesians in this room will reply, “But you need demand to buy these products.” And I will reply, “Do you not believe in supply and demand? Do you not believe that products once made will adjust to a market clearing price?”

Further , I will argue that the price of the factors of production will adjust to prices at the consumer level and that thus the markets at all levels will clear. Again do you believe in supply and demand or not?

I scratch my head that somehow most of you on some academic level believe in the theory of supply and demand and how market setting prices result, but yet you deny them in your macro thinking about the economy.

You will argue with me that prices are sticky on the downside, especially labor prices and therefore that you must pump money to get the economy going. And,  I will look on in amazement as your fellow Keynesian brethren in the government create an environment  of sticky non-downward bending wages.

The economist  Robert Murphy reports that President  Herbert Hoover continually pressured businessmen to not lower wages.[1]

He quoted Hoover in a speech delivered to a group of businessmen:

In this country there has been a concerted and determined effort  on the part of government and business... to prevent any reduction in wages.

He then reports that FDR actually outdid Hoover by seeking to “raise wages rates rather than merely put a floor under them.”

I ask you, with presidents actively conducting policies that attempt to defy supply and demand and prop up wages, are you really surprised that wages were sticky downward during the Great Depression?

In present day America, the government focus has changed a bit. In the new focus, the government  attempts much more to prop up the unemployed by extended payments for not working. Is it really a surprise that unemployment is so high when you pay people not to work.? The 2010 Nobel Prize was awarded to economists for their studies which showed that, and I quote from the Nobel press release announcing the award:

One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times.[2]

Don’t you think it would make more sense to stop these policies which are a direct factor in causing unemployment, than to add to the mess and devalue the currency by printing more money?

I scratch my head that somehow your conclusions about unemployment are so different than mine  and that you call for the printing of money to boost “demand”. A call, I add, that since the founding of the Federal Reserve has resulted in an increase of the money supply by 12,230%.

I also must scratch my head at the view that the Federal Reserve should maintain a stable price level. What is wrong with having falling prices across the economy, like we now have in the computer sector, the flat screen television sector and the cell phone sector? Why, I ask, do you want stable prices? And, oh by the way, how’s that stable price thing going for you here at the Fed?

Since the start of the Fed, prices have increased at the consumer level by 2,241% [3]. that’s not me misspeaking, I will repeat, since the start of the Fed, prices have increased at the consumer level by 2,241%.

So you then might tell me that stable prices are only a secondary goal of the Federal Reserve and that your real goal is to prevent serious declines in the economy but, since the start of the Fed, there have been 18 recessions including the Great Depression and the most recent Great Recession. These downturns  have resulted in stock market crashes, tens of  millions of unemployed and untold business bankruptcies.

I scratch my head and wonder how you think the Fed is any type of success when all this has occurred.

I am especially confused, since Austrian business cycle theory (ABCT), developed by Mises, Hayek and Rothbard, has warned about all these things. According to ABCT, it is central bank money printing that causes the business cycle and, again you here at the Fed have certainly done that by increasing the money supply. Can you imagine the distortions in the economy caused by the Fed by this massive money printing?

According to ABCT, if you print money those sectors where the money goes  will boom, stop printing and those sectors will crash. Fed printing tends to find its way to Wall Street and other capital goods sectors first, thus it is no surprise to Austrian school economists that the crashes are most dramatic in these sectors, such as the stock market and real estate sectors. The economist Murray Rothbard in his book America’s Great Depression [4] went into painstaking detail outlining how the changes in money supply growth resulted in the Great Depression.

On a more personal level, as the recent crisis was developing here, I warned throughout the summer of 2008 of the impending crisis. On July 11, 2008 at EconomicPolicyJournal.com, I wrote[5]:

SUPER ALERT: Dramatic Slowdown In Money Supply Growth

After growing at near double digit rates for months, money growth has slowed dramatically. Annualized money growth over the last 3 months is only 5.2%. Over the last two months, there has been zero growth in the M2NSA money measure.

This is something that must be watched carefully. If such a dramatic slowdown continues, a severe recession is inevitable.

We have never seen such a dramatic change in money supply growth from a double digit climb to 5% growth. Does Bernanke have any clue as to what the hell he is doing?

On July 20, 2008, I wrote [6]:

I have previously noted that over the last two months money supply has been collapsing. M2NSA has gone from double digit growth to nearly zero growth .

A review of the credit situation appears worse. According to recent Fed data, for the 13 weeks ended June 25, bank credit (securities and loans) contracted at an annual rate of 7.9%.

There has been a minor blip up since June 25 in both credit growth and M2NSA, but the growth rates remain extremely slow.

If a dramatic turnaround in these numbers doesn't happen within the next few weeks, we are going to have to warn of a possible Great Depression style downturn.



Yet, just weeks before these warnings from me, Chairman Bernanke, while the money supply growth was crashing, had a decidedly much more optimistic outlook, In a speech on June 9, 2008, At the Federal Reserve Bank of Boston’s 53rd Annual Economic Conference [7], he said:


I would like to provide a brief update on the outlook for the economy and policy, beginning with the prospects for growth.  Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly.  Indeed, although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.  Over the remainder of 2008, the effects of monetary and fiscal stimulus, a gradual ebbing of the drag from residential construction, further progress in the repair of financial and credit markets, and still-solid demand from abroad should provide some offset to the headwinds that still face the economy.

I believe the Great Recession that followed is still fresh enough in our minds so it is not necessary to recount in detail as to whose forecast, mine or the chairman’s, was more accurate.  

I am also confused by many other policy making steps here at the Federal Reserve. There have been more changes in monetary policy direction during the Bernanke era then at any other time in the modern era of the Fed. Not under Arthur Burns, not under G. William Miller, not under Paul Volcker, not under Alan Greenspan  have there been so many dramatically shifting Fed monetary policy moves. Under Chairman Bernanke there have been significant changes in direction of the money supply growth FIVE different times. Thus, for me, I am not at all surprised at the current stop and go economy. The current erratic monetary policy makes it exceedingly difficult for businessmen to make any long term plans.  Indeed, in my own Daily Alert on the economy [8] I find it extremely difficult to give long term advice, when in short periods I have seen three month annualized M2 money growth go from near 20% to near zero, and then in another period see it go from 25% to 6% . [9]

I am also confused by many of the monetary programs instituted by Chairman Bernanke. For example, Operation Twist.

This is not the first time an Operation Twist was tried. an Operation Twist was tried in 1961, at the start of the Kennedy Administration [10] A paper [11] was written by three Federal Reserve economists in 2004 that, in part, examined the 1960's Operation Twist

Their conclusion (My bold):

A second well-known historical episode involving the attempted manipulation of the term structure was so-called Operation Twist.  Launched in early 1961 by the incoming Kennedy Administration, Operation Twist was intended to raise short-term rates (thereby promoting capital inflows and supporting the dollar) while lowering, or at least not raising, long-term rates. (Modigliani and Sutch 1966).... The two main actions of Operation Twist were the use of Federal Reserve open market operations and Treasury debt management operations..Operation Twist is widely viewed today as having been a failure, largely due to classic work by  Modigliani and Sutch....

However, Modigliani and Sutch also noted that Operation Twist was a relatively small operation, and, indeed, that over a slightly longer period the maturity of outstanding government debt rose significantly, rather than falling...Thus, Operation Twist does not seem to provide strong evidence in either direction as to the possible effects of changes in the composition of the central bank’s balance sheet....

We believe that our findings go some way to refuting the strong hypothesis that nonstandard policy actions, including quantitative easing and targeted asset purchases, cannot be successful in a modern industrial economy.  However, the effects of such policies remain quantitatively quite uncertain.  

One of the authors of this 2004 paper was Federal Reserve Chairman Bernanke. Thus, I have to ask, what the hell is Chairman Bernanke doing implementing such a program, since it is his paper that states it was a failure according to Modigliani, and his paper implies that a larger test would be required to determine true performance.

I ask, is the Chairman using the United States economy as a lab with Americans as the lab rats to test his intellectual curiosity about such things as Operation Twist?

Further, I am very confused by the response of Chairman Bernanke to questioning by Congressman Ron Paul. To a seemingly near off the cuff question by Congressman Paul on Federal Reserve money provided to the Watergate burglars, Chairman Bernanke contacted the Inspector General’s Office of the Federal Reserve and requested an investigation [12]. Yet, the congressman has regularly asked about the gold certificates held by the Federal Reserve [13] and whether the gold at Fort Knox backing up the certificates will be audited. Yet there have been no requests by the Chairman  to the Treasury for an audit of the gold.This I find very odd. The Chairman calls for a major investigation of what can only be an historical point of interest but fails to seek out any confirmation on a point that would be of vital interest to many present day Americans.

In this very building, deep in the underground vaults, sits billions of dollars of gold, held by the Federal Reserve  for foreign governments. The Federal Reserve gives regular tours of these vaults, even to school children. [14] Yet, America’s gold is off limits to seemingly everyone and has never been properly audited. Doesn’t that seem odd to you? If nothing else, does anyone at the Fed know the quality and fineness of the gold at Fort Knox?

In conclusion, it is my belief  that from start to finish  the Fed is a failure. I believe faulty methodology is used, I believe that  the justification for the Fed, to bring price and economic stability, has never been a success. I repeat, prices since the start of the Fed have climbed by 2,241% and there have been over the same period 18 recessions. No one seems to care at the Fed about the gold supposedly backing up the gold certificates on the Fed balance sheet. The emperor has no clothes.  Austrian Business cycle theorists are regularly ignored by the Fed, yet they have the best records with regard to spotting overall downturns, and further they specifically recognized the developing housing bubble. Let it not be forgotten that in 2004, two economists here at the New York Fed wrote a paper [15] denying there was a housing bubble. I responded to the paper [16] and wrote:

The faulty analysis by [these] Federal Reserve economists... may go down in financial history as the greatest forecasting error since Irving Fisher declared in 1929, just prior to the stock market crash, that stocks prices looked to be at a permanently high plateau.

Data released just yesterday, now show housing prices have crashed to  2002 levels. [17]

I will now give you more warnings about the economy.

The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or,  if you stop printing, another massive economic crash will occur. There is no other way out.

Again, thank you for inviting me. You have prepared food, so I will not be rude, I will stay and eat.

Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats.


Footnotes

[1] http://www.amazon.com/Politically-Incorrect-Guide-Depression-Guides/dp/1596980966/ref=sr_1_1?ie=UTF8&qid=1335313972&sr=8-1

[2] http://www.nobelprize.org/nobel_prizes/economics/laureates/2010/press.html

[3] ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

[4] http://www.amazon.com/Americas-Great-Depression-Murray-Rothbard/dp/146793481X/ref=sr_1_1?ie=UTF8&qid=1335314537&sr=8-1

[5] http://www.economicpolicyjournal.com/2008/07/super-alert-dramatic-slowdown-in-money.html

[6] http://www.economicpolicyjournal.com/2008/07/alert-collapsing-credit.html

[7] http://www.federalreserve.gov/newsevents/speech/bernanke20080609a.htm

[8] http://www.economicpolicyjournal.com/2009/04/announcing-epj-quarterly-economic.html

[9]http://www.economicpolicyjournal.com/2008/07/super-alert-dramatic-slowdown-in-money.html

[10] http://www.frbsf.org/publications/economics/letter/2011/el2011-13.html

[11] http://www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf


[12] http://www.huffingtonpost.com/2012/04/03/federal-reserve-watergate-iraqi-weapons_n_1400645.html

[13] http://www.federalreserve.gov/releases/h41/Current/

[14] http://www.newyorkfed.org/aboutthefed/visiting.html

[15] http://fednewyork.org/research/epr/04v10n3/0412mcca.pdf

[16] http://www.economicpolicyjournal.com/2012/02/checkmate-new-york-fed-as-totally.html

[17] http://www.nytimes.com/2012/04/25/business/economy/survey-shows-us-home-prices-still-weak.html

Special thanks to the following, who helped me research and collect data for this paper: Stephen Davis, Bob English, Jon Lyons, Ash Navabi, Joseph Nelson, Nick Nero,  Antony Zegers

180 comments:

  1. You've got great big brass balls.

    Nice speech.

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  2. Oh good, you made it out alive.

    Awesome speech!

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  3. Priceless! Great speech and great prediction at the end.

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  4. Hi Bob,

    Thank you for your service to this country.

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  5. Bravo! A heroic speach that makes me proud to call myself an EPJ reader.

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  6. Thunderous Applause and Cheers!

    Congratulations. Your prepared comments are courageous and show a man of principal willing to tell the truth to those who need to hear it the most. I’m curious, what questions did they ask? Were you met with resistance and disbelief, or were there any open minds?

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  7. Nice work. I hope you will share with us details of the response you received.

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  8. Bravo! Powerful, provocative, and convincing.

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  9. Leave it to the "four legged rats" (opposed to the two legged ones currently occupying the Fed... very clever)


    Very well done, I wish I was there to see the faces of the audience. Who was in attendance? I hope Dudley was there.


    Can you please tell us how the speech was received? Did anyone express desire for you to offer further insights? Could they even bare to give you an applause when you finished or was there just silence?


    I am a little surprised you didn't expand on the looming bond bubble and skyrocketing interest rates that will result. Perhaps you were restricted by time or that simply wasn't a goal of your speech.

    Anyways, knowing that the names of Mises, Hayek, and Rothbard echoed in the halls of the Fed makes me smile... I hope your audience silently admitted to themselves that the Austrians have been right all along. However, I suspect they rolled their eyes in disgust. Let it not be said that the Keynesian manipulators were not warned.

    Bravo Mr. Wenzel. Bravo.

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    1. Ditto. I also would like to know how the speech was received, and to have watched those in attendance during the speech.

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    2. The New York Federal Reserve Bank has a room called the Liberty Room?

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    3. Yes, it's where they conspire to take more of it from us.

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  10. You, sir, are a genuine hero.

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  11. Bravo Robert,

    So how was their reception of your speech? How many people listened in?

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  12. So... how were the responses? C'mon Robert, you must inform us of their reactions!

    Great speech by the way

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  13. So, how was the lunch?

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  14. Bravo Mr Wenzel! Delivering that speech in the belly of the beast took cojones gigante!

    I'm curious as to how it was recieved. Polite applause, silence, masss exodus? Was there a question and answer period? If so, what was the tone and what were the subjects?

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  15. Great speech. The ending was awesome. How many people do you think showed up?

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  16. I wonder how Fedsters made the connection that they are the two-legged rats?

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  17. "I beg you all, walk out of here with me, never to come back."

    Did this get a laugh? Even I, who agree with you, would have laughed. As Upton Sinclair said, "It's hard to make a man understand something when his livelihood depends on him not understanding it".

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  18. Was there an attendance ledger? Who was in the Fed audience?

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  19. Was there a Q&A? What reactions did you get? Don't leave us hanging.

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  20. Well said. Can I ask what questions/objections were directed at you after the speech? I take it the whole staff did not leaver afterwards and head home.

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  21. Tell me there's video of this.

    Better yet, tell me there's video of the faces in the audience.

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  22. How many attended, and how were your remarks received?

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  23. Why do you always pull your punches?

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  24. It's like an atheist giving a speech at Sunday mass. I'd really like to know how the lunch conversations went afterwards.

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    1. Except in this case he was founded and right.

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    2. Forget the "Except" part. I agree that he was founded and right. I scratch my head at the "Except" business you have going on, Mr. Anonymous. You can leave that word out.

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    3. everyone is entitled to his opinion i guess; the matter of faith had little to do with the current discussion so i don't believe it should have been included in your original post.

      as far as the fed decisions are concerned, at least those opinions are documented and can be severely judged for what they are from a practical standpoint (and point by point dismantled as Bob has so brilliantly done in his speech)

      as for the matter of faith, the jury is still out and will probably be so until the end of time ;)

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    4. Different Anonymous

      From the point of view of an Atheist, Tom's analogy is spot on. Wenzel insulted them in their house of worship by using evidence to question the articles of their faith.

      A Christian who is also anti-FED will take offense at the analogy, but it's a valid one.

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    5. Yet Another Anonymous

      The analogy fails in that Wenzel's economics are solidly grounded in provable science and logic.

      Atheism, on the other hand, is purely a matter of blind faith -- there's simply NO WAY to "prove" that there's no such thing as an Infinite Aristotelian-First-Cause/Prime-Mover/"God" in this or any other universe/dimension/whatever.

      Now, I do have some respect for Agnosticism as a logical position; but outright Atheism (which is an unprovable Faith-Claim in and of itself) really has little correspondence with Wenzel's economic views -- which I believe he can prove from foundation to conclusion with a maximum of facts and logic, and a minimum of unproved assumptions.

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    6. Well put Anonymous and Yet Another Anonymous! And I agree that atheism takes more blind faith than it takes Christians to believe in God. If anyone has any doubt, I encourage them to read up on Dr. Randy Guliuzza's "Darwin or Design: The Human Reproductive System". It takes far less faith to believe in a Creator than it does to prove there is none! And Wenzel did an EXCELLENT job challenging the Fed.

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    7. Yet another, other anonymous, in response to "yet another anonymous".

      You should freshen up on your epistemology. The burden of proof is on the believer. I can imagine any number of un-provable things and that does not obligate you to entertain whether they might be true. With respect to confirmable, but not refutable (also called undedecidably confirmable) postulates, having no evidence that something is true is exactly the strongest evidence possible that something is false. One can do no better, due to the nature of induction, which means there is nothing lacking in the atheist position.

      Imagine the assertion that that "there exists a white raven", but nobody in the world has ever seen a white raven (and there is an infinite amount of time for a white raven to show his face). In this case, the strongest statement one can make against the white raven's existence is that no white raven has never been seen. Does this mean that the man who says there is no white raven is wrong for saying so? No, he's converging on the truth at the fastest possible rate, and he will only change his mind if he is forced to change it by the observation of a white raven. The proof you demand is logically impossible to obtain without already knowing the whole of time, and there is no point entertaining the possibility, let alone the consequences, of the existence of a white raven. There are similarly refutable, but not confirmable postulates, such as "all raven's are black", that you would apparently contemplate forever, based on your earlier assertions. Actually, there are an infinite number of these postulates, and perhaps your brainpower is entirely wasted by contemplating them all at once.

      In other words, you don't have any clue what you're talking about. The atheists are correct in the only possible sense of the word, precisely because we're dealing with something, the existence of god, that is purely confirmable, but not refutable, given the effectively infinite nature of the universe and future knowledge.

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  25. Every single point was spot on, from the way you ranked them to the way you framed them. You didn't fool around and went straight for the jugular. Magnificent. I would've loved to deliver this speech at the fed.

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  26. Epic!! Outstanding! Bravo, Robert!

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  27. Epic! Outstanding! Bravo, Robert!

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  28. Phenomenal speech,Robert. I applaud your courage and forthrightness. I will continue following you. You are the Rothbard of the 21st Century. Congratulations on giving the Fed the only bit of truth they will ever hear!

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  29. I have the utmost respect for your fearless delivery of this epic speech in the belly of the beast. Well done, sir. They may scoff and laugh at you now, but it is you who shall have the last laugh. It is at times like these, with people like Bernanke pulling the levers, when economics really earns its keep as the dismal science.

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  30. Wow. As my friend would say, that was a "drop the mic" speech -- a "walkoff" of sorts. Well done, sir.

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  31. So I guess no one jumped out the window?

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  32. Nothing less than historic. Bravo, sir. BRAVO!!

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  33. wow, attaboy rw. its times like this that i need to thank you for the years of education & entertainment. im joining your daily alerts right now, you've earned it many times over. thank you, thank you, thank you.

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  34. There are a few times in our short lives, if we are very, very lucky, that we stand in the presence of true greatness. As I read your remarks, silent tears of gratitude began to flow down my face. Thank you sir for your principled, courageous, heroic act. Let the world know that there are still men of honor walking the earth.

    One of them is Mr. Robert Wenzel.

    I, am Spartacus

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    1. I, am Ron Paul.

      Might have to now add to that...

      I, am Robert Wenzel.

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  35. Between you and Ron Paul, I feel genuinely humbled.

    I need to cinch up my manhood, and fight just a little bit harder!

    Well done, sir!

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  36. Well said! I hope it was a convivial meal. The wine was to your liking.

    I wish it had been videoed for You Tube.

    Cheers

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  37. Great speech, Bob!

    Thanks for doing much, much more than your part to fuel the revolution.

    This could be one of those speeches that we look back on -- Founding Father like -- after the ultimate fall of Leviathan.

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  38. Well done, Bob.

    I guess we can assume that no Fed consulting contract is in the offing?

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  39. Well done Robert.

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  40. Bravo Mr. Wenzel. Bravo. You are a true Mensch!

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  41. To think... the names of Paul, Mises, Hayek and Rothbard echoing from deep within the belly of the beast, right before it's collapse... How fitting. And poetic. I applaud you, sir.

    And as the others have asked, how was this recieved?!

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  42. History will remember this moment.

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  43. How come the MSM won't publish these efforts in their publications or news shows? Because no one there will stand up for the economy and free enterprise system like Mr. Wenzel does, continuously! They would rather buy into the program of the FED and the liberals destroying the country from within, all with their help, of course. 3 cheers for Mr. Wenzal! 3 cheers, sir!

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  44. I take it that Ben Bernanke was busy, and couldn't make it. Ha, Ha.

    I hope that you used appropriate histrionics and oration, like holding out your arms and bowing your head while talking about the gold in Fort Knox, like W. J. Bryan's "Cross of Gold" speech.

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  45. Haha nice! Those crooks won't walk away from that kind of power though. Sure the dollar is a fraud, but billions of people don't know it. The system will keep limping along until they lose faith, and there's no telling when that will be.

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  46. Thrilling to know you spoke to them, and so eloquently. I hope the bastards listened.

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  47. Y E S!!! Brilliant in its simplicity.

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  48. That was better than a slap in the face with a wet fish.
    Kudos and bravo.

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  49. Please tell me there is some type of video of this on youtube or something. I have to hear the silence in the room as you walked out of that room.

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  50. This speech is to be documented as historic and is remembrance to be etched in the history books for generation to come.
    GG

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  51. This wa an excellent speech. What were the faces like in the audience?

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  52. Yes. Mssive money supply run up for a couple years then severe contracton of margin loan rate in the brokerages to cover steadily falling money supply to drive down the US economy bug time once again. The fleecing is now well underway.

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  53. Ron Paul needs to invite RW to speak before his subcommittee and discuss his speech to the FED and their reactions.

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  54. RW,

    That was the reading highlight of my day and I will go so far as to venture saying I believe you've made history. Keep up the great work!

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  55. Probably be a while before your next invite.

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  56. Please, tell me you had someone filming this!!!

    Give 'em hell Wenzel!

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  57. Well said.

    It would be nice to think your rationale might give rise to some genuine introspective analysis at the fed, however I fear the mere mention of the word "Austrian" probably shut them down mentally.

    As others have asked, what reactions & feedback did you receive from others in the room?

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  58. No punches pulled, you ripped em' a big one.

    If I was affilitated with the Fed I would be in a state of shock,
    they have to know how screwed up the international monetary system is and are foaming at the mouth!

    If they let you in to do a speech like this, shows you they know the jig is about up.

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  59. this is...f***ing...awesome. That's all I have to say.

    "The more the plans fail, the more the planners plan."
    -Ronald Reagan

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  60. Very nice. I'm wondering though...why in the world did they invite you to speak? I doubt they expected such a forceful rebuke, but they couldn't have expected you to bow down to their superior ideas.

    Did your house by any chance get robbed while you were there???

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  61. Keep up the good fight. Excellent points. Clear wording. Apt examples. The fed rats probably couldn't understand any of this speech because of the lack of double speak.

    Thank you!

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  62. We stand at a very historic moment when economic armaggedon is already in motion.When its all done the world will not be the same again.The above speech will stand out as a testimony to individual courage in the face of collective amnesia a la Bernanke and his Keynsian mafia.

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  63. Are you still alive? Was there silence? Did you eat the food?

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  64. Bravo! And you know you have to tell your fans something about the reaction soon.

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  65. Simply amazing. You are my hero! :)

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  66. What a speech! Truly courageous!!

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  67. That was quite a lecture heh. I wonder ...... did they even validate your parking?

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  68. There are those, who I call theorists, who believe so strongly in their theories that, when their theories conflict with reality, they chose to alter reality. These are usually academicians who have avoided experience directly, and are avoiding a good study of history. They chose instead to rewrite history, to rewrite laws, to redefine, and to rename, so as to make it look like their theory works. Keynesians are such people and, dare I say that in their arrogance, they believe their theory to be more important than all the gold in Fort Knox. Like with socialists and communists, when failure repeats itself, they will only say that they didn’t throw enough resources at it, and it would have somehow worked with a bigger effort.

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  69. Aren't these people embarrassed about being wrong most of the time. My wife tells me, "If two or more people call you a horse, ya ought to look around and see if ya got a tail."
    Sir, we shouldn't go down that road. The pot holes are more like man holes. It will certainly ruin the car.
    Never mind the car, our job is to keep our job. They're certainly not going to pay us for doin' nothin'. Full speed ahead driver!!

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  70. Spoken like a true American and patriot. Nice!

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  71. Awesome, brave speech!! Tell us about the reaction, the number in attendance, etc. Any booing and hissing? lol.

    And congrats on 10M views.

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    Replies
    1. "Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, SLITHER out of here with me, never to come back."

      Delete
  72. I put off reading this yesterday because of the length. Now, after reading it, all I can say is Wow! I can't believe you were allowed to give this speech to these guys. This took nerves of steel. This would be like being invited to a church to deliver a speech that there is not God. You have to post a followup. I can't believe these guys just sat there without some kind of reaction or at least challenging your ideas. Anyhow, good job!

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  73. Thanks for the credit, RW, but I can't take it for the data collection effort. The others did a fantastic job, though. I did, however, manage to squeeze in a shout out at 12m 30s on this Capital Account appearance re: your speech.

    http://www.youtube.com/watch?v=ENA7jtCt0Vw

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  74. I am passing this along. It is brilliant. You are courageous!

    (Wish there was video of this.)

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  75. One of the greatest speeches I've ever read, especially considering the audience. I hope you give a similar one to Congress.

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  76. That took guts!!

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  77. You are courageous and I can't thank you enough for standing up for what is morally and ethically right.
    If they would only have the guts to take your advice...

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  78. WOW is all I can say. This was without a doubt one of the most courageous speeches to a most inane group of supposed leaders who know nothing other than Keynsian BS. Your honesty and factual diseration was very refreshing to say the least...hopefully some of it sank into their heads, but unfortunately probably wont. I would have loved to have heard their comments after they got up from the floor and what they then discussed wth Ben. Agan, WOW.

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  79. Well, well said, Mr. Wenzel. I am proud to be a reader of your blog.

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  80. Unfortunately I fear that he may as well of been speaking to the four legged rats, as there is no difference in my eyes between them and the two legged rats leading us to economic ruin!

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    Replies
    1. I believe you have just delivered a terrible insult to four legged rats.

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  81. I wish this were true... Sadly, I doubt anyone at the Fed will hear of the article much less read or hear it as a speech. Nicely written though!

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  82. And how WAS the breakfast anyway?
    Just curious...

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  83. Ummm, wtf is the audio or video of this speech? (Video would be great to see crowd reactions). This sounds like an epic situation.

    Also, why doesn't your blog post give a bit of backstory..ie, namely the elephant in the room, h.t.f. did you even get invited to give a speech ther?!?

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  84. Wow! Not that is one fine speech. I would love to see the reaction of those present. Video please.

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  85. Beautifully delivered, Robert! I second the question others here have asked: How was your speech received, and did you get any feedback from the audience?

    I can only imagine that they reacted to this blast of truth either like a vampire reacts to a silver cross, or the way the average Amoricon reacts to reality (i.e., by curling up in a fetal ball and ignoring it).

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  86. Background please! This is brilliant but I can't help thinking it's some kind of belated April Fool's prank. You weren't really invited to the NY Fed to deliver a speech were you? If so whatever possessed them?! Or do you have a "mole" on the inside?

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  87. For those wondering how RW got invited to speak at the NY Fed, watch Bob English's RT interview. 12:30 mark.

    http://www.youtube.com/watch?v=ENA7jtCt0Vw


    Here's the back story to the Richard Peach invite:

    http://www.economicpolicyjournal.com/2012/02/checkmate-new-york-fed-as-totally.html

    Well done, RW!

    Tu ne cede malis sed contra audentior ito!

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  88. Mr. Wenzel,
    My chest inflated with PRIDE as I read your remarks. God bless you for your intellect, the confidence of your research skills, and the strength of your character in being willing to criticize the policies of the Fed. Keep up the good work for ALL of us!

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  89. Thank you for carrying our Standard into the halls of the enemy. When you return to DC there's a bunch of EPJers that would love to buy you a couple beers. You deserve it.

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  90. My simple examples why supply drives demand, not the other way around.

    Supply is like a flower that attracts a bee. Why does the bee go to some flowers and not others? Because the flower uses clever marketing (e.g., color, fragrance, etc.) to entice the bee to take its pollen. The flower has created the foundation for a market with the bee community. If there are no flowers in the area that create pollen (the supply) there will be no market and no economy no matter how many bees there are (the demand). The supply has to exist first before demand can be fulfilled to make a market.

    I sit at home and read my local newspaper. Everyone knows newsprint cannot exist without advertising. Who are the majority of advertisers? Is it consumers asking, "please somebody make a product or service that is good quality and reasonably priced so I can buy it?" No, it's not the consumer i.e., the "demand". It is the creator of the product or service, the "supplier" who through research and innovation creates the potential for a market.

    I might not have had any inclination to make a purchase today but an offer to buy something ("supply") that has a unique use or property and at a reasonable cost will entice me to do so. Even those consumers who place an ad in the newspaper requesting something they are looking for ("demand") are basically searching for the supplier of it to complete the transaction. If the demand is not fulfilled by supply, a market will not be made. You first need supply to make an economy work because it is paramount to demand. The public's demand for a product or service that does not exist does not spur the economy forward. There will be no market and no economy until there is a supply of it.

    Remember the cabbage patch dolls? Initially there was no demand for these toys until clever marketing and sufficient supply and distribution created a market for it with the buying public. As sales dropped off, the public continued to make purchases because the manufacturer lowered the price of the toy to stimulate demand. When the manufacturer no longer was able to make a profit the demand ceased to be in the primary marketplace.

    Now what does the Federal Reserve do to contribute to the economic health of the nation? They create fiat debt, not real money. The Feds believe that offering cheap dollars (the supply) through the commercial banking system to producers and consumers is all that is necessary to stimulate the economy. They don’t understand how a free market economy works. They liken their worthless debt is comparable to a product or service the private enterprise creates, but it’s not. Paper money not backed by something that cannot be counterfeited such as precious metal is transitory in material worth. Its value only exists for the life of a transaction. They ignore the fact that inflating the money supply debases the purchasing power of their debt paper. This flawed philosophy is the reason commodity and retail prices move upward. When a supply of a retail good exceeds its demand the price of that good falls in relation to its value. The same applies to fiat dollars that exceed the production potential of the private economy. The price of money falls along with its value.

    That’s the insanity of the Federal Reserve monetary policy.

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  91. GREAT SPEECH BOB----BUT YOU SEEM TO HAVE FORGOTTEN THAT THE
    ILUMINATTI RUN BANKS--AND THE US CORPORATE GOVERNMENT, WANT
    TO CRASH THE ECONOMY, CAUSE WIDESPREAD MAYHAM, AND IMPLEMENT
    FULL SCALE ---IN YOUR FACE---MARTIAL LAW--(WE HAVE IT NOW--BUT
    IT IS SORT OF INGOGNITO) DON'T BELIEVE ME--GO BACK AND READ
    ALL THE --EXEVUTIVE ORDERS THAT HAVE BEEN PASSED OVER THE LAST
    YEARS. THE (ADMITTED) KENYAN IN THE WHITEHOUSE--IS DOING A
    GREAT JOB---EXACTLY WHAT HIS HANDLERS, WANT HIM TO DO. THE
    WORLD GLOBAL SETTLEMENTS, THE PROSPERITY PROGRAMS, THE CMKX
    3.7 TRILLION DOLLAR SETTLEMENT AGAINST THE NATIONWIDE BROKERS
    (WALL STREET) AND OTHERS, THE NESARA PLAN--ETC--IS THE ONLY
    WAY OUT OF THIS MESS---AND IT WILL HAPPEN SOON---PJ

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  92. Mr. As I was reading this man's closing statement I began to tear up a bit as I was filled with a long lost sense of Pride and Joy as I have begun to think there are no good ones left anymore. After today I can pick my head up and continue the fight because of you Fine Sir. Thank you for your courage and dedication to what is right!

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  93. Mr. Wenzel,

    I have to admit that I had all but given up the fight until I read your speech to the federal reserve. I am proud to know that there are still some good guys still around who have the expertise, knowledge and fortitude to go toe to toe with such an entity. You sir have given me my pride back and for that I thank you.

    God Bless you and keep at it my friend.

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  94. Fourth time trying to post as it keeps eating my message. Short version. Thank you sir for standing up for what is right. I am able to raise my head again knowing there are people willing and able to stand up to the beast.

    God Bless You Sir

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  95. Anonymous said...

    Fourth time trying to post as it keeps eating my message. Short version. Thank you sir for standing up for what is right. I am able to raise my head again knowing there are people willing and able to stand up to the beast.

    God Bless You Sir

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  96. Great speech.

    Unfortunately the vast majority of Americans only want to know who their NFL team is going to take in the draft or what Kim Kardasian is wearing.

    We are doomed.

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    Replies
    1. More like what NFL is wearing and who Kim Kardasian is doing . .

      Delete
  97. Well said sir, thank you for telling it like it is.

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  98. Well done! Please provide an update and let us know what the reaction was, etc. Frankly, I'm surprised you made it out alive. You sir are a true patriot!

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  99. You put them on blast!

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  100. God Bless you and thank you Mr. Wenzel. I notice the term is "Supply and Demand", not the other way around. A related phrase, when corrected to "Invention is the mother of necessity", further illustrates the point.

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  101. I applaud you, sir. However, those in the Fed have no morals or ethics, therefore they will not quit until the country is literally burning.

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  102. A true patriot - Jefferson would be proud

    A videod version would have been great - hopefully they may make a movie of this one day!

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  103. As I already said, thank you for the fine delivery. As Jared Diamond wrote in "Collapse", nations choose whether they fail or succeed.You have done enough to make your way into the historical ledger. We can only hope that your audience agreed with you; then again, I've been wondering where the second civil war was since late 2010, given human proclivities.

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  104. So what are you going to do for an encore? I mean when they invite you back for another speach? They ARE going to invite you back...right? Well, maybe not...

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  105. Sir,

    I hold no great fondness for the Fed, nor respect for their mental abilities.

    Having said that, I would like to comment on your idea around the demand vs production debate as to what drives the economy, as highlighted in your statement, "Do you not believe that products once made will adjust to a market clearing price?”

    There's an old joke about a widget salesman shouting from a stand on the corner, "Get your widgets cheap! I pay $2; you pay $1!"

    After hearing this proclamation for several days a passerby asks the salesman, "Ok, I'll beg the question. How do you make money selling your product for half the price you pay to create it?"

    The salesman bends over to the ear of the questioner and whispers, "Volume!"

    Production without demand leaves you with nothing but "volume."
    Volume seems to be a commodity commonly found between the ears of the Fed, and those who eat with them.

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    Replies
    1. Greg, you need to read Say's law. Eventually, no one works for "money" but or stuff. The more stuff a society has, the richer it is. But if demand existed first, there'd be no starving bums on the street. Imagine you are stranded on a desert island. If you just sit under a rock and demand food, do you think it will appear? You need to produce your own food first by fishing or breaking open coconuts, etc. In a free market producers will stop producing when the sale price of their product falls below the cost of the factors of production.

      Delete
  106. That was awesome. I want to give you a bear hug.

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  107. Heroic, genuine, the time is running out for the moneylenders in the Temple

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  108. I would equally “stand here confused as to how you see the world so differently than I do.”

    All bank crisis ever, have resulted from excessive lending or investing in what was ex-ante perceived as not-risky, and none from excessive lending or investing in what was perceived as risky. And yet you all agree with capital requirements for banks which are much lower when they lend or invest in what is perceived as “not-risky” than when they lend or invest in what is perceived as risky.

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  109. Excellent speech. Tragically, I suspect the entire thing bounced like water off a duck's back. Bernanke & Co are intent on driving America into the ground.

    Love the "four-legged rats" dead pan at the end, too. Classic.

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  110. A magnificent speech, easy enough for me, a non-economist, to understand, and totally enjoyable (except for the harsh realities it repeatedly refers to). My only regret is that you did not take my suggestion and bring Bob Murphy along as the zombie. http://www.youtube.com/watch?v=TrcM5exDxcc

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  111. If you ever visit central Wisconsin, you sir, are an invited guest at my table!

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  112. Great speech! It will stand for posterity along with anoither great speech on the FED by Honorable Louis T. McFadden 1932.
    http://www.afn.org/~govern/mcfadden_speech_1932.html

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  113. I love you for your courage, wisdom and verbal fight with criminal FED. I only wish all media of the world transcript your speech and discuss it loudly. Strange is that everyone knows what the evil FED really is but almost nobody wants to talk about it publicly. Bravo Robert. End the FED !!!

    Lili Brentano

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  114. Lovely speech, it is important work, and yet so long as funding costs for the USA government remain at historic lows, it is unlikely anyone will care...... Japan is an awesome example of a scenario where the government took rates to near zero, held them there.....now for some 20 years.....and the only thing that could have stopped the damage would have been outright refusal to buy JGB's

    The USA has many extraordinary alliances and it is difficult to see where the FED wouldn't continue to change the rules as it goes in order to create another several years of ZIRP while effectively locking rates down on he long end of the curve by acquiring "ASSETS" which are in fact worthless paper liabilities of someone elses.


    www.pamria.com

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  115. I can only echo the very positive comments of the posters. The Fed expected criticism but what they heard must have shocked them to their cores. The truth really hurts sometimes but they have such thick skin, your words will go unheeded o course.

    I was going to point out the ice doesn't freeze at 32, water does but I see it has been corrected.

    Again, one of the best speeches I have ever read. I'd love to see the video.

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  116. I am surprised he could even walk out of that place due to the sheer weight of his balls...

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  117. Excellent Speech. Truth Shines like the Sun!

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  118. Spectacular! This is one for the ages. Every once in a while something happens or someone does something and it makes me deeply proud to be an American. This was one of those times.

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  119. "Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats."

    What a speech! What a man!

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  120. i think the delivery of this speech is history in the making. Congratulations from down under.

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  121. Kudos for venturing into the belly of the beast. It's cute how you pretend that the Fed's purpose isn't to transfer wealth from the populous to the member banks and their political allies (those who are surprised you made it out alive, take note). Hopefully the room was full of recent college graduates who haven't been 'brought in' yet - no doubt they're useful to keep around to write all those papers with illusory constants to maintain the charade.

    Just one suggestion, if you get another opportunity, and for the benefit of those young folk: "and today I'll make a testable prediction: that there will be no sustained return to economic prosperity until The Fed ceases its practice of artificially suppressing interest rates. Be keenly aware of cause and effect, because any easing of rate manipulation will be subsequently described as a reaction to prosperity rather than its cause. But, alert economists will take notice of the proper causality and, even if that's five years from now, when you realize that there is a branch of economics that can make reliable predictions and thereby serve mankind - we'll be waiting for you at the Austrian School."

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  122. Incredible speech. Congratulations and thank you for your work. We would like a youtube video to promote it.

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  123. Phenomenal!! If you sell that speech hard copy I think it would look good next to the declaration of independence!

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  124. That was amazingly great! Too bad there's no video (or is there?) of their faces as they listened to the speech.

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  125. I read the speech. The number of non-sequitur logical fallacies are so great that my first reaction was to wonder if this "speech at the Fed" was just another Internet joke.

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  126. Mr. Wenzel, Excellent speech its about time someone called it like it is. me as a small business owner has been pulling my hair out the last 2 years.(i deal and work with commodities.) it has been the battle of my life.please do the American and the Worlds population and try to get on the mainstream news,ie CNN, FOX, CNBC, local and repeat it in laymans terms so we all know what were up against, thank you for your courage. p.s. what was their response to your speech?

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  127. Hi
    I would love to see audio or video of this event. It sounds too historic to not be recorded.

    Is there one available?

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  128. I have real sympathic concern for the health and safety of the Fed minion who invited Mr. Wenzel to speak at this forum.

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  129. The scheme of money printing run by the Federal Reserve and the other central banks, when combined with a tax on incomes including taxing as income the nominal rise in assets due to money printing, is the grandest embezzlement of private wealth to benefit government in all human history.

    While a growing number of people see this scheme for the plain theft that it is, there is not yet a call for this evil system of government engorgement to be replaced with honest money. But the parasitic engorgement will continue until the parasite kills the host, at which point fiat money will cease to be trusted by anyone who actually creates wealth as opposed to those who are dependent upon living off the wealth of others.

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  130. Not to mention the lack of Constitutional authority to transfer the specifically enumerated power of Congress to a private company like the Federal Reserve Act of 1913 did.

    And when the Federal Reserve creates phony capital gain through currency devaluation, the IRS (courtesy of the Revenue Act of 1913) is there to tax gains that never really occurred.

    1913 was a God awful year. 100 years of moronic monetary policy is enough.

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  131. A truly memorable speech; perhaps one day historians will look back on it and accord it an important place in economic history.
    One thing is already certain though: the war of ideas could use more warriors like you. My compliments.

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  132. There is no gold in Ft. Knox. It was all stolen by Auric Goldfinger back in the 1960s. The U.S. government commissioned Ian Fleming to write a book where the hero foiled the plot in order to cover up what was a successful theft.

    In writing the book Mr. Fleming, who was a fan of JFK, based Pussy Galore on various paramours of the President.

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  133. Why isn't this speech front page news?

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  134. Great speech!
    Though what system would be used in place of the Fed? The Fed sets the bank reserve rate, provides check clearing among other things. Don't we need some of this? If you don't have some way to create money, then won't the public stop spending? If the longer you hold a dollar the more value it has, won't this cause banks to close. Who will lend money, won't consumer demand decline?

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    Replies
    1. You'll still get higher returns putting money in a bank then waiting for natural deflation. If people start hoarding money cause it will be worth more later, banks will raise interest rates to encourage people to open an account.

      'Aggregate demand' may decline, but aggregate demand doesn't equal growth. You need investment for growth, and incentivizing spending over saving like the Fed currently does reduces investment.

      Delete
    2. "banks will raise interest rates to encourage people to open an account."

      Not if the Fed supplies them with money for free. Thats' the whole problem with ZIRP. People aren't compensated by banks for savings.

      Delete
  135. Some comments about what happened afterwards.

    http://mises.org/daily/6028/New-York-Fed-Leave-the-Building

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  136. You must have felt like a vegetarian at a beef growers convention. Interesting, amazing that they invited a non-Keynesian.
    I congratulate you on your courage. Its what true leaders are made of.

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  137. I sent a tweet to Larry Kudlow asking him to interview you on his show to discuss the speech. Do you have a twitter page I can follow?

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  138. In keeping with your "Daniel in the Lying Den" theme, I am reminded of this phrase:

    Mene, mene, tekel upharsin

    Audit the Fed, then end it.

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  139. Excellent thought. Daniel, Judgement Day. Eventually The Almighty looks at the books and decides if each of us are found wanting.

    Ending the Fed as we know it will require a love of the truth, which is inconvenient right now for them. But will the power of the Fed be assumed by Congress as Ron Paul fears? They will show even less discipline as they print money for political rather than fiscal reasons. We could go from the frying pan into the fire with that move.

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  140. Ending the fed is up to "we the people", who must contact their elected representative and DEMAND that this be done. However, knowing how cowardly and ignorant of current events most Americans are, it won't happen.

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  141. This dude is a freaking baller!

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  142. How was the speech received?

    Well, the FED is still open...

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  143. I congratulate you on your courage. Its what true leaders are made of.

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