I agree that monetary policy played a role in the bubble, although I actually think fiscal stimulus was a bigger problem over the last two years. More importantly, however, I generally believe in the necessity of central banks mostly because I have read so much about what the United States (and other countries for that matter) looked like when they don’t have one. The wildcat banking was disastrous in the mid-1800s in the United States, and I don’t think that’s something we want to go back to.

With regard to rising US debt levels, I agree with you that it is probably the biggest long-term challenge for the United States — but that is more of a fiscal issue. I get that our reserve currency status enables us to continue doing this to a large degree, but I still think of it as more of a fiscal issue. In researching the last 230 years, the shift in our philosophy on public debt is probably the biggest change that I have seen in U.S. policy. Prior to World War II, the United States increased public debt during wars and then paid it down during times of peace. This is no longer the case and it is one of the biggest problems that I see for our country right now. I don’t know how it gets solved, but I’m pretty sure returning to decentralized, unregulated financial systems is not the cure.