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Jane Knodell

lines on the record: 112
first: 2023-01-02
most recent: 2023-01-02
sittings or episodes: 1
sources: podcast

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“Just go to University of Vermont and look up Jane Nodell, and you'll get to, you know, my page with my contact information. The page is a little out of date, but would love to hear from anyone from email with any follow-up conversation. Thanks so much for having me, Jack. It's really been fun.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Professor, thank you again. It's been an absolute joy. Yeah, people want to get in touch with you, learn more about your work, where can they go? Of course, the book is Second Bank of the United States Central Banker in an era of nation building. But yeah, where can people learn more about your work?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a great question. I mean, I really think we'll look back and say this was a turning point that led to major regulation and rethinking of the how much we're going to Are we going to continue to segregate the mainstream banking system from crypto? Are we going to try to tie crypto in to the banking system that is backed up by deposit insurance and lender of last resort in order to create a more stable environment for everybody? But again, there's a lot of risk in doing that. But if you can't control it anyway, maybe you should try.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Thank you, Professor. It's been an absolute privilege to pick your brain about this stuff. My final question is about the fall of crypto exchange FTX. How do you think mainstream financial monetary historians such as yourself will remember and scrutinize this scandal, which occurred in November 2022? Will it be a minor footnote in financial history? Will it be something that maybe takes up of chapter? Will books be written about it? And what lessons might be learned? What parallels could be drawn?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Are used to shortages and constraints on the supply side. We in the United States and the Western world generally are used to having an abundance of everything all the time. And I think we're moving into a world where that's going to be less true.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. So I think my main critique of the Fed now would be that the 2020s are not the same as the 1980s. And the world economy is more open. And a lot of our problems, inflation sources of inflation today are the supply chain problems. which were not really a problem in the nineteen eighties. In the 1980s it was definitely aggregate demand growing too fast. In relationship to the supply of goods and services, which was growing at a decent clip. But now we've got these shortages of goods and services, supply chain problems, the Ukraine war. So in that setting, when you increase interest rates, you could actually be making some of your supply side problems worse. We don't have a lot of good policy tools to deal with supply. We've, you know, unlike people who've lived in more constrained economies.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so now FedCHAL facing a similar conundrum of inflation being high, and he's raised interest rates drastically and other central banks have followed suit. As a historian, what lessons do you learn from history, let's say, of the 1980s of Volcker about whether it might these efforts to tame inflation might be successful and yeah, what their cost might be.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“But in an overheated economy, we're going to care more about price inflation. And then things didn't go very well in the 70s, which gave rise to Volcker. And, you know, Vilker had to apply. Discipline, if you will relentlessly. and eventually it worked but it only worked by by creating a very deep recession so you can ask when was it worth it”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Ah, that's a great question. I have to look it up a little bit, but I think that really probably after the Treasury Fed Accord. Because before that, if all they're doing is keeping interest rates pegged, there's no that's their job. That's all they're doing. They're buying and selling government securities to keep the interest rate where the government where the treasury wants the interest rate to be. But once it has control over the interest rates, then it's saying, okay, so we're going to we care about full employment and price stability. And that's what we're going to pursue. And that's understanding that at some points in time and points, some points in the business cycle, you're going to prioritize one over the other, right? In a recession, we're going to. Care more about unemployment.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“But today As in, I would say, the gold standard of the national banking period throughout all this period that we've been talking about. If you look at the international monetary stability depends less on are the currencies pegged to something real like gold and more on effective cooperation among the central banks. This is what Eichengreen argues and I think it's a pretty good argument. 'Cause in the history of the gold standard, which is supposed to be so stable, you find all these little stories of crises, you know, the Bank of England is a worry that it doesn't have enough gold, there's going to be a run on it, and the Bank of France ships some gold over. You know, so because they all have a collective interest in stability. And so we need more of that kind of international”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“And when the dollar became the global world standard, is this when you had, when there was a global economic slowdown, the dollar tended, there didn't tend to be a dollar squeeze and foreign currencies weakened against the dollar because they owed money that was often denominated in dollars. So they had to print their currency to pay back loans because the loans were being recalled. And yeah, I guess this was a somewhat more stable system than the 1930s, but it not completely stable.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“And it did because it meant that the US could finance its balance of payments deficits by just printing money, because the rest of the world would be happy to absorb more deposits, whether they're deposits in a London bank or if it's a central bank in Europe, they're accumulating deposits in the Federal Reserve Bank of New York. And there is good as gold, and so That's definitely a privilege that we continue to enjoy, that we benefited from we, the United States, benefited from enormously in the pandemic. and in the financial crisis. Because the rest of the world was really, but if the rest of the world doesn't want to hold seemingly infinite amount of your money, then you are constrained. As a government, as a national government, you can't do as much. As a government that issues the reserve currency, you can cancel.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So Breton Woods, Put the dollar at the center of the International Monetary System. So the idea was we're still going to be based on gold, but it's the dollar that's convertible to gold, and all the other currencies are going to convert to dollars. At fixed prices. the sixth interest rate system the credibility of the system rests importantly on their not being too many dollars in relationship to the amount of gold owned by the US US government. And that basically comes apart in part because of these euro dollars, Vietnam War financing, France. France was like not a, did not love Brettonwoods. They felt that this gave the US an exorbitant privilege, as called it.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. And as you have the Bretton Woods conference, which says currencies should be backed by gold, but What is the ones conference again? And then also, I really want to talk about the euro dollar system, the offshore dollar system, how offshore banks not within the US would be able to essentially create and lend against dollars that they can essentially print from nothing. I know that system is really important. So yeah, Bretton Woods and the Eurodollar system.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, they suspended, you know, so they say, we're not going off permanently, we're just suspending. And there is a it's pretty well agreed that the countries that suspended early recovered earlier because they're able to... Expand their, you know, do more borrowing and spending and bring the economy back.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. But didn't all of them eventually suspend? I think that Britain was the last to suspend, but I think maybe journeys suspended first, then France, then England. So there was a time when no one was convertible, right?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Know if they did that, but the gold is there, you know, to kind of meet claims. Someone says, you know, I've got $20.67, give me an ounce of gold. The US is also moving off and further and further off the gold standard because by eighteen nineteen thirties. The or maybe this is happening later, but at some point you a US citizen could no longer go to the treasury with a ten dollar bill and get gold. So the gold convertibility was just with other countries.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Executive order, they found some authority You know, that he could use as president just to say, you know what, the price of the dollar price of gold is no longer twenty dollars sixty seven cents, it's $35.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right, so if print money means issue banknotes, yes, they could and they did issue banknotes. And there was no in terms of just demand for currency, they meant all the demand for currency. So by nineteen thirteen standards, you know, they were good at what they did in terms of providing currency that was needed. And so currency is different from banknotes because you still have a lot of people who don't have a bank account period of time. And historically policymakers in the United States felt like they needed to be protected a bit more than bank deposits. Because if you're depositing in a bank, it means on average you're a little bit wealthier and you should just choose a good bank to put your deposit in. But the banking panics are ended. In the nineteen thirties, not because of the fad, but because of Roosevelt The banking holiday”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So there are people today, Professor, who have a lot of thoughts about can central banks print money? And they have that question today. My question is, could the Federal Reserve print money in the 1930s? Or did the gold standard constrain their ability to, quote, print money? And I think part of the reason this answer is so hard to come by is because the question, the phrase print money is quite nebulous.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“It could be, yeah, I think that's right. Because Cain saw this problem too. You know, we think of this gold standard as being very stabilizing people that, you know, proponents of the gold standard will say, you know, that brings a discipline to the banking system and to central banks and to governments that is good for price stability over the long run. But it's not so good for this kind of instability, which is related to bank failures and loss of confidence in banks leading to bank runs. The run for liquidity and the stock of gold is basically fixed. You know, in the short run, you can't. All you can do is import from somewhere else, but that's just making it harder for people, you know, in your trading partner.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, I can greenhouse this book called, you know, golden fetters, you know, which. Is internationally. He deals not which is the US, but you know, England.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. So then banks called in their loans from businesses. So then businesses had to pay, so then they could make payroll. And then it's a vicious, vicious cycle. Okay, so yeah, gold standard, it's my understanding that in scholarship, the gold standard is seen as a major cause of the Great Depression. Would you say, number one, that the scholarship is somewhat consistent? And number two, your personal opinion. What do you think about that?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“There's lots of bank failures. I think there are some district reserve banks that are actually providing some good lender of last resort services to and stabilizing their regional banking systems. But But the Fed's hands are kind of tied because we're still on gold. So there's still this requirement to keep maintain some minimum reserve of gold against your notes.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“But it was not a central bank. It had no backing whatsoever. That went under. I suspect that probably may have not been a reserve bank. Yeah, so banks that did not have access to the network of liquidity from the Federal Reserve, they went under. Yeah, I mean, and just the banking panics in the early 1930s, they were severe. Did the Federal Reserve save the banks that were member banks? Because I know so many, there's so many bank failures, right?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“One bank which is covered in the bankers who broke the world by Lia Kwad Ahmed is a bank that tailored to mostly Jewish immigrants who worked in the garment industry. And that bank, just to take a full circle, was called the Bank of the US.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“so they have access to the discount window, which is where you could a bank would borrow for the purpose of addressing a short run liquidity problem. Where the bank fails are happening, those banks are not members of the Fed. The feds kind of like, you know, we're not too worried about that, not our problem, you know, until it is their problem”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Because again the act is amended. So the whole financial history you can think of as when there are problems and instability, there's some kind of legislative response, like political response, ideally. Ideally, it's kind of a rational political response that we're going to, yeah, that was a problem. That didn't really work out. So we have to change things. Now, the problem is you're always fighting the last panic, like the Fed in 1913. Future panic is going to be different. So what's happening in 1929 to 1933 are all these bank failures. And a lot of the failures are happening with these small banks that are not members of the Fed. The members of the Fed are larger, more than kind of the major cities, New York City, you know, all these, you know.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Talk a little bit about the Great Depression. I think it's a good way to kind of like a cornerstone on this because the Federal Reserve is widely thought to have failed during the Great Depression. And that's probably true. But again, it could have been not a problem of bad decisions, but bad rules.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. So that reminds me of quantitative easing where, oh, the Federal Reserve is buying US government debt of treasuries, but it would never buy them from the Treasury issue. It buys them from JP Morgan, who just bought it from the Treasury. It's like one degree of separation. Okay, so that's 1917. I feel like we could talk about the 1920s and the Great Depression, which is so interesting, or we could zoom forward to the present.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So there's okay. So there's. The Federal Reserve is expanding its balance sheet and someone is buying government debt. It's not the Federal Reserve who's buying the debt. We would never allow that. That's, you know, that's off the, we'd never do that. But they're lending to banks so that they can, the banks can buy government debt.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Intermediary So was they after the nineteen seventeen amendments? They're able to lend to member banks. For member banks to loan make loans on collateral of the new debt. Either they themselves, the banks are buying the US government debt and at the same time they're borrowing from the Fed.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“As soon as they started to operate these reserve banks under the rules of the game of the nineteen thirteen Act, they're kind of like there's no way you can run a bank this way. I mean, because some of these people had been in banking, like, you know, Benjamin Strong at Bankers Trust, Paul Warburg at Kuhn Loeb, they're like, this is a crazy way to set up a bank. So they're already like, you know, like the note issue provisions of the Federal Reserve Act are just incredibly arcane and very limiting. It's almost like more limiting than the National Banking Act was. So anyway, so once, though you had to find a way to quickly expand the capacity of the monetary and credit system. Then people started like, okay, well, we can let go of some of these other things we thought were so important back in 1913. And so the Fed becomes a very important”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. So during neutrality, a lot of gold came in to the country. And so the banks were pretty liquid in the sense they had a lot of, you know, this gold, but it didn't mean that they could then necessarily absorb all the debt that the US government was trying to issue. So in June of 1917, there were a bunch of amendments made to the Federal Reserve Act. And you and I were talking about how these are amendments that the leadership”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So it's a specific ratio. There's a recipe, 30% this, 30% that, and there's just a lot of government debt that went on the market. I imagine, though, that amount of US government debt was a small fraction of France, Germany, England. But that's another side. And during World War I, a lot of gold was flowing into America because America was the breadbasket of the world. It was selling all of the machines and industrial, the weapons. Gold was flooding out of Europe because they were borrowing way more money than they ever thought possible to fund the war. So money was flowing into the U.S. So the finances of the U.S. were decent during World War I, but then they did issue a lot. The government issued a lot of debt. So sorry, yeah, yeah, yeah.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“The nose would be issued against government debt, but they also had to hold reserves, you know, gold reserves against the deposits that they issued”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So again, with war finance, you know, you needed some way to float all this debt. And if you compare the debt issue right after the US enters the war in april nineteen seventeen, the size of that debt was of that issue, that just one issue was orders of magnitude larger than any other earlier issuance of debt by the US government. So they were kind of like, I just really don't know how this is going to work, right? And as they're floating that death, they're not really having much success in getting banks to buy it because, as you pointed out, the banks aren't supposed to maintain convertibility into gold. And they're supposed to keep their capital ratios in a reasonable place. Right.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Credit its deposit account. But some, so depending on what the form of what kind of money was actually needed, but they could issue these Federal Reserve notes. But the idea was that currency shortage was over that those notes would be retired. Okay, so I'm actually working now on a paper. I think we were talking about this, that's saying that the Federal Reserve Act itself did not in fact like create whole new plumbing. of the kind that we're used to today where the banks keep all their reserves either directly or indirectly with the Federal Reserve. That's what reserves are. The federal under the Federal Reserve Act, the banks would continue to hold gold and greenbacks and silver, and then they would also hold, you know, some balances with the reserve banks.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so there's all these inelasticities that you refer to, you know, and so the idea behind the Federal Reserve Banks is that they would be a source of currency when there was a shortage of currency. So that's not bailing out a bank. It's saying a bank, it's a place a bank can go to. And as long as it has good collateral and the act defined what kind of paper could be discounted, they would take it to the reserve bank. A member could, and the nationally charted banks had to be members, take it to the bank the reserve bank, they would discount it, again, buy it at a discount from the face value and give the bank either Federal Reserve Notes or”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so first of all, there's nothing in the Federal Reserve Act about like lender of last resort. So the idea was, though, that the panics Up to then mainly happened in the fall when there was a big demand for currency to move the cross. the cotton and the wheat and all stuff. And then when the New York banks didn't have enough currency, because there was a problem with the law and other national banking act in terms of how much currency they could issue. When they couldn't get enough currency, then there was that a bank run, right? Kind of the sense of, oh, so-and-so couldn't get their currency. I'm going to go get all my money out of the bank.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“How would they make loans to those banks? And in what way did it really transform? Did it sort of take out root and stem all of the old plumbing and put in new plumbing where now did banks have deposits with the federal reserve? I know now banks say, oh, I've got half a trillion dollars of reserves with the thing and there's the reverse repo facility. But back then, I think a lot of it was, I mean, all of it was still backed by gold. So how much of it was backed by gold versus backed by the Federal Reserve? And yeah, tell us about sort of the new plumbing.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So that is a distinct feature, completely different from the second bank of the United States and the first bank of the United States, which is to monetize debt. Not didn't really care about being a lender of last resort. In this case, the Federal Reserve wants to preserve financial stability and lend to beleaguered banks. In what way would they do that? And I feel like the plumbing of the Federal Reserve, it's very complicated.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“They made some loans, but what finally ended the panic of nineteen oh seven was the arrival of a One of the European countries and so once the gold came in, again, that's the stock of cash increased, right? You need that stock of cash to increase somehow. And that's what happened. And so a lot of people think that the New York City banks that had been very involved in managing all these panics through the national banking period were kind of ready not to do that anymore. So they didn't put up a big fight to creating a central bank. And I think the smaller banks were more worried about creating the second bank. But certainly the main purpose of the Fed was to prevent these banking panics that had been experienced time and again.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Incredible, yeah. So, and a lot of people think, you know, and that we had national banks had double liability until 1934. They lost it as part of the New Deal, which was kind of like, well, wait a second, maybe that wasn't such a bad thing. And there's some interesting papers about, of course, the reason for it was that if they had, there would be better risk management. But that kind of all assumes that stockholders can really oversee what banks are doing. That might not be true. But anyway, so back to the narrative about the creation of the Fed. It's pretty close. I mean, of course, J.P. Morgan didn't do it all by himself. He organized a group of New York City bankers. And they as a group decided which banks to bail out and which banks not to bail out.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Wow. So yeah, now if I buy a stock in Goldman Sachs, I'm just picking them out of a hat. If I eat the stock's like 300 bucks, if I buy a single share, the most I can lose is 300 bucks back then not true. I could lose 600 bucks”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Correct. Now the deposits you were completely out of luck because the shareholders of national banks had double liability. So when your bank failed, it went into a bankruptcy process and there was a receiver that was set up to collect the assets and distribute them among the creditors of the bank. And among the assets every stockholder, like if you owned two thousand dollars of stock in this bank? You had You had to make four thousand dollars available to the creditors of that bank. Okay?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Okay. And I guess this is a really important distinction that's important all throughout financial history as well as now with FTX of the difference between an asset and a deposit. So if I had deposited money with a, but I didn't know any of this before you said it. So interesting. If I had deposited money, you're saying with a national bank and that national bank went down, I would be left in the lurch. If you, however, owned a banknote of a national bank, you could go to the treasury and you would be safe. So that's like a primordial early form of insurance. Not for deposits, but for the notes.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so just to fill in a little bit of the gaps, after the Civil War, it was a dual banking system because you had the National Banking Act. set up in eighteen sixty three. So now banks could get a charter from their state government or from the national government. And the national banks, you know, were regulated by a new department within the treasury, the office of the controller of the currency. And again, the desire was we want these national banks, we want a national currency, right? We want paper money that is going to be worth the same throughout the country. And those national banks are really ultimately backed up by the federal government, not very well known. Not deposits. There was no deposit insurance. That national banknotes, if your bank failed, you could go to the US Treasury and they will give you face value for it”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Crypto institutions, we now learn he was lending to them with money that he did not have, but he was called the JP Morgan of Crypto, not the bank JP Morgan of crypto, but John Pierport Morgan from what he did in 1907. And the narrative is that the Federal Reserve was started so that you can't rely on a single man to save the financial institution and be the lender of last resort. It shouldn't be a single institution. It should be a, you know, by a private citizen. It should be an centralized entity that is its full-time job is to do this rather than just like the CEO of one of the largest banks. How much truth is there to this narrative and to the extent that it's an overly simplified narrative, what are we missing?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Have the Federal Reserve in 1913. The narrative of the reason why the Federal Reserve was created was there was this financial panic in 1907 where lots of speculators had borrowed money and bought stocks with money that didn't have. The economy was going to crash because all these loans were called in as the stock market crashed and the value of the collateral went down. It was saved by one man, John Pierpont Morgan of the eponymous JP Morgan, who told the bank cashiers to, hey, give them the money, lend it out. And he was the lender of last resort. Interestingly enough, when people earlier this summer referred to Sam Bankman Freed of the now disgraced founder of FTX, they said he was lending to bankruptcy.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT