You have persistently called for higher interest rates. Why?
You know, there is a great emphasis now within the Federal Reserve on consumer protection. And I think a nice way to protect the consumer is to give the consumer a rate of return on his or her savings greater than zero. The great paradox to me of the Fed's obsession with consumer protection is that the one thing it can control— that is to say, its own federal funds rate—is stuck very close to zero.
Is it an elite policy? Are they doing it off Ben Bernanke's study of the Thirties, which stressed saving the financial institutions but not savers?
I am not sure I would call it elite. I think I would call it misplaced. I'm not sure Chairman Bernanke has any greater love for JPMorgan (JPM) than he does for the average saver. Maybe there are only six or eight savers in America left, in which case he is playing to a much bigger constituency on Wall Street.
Why can't we just do what we need to do—let banks fail, let housing prices reach their right level, allow foreclosures to run their course—and get things moving again?
In the depression of 1920-21, the Fed actually tightened, exactly what the Fed is not doing now. That depression was brutal, but it was over in 18 months. Today, by refusing to let markets clear, by refusing to say "let's just see where prices would be in the absence of meddling," what we do is prolong the agony. We are stuck with the Japanese approach.