Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America | Danielle DiMartino Booth

Interview transcript of Danielle DiMartino Booth, Federal Reserve, By Alan Olsen, Host of the American Dreams Show.

Danielle DiMartino Booth: I’m a good old-fashioned product of the community college system in this country. I worked my way through school. I ended up with an MBA in finance and knocked on every door on Wall Street until somebody finally relented so I had a wonderful career there. 9/11 changed my perspective and I ended up leaving and using my second masters which was in journalism from Columbia. I’d gone to night school, I was probably the oldest night school student they’d ever seen and I ended up writing in a newspaper in the Dallas in the Dallas Morning News which is where Warren Buffett discovered my writing and eventually Richard Fisher, who was president of the Dallas Fed, learned of my work and he asked me to come join the Federal Reserve and I felt it was my duty to God and country so I did. When he retired, I retired with him and now I’ve written a book called Fed Up. It is it is a primer on financial literacy, it is opening the doors for millions of people and it’s a great source of pride. I also write and blog every week, every day on this mission to really expand improve financial literacy in this country.


Alan Olsen: Can you share some of your thoughts on the recent financial crisis?


Danielle DiMartino Booth: Well first of all I think people should understand that the basis of the financial crisis was created within the Fed. So Alan Greenspan- this came out in his biography- Alan Greenspan was aware of the magnitude of what was building in this subprime mortgage bubble that then became a crisis, but that was neither here nor there. When you were on the inside of the Fed it was DEFCON 1. You absolutely had to do something because we saw the dominos lining up. We knew that the financial system globally was at grave risk of collapsing and we absolutely had to do something to prevent that because things that take Wall Street down inevitably harm those on Main Street much much more. And so at the time it was absolutely the right thing to do when we were in the thick of the crisis and Lehman was going and AIG went right after it but at some point we should have stopped. I mean you spend time and Wall Street as a trader on the floor. I was in sales, and I was introduced back then to the idea of private equity which has now become this mammoth industry that lives outside of the conventional banking system. I started at a firm called Donaldson Lufkin & Jenrette and it was a highly entrepreneurial firm that taught me everything I know about running a business because they let each person work inside of their own silo that was that there. Prior to 9/11, I worked a lot in fixed income in the bond market and so I knew people who came down with that building. One of my sales assistants who was sitting outside actually watched the second plane fly into her father’s floor at Morgan Stanley, now he had gotten out which was a wonderful thing but it there was something about 9/11 that woke up my inner patriot and I knew what I was doing was great for me and it was fun to be single in New York City and have a lucrative career, but it told me that there was a purpose- that there was a deeper purpose for me and I didn’t know what it was at the time. I didn’t know what it was until the Federal Reserve came calling but when that happened I realized that I had been placed in the right place at the right time. 9/11 shifted my perspective. I left about a year after 9/11, moved to Dallas and got married- but I don’t think I’ve missed a month since then, I’m constantly back in my second home, New York City, and it is the city I love and embrace.


Alan Olsen: What was is like to work inside the Federal Reserve?


Danielle DiMartino Booth: Inside it was really like day and night. Trading floors are places where you smell the red meat. You eat what you kill, you are what you produce and you’re only as good as you are today and tomorrow everything the clock resets. I was very surprised when I stepped into the Fed because it was a quiet, sterile, almost hospital like feel. There wasn’t much noise, there wasn’t a lot of soul. Everything moved at a very different pace and I’m clinically hyperactive, I have to move all the time and it was quite a culture shock for me to be in that kind of an organization because I still had to keep moving whereas everybody around me it felt like was in suspended animation. I followed Richard Fisher into the Fed and I followed Richard Fisher out of the Fed. I was not exactly welcome after he left and I had a much different, unorthodox role within the Fed because of him.


Alan Olsen: Can you tell us a little about the role that you had at the Fed?


Danielle DiMartino Booth: Richard Fisher started at Brown Brothers Harriman. He was an MBA in finance, I was an MBA in finance. We were some of the few people in the building who were not Ph.D. academics in economics so we looked at the world through a much different prism. So rather than take all of the markets intelligence from the New York Fed which was tradition among the other districts, he decided that he wanted to have his own markets intelligence. So he had me found his own his markets desk inside the Dallas Fed and sent me off- ferried me off to New York before every Federal Open Market Committee and walked into the room with Ben Bernanke and others armed with his own market intelligence which was much to the chagrin of a lot of people at the New York Fed. I will tell you what I did it was wonderful, I didn’t mind being the person behind the leader because I felt that he was doing something that was so very important in fighting what was going on at the Fed which really was devastating to our nation’s retirees.


Alan Olsen: When Richard Fischer left the Dallas Fed, you decided to step into a new venture, can you tell us a little about that?


Danielle DiMartino Booth: Somebody who had read my book, Fed Up, was inspired by the way I thought, which again is very unorthodox. I don’t think like most people when it comes to economics and finance, so upon finishing the book, he put a call in to me and said, “we are wondering what we could do with the way you think. If we could marry it to the next generation of technology and we think that if we could plug your brain into a supercomputer that we could revolutionize the way research is created and delivered and help out every CEO, CFO, hedge fund manager, mutual fund manager in the country.” and I said, did you say supercomputer, and they said all you have to do is continue thinking the way you think, we’ll take care of the technology end of it and so almost a year later we are in the process of founding Quill Intelligence. The Quill is my written word, and the intelligence is the technology of the future. We cannot deny machine learning, we cannot deny artificial intelligence, but we can learn how to work with it to make something that is more accessible and better for everybody. If I could be cloned by a hundred and read in 396 different languages, what would my capabilities be, what would my views be, what would my analysis be if I’m already a thought leader in the field of economics and finance, what would putting that on steroids do and I think we’re going to find out.


Alan Olsen: What’s your take on cryptocurrency?


Danielle DiMartino Booth: My take on crypto is that because governments have become involved it quickly became a matter of national security. So we know that the three countries that are the most advanced is Venezuela is for starters but that has more to do with China and Russia, the other two countries that are making great inroads into cryptocurrency. I think they have aims of monitoring and controlling what people buy in their countries but by that same token, Great Britain was very quick to come out and say we’ll be right behind you. The Federal Reserve under Jay Powell, who I had tremendous respect for, first non-PhD in economics to lead the Fed since Volcker was in office. They have come out and been very adamant in saying if we do roll out a national cryptocurrency, any transaction that takes place will be just as anonymous as if the two of us were to exchange a dollar bill. We’re not going to monitor our society so I think that the crypto and blockchain technology is a wonderful thing that we can learn from and venture off into the next way we transact.


Alan Olsen: How successful do you think the Central Bank is going to be in intervening in cryptocurrencies?


Danielle DiMartino Booth: I don’t think there’s really a choice in the matter. I think that they’ll have to figure out a way. I know that the next generation of quantum technology is going to be a game-changer in terms of how efficiently crypto currencies behave. I’m no expert, but I don’t really think it’s a matter of choice I think it is something that will have to be figured out whether it’s the Fed, whether it’s Treasury, whether it’s a higher being not, that I want to create more bureaucracy, but we will have to figure it out.


Alan Olsen: Can you give your perspective on the U.S. debt?


Danielle DiMartino Booth: I’m gravely concerned for my children for my grandchildren. It’s one of the reasons I wrote Fed Up and one of the reasons that I became so disgusted with what was going on in this country is that our founding fathers they intended for us to save and invest in the future, not for us to borrow our way to prosperity. It’s not a finite solution and I promise you that our sovereign enemies are paying attention to how we’re trying to grow. I’m very concerned at the direction we’re taking. I don’t think we should be this profligate nation and depends solely on the fact that the dollar is the world’s reserve currency and rest on our laurels based on that indefinitely. The British Pound Sterling did fall and in times of extreme income inequality which we see in our country and populism and divisive enough sometimes the settings that that bring about revolution economically that can sometimes lead to other kinds of revolution the debt situation is a ticking time bomb and I don’t mean to be that I’m not there’s no scare mongering here but it is very unamerican and I hope that we have strong leaders going forward who address it like adults.


Alan Olsen: What’s your take on the tariffs with china and how is it going to affect us?


Danielle DiMartino Booth: I’m beginning to feel like this is a high-stakes poker game that is going to have true ramifications. It was one thing when they were banding about twenty thirty billion dollars it’s a whole different story when you’re talking about two hundred billion dollars in magnitude that is a bonafide trade war and trade wars have often ended in true hot wars and that is really what bothers me. The most you look back in your history it’s terribly inflationary for US consumers as well and jobs will be lost and jobs will be sent overseas. There are tremendous negative consequences to what we’re doing and I’m not so sure that China is necessarily as worried as we think they are because we’re doing this because they’re going to accomplish what they’re going to accomplish. They look at the world through a much different prism, Their level of patience is unlike American politicians and I have serious concerns about where this headed.


Alan Olsen: Why haven’t we seen major reactions to this on Wall Street?


Danielle DiMartino Booth: Well what we have seen is a major reaction to this in the bond market and one of the things that has been a hallmark of the current volatile year 2018 has been after 2017 was the year of complacency one of the hallmarks is that the bond market has been very steadily advertising that things are going wrong. Well the stock market in a very bumpy way is advertising the opposite so these things will be rectified, we just don’t know how but right now the bond market is flashing a very distinct signal that this going to slow the US economy. When Alan Greenspan took office and started allowing the markets to be manipulated under his watch, it’s documented, I’d like to see us go back to a more normal world where one market reflects where we’re headed and another market reflects the opposite- they’re supposed to move inversely to one another. I’m not so sure that the investing community is prepared for that, it’s interesting because it’s been over 30 years and this whole generation has grown up without seeing this. There are 13 million new entrants to the financial services industry since 2007, it’s safe to say there’s an entire generation that doesn’t even know what a rational bond market behave on market behaves like.


Alan Olsen: How should average person prepare for the next crisis?


Danielle DiMartino Booth: If there’s one thing that is improved over the last 12 months or so, it’s that there’s no longer a stigmatization associated with holding cash. You can actually put your money into cash and make a decent return. You don’t have to be exposed to these markets, there’s no hard fast rule that says as long as you’re diversified and you’re invested for the long haul that you’re going to be fine. I have grave concern for the baby boomers because I think the next big market correction that we have is going to be a body blow to this generation the last time this happened a decade ago they were able to make the decision, they live longer, we’re all living longer, they were able to make the financial decisions, stay in the workforce for another decade. I don’t think that it’s going to be the same for baby boomers as they segway into their 70’s. I think the optionality is lower, so again there’s nothing wrong with getting a return on cash at all. Though I did a study a few years back on demographics and of course in the U.S. the big person preaching demographic trends is Harry Dent, yes cult followers of him.


Alan Olsen: How does a person get signed up for your blog and connected with you.


Danielle DiMartino Booth: Just go on Quill Intelligence.com and you’ll see everything you need to know about me and all of our offerings and how you can begin your journey to financial literacy.


Edited for Concision

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This transcript was generated by software and may not accurately reflect exactly what was said.

Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

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    Danielle DiMartino Booth on Alan Olsen's American Dreams Radio
    Danielle DiMartino Booth

    Danielle DiMartino Booth is a global thought leader on monetary policy and economics. She is the author of FED UP: An Insider’s Take on Why the Federal Reserve is Bad for America (Portfolio, Feb 2017). FED UP rose to #22 on Amazon’s Best Seller List.

    DiMartino Booth founded Money Strong LLC in 2015. Through her economic consultancy, she has published a weekly newsletter for 140 consecutive weeks. Her writings are regularly featured on Linked In, Seeking Alpha, Nasdaq, Talk Markets and dozens of other websites. In affiliation with Quill Intelligence, DiMartino Booth also publishes a weekly newsletter subscribed to by institutional investors.

    DiMartino Booth is a full-time columnist for Bloomberg View, a business speaker, and a commentator frequently featured on CNBC, Bloomberg, Bloomberg Radio, Fox News, Fox Business News and other major media outlets.

    Prior to Money Strong, DiMartino Booth spent nine years at the Federal Reserve Bank of Dallas where she served as Advisor to President Richard W. Fisher until his retirement in March 2015. She continues to research, write and speak on the financial markets, focusing recently on the ramifications of credit issuance and how it has driven global fixed income, equity and real estate market valuations. Sounding an early warning about the housing bubble in the 2000s, DiMartino Booth has earned a reputation for making bold predictions based on meticulous research and her unique perspective honed from years of experience in central banking and on Wall Street. DiMartino Booth began her career in New York at Credit Suisse and Donaldson, Lufkin & Jenrette where she worked in the fixed income, public equity and private equity markets. DiMartino Booth earned her BBA as a College of Business Scholar at the University of Texas at San Antonio. She holds an MBA in Finance and International Business from the University of Texas at Austin and an MS in Journalism from Columbia University.

    Bio sourced from dimartinobooth.com

    Alan Olsen on Alan Olsen's American Dreams Radio
    Alan Olsen

    Alan is managing partner at Greenstein, Rogoff, Olsen & Co., LLP, (GROCO) and is a respected leader in his field. He is also the radio show host to American Dreams. Alan’s CPA firm resides in the San Francisco Bay Area and serves some of the most influential Venture Capitalist in the world. GROCO’s affluent CPA core competency is advising High Net Worth individual clients in tax and financial strategies. Alan is a current member of the Stanford Institute for Economic Policy Research (S.I.E.P.R.) SIEPR’s goal is to improve long-term economic policy. Alan has more than 25 years of experience in public accounting and develops innovative financial strategies for business enterprises. Alan also serves on President Kim Clark’s BYU-Idaho Advancement council. (President Clark lead the Harvard Business School programs for 30 years prior to joining BYU-idaho. As a specialist in income tax, Alan frequently lectures and writes articles about tax issues for professional organizations and community groups. He also teaches accounting as a member of the adjunct faculty at Ohlone College.

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