This is the Cato Daily Podcast for Tuesday, November 26, 2019. I'm Caleb Brown.

During the financial crisis, a decade ago, one name kept popping up,

Badgett.

He's known for Badgett's rule that prescribed how central banks

ought to respond to certain crises.

But there's more to Walter Badgett than that.

James Grant is author of Badgett, the life and times of the greatest Victorian.

For those who are lucky enough to have studied macroeconomics in any level of detail. One name comes up when it comes to how

Central Banks ought to operate more than others, and that is Badgett. And he comes up as having either coined, he didn't

certainly didn't create the practice, but he certainly coined the idea of central banks should be, as it's been shortened,

be lenders of last resort, they should provide capital as it's needed at high rates of interest

to certain borrowers with good collateral and all of those parts are very important.

So how has Badgett's rule performed or has it really been given a chance to

perform in this modern era? Walter Badgett to give the man his full due.

Walter Badgett to give the man his full due. Walter Badgett prescribed exactly, Caleb, what you said he did.

In a crisis, a central Bank ought to lend freely to anyone with good collateral,

solve it to anyone, and at a high rate of interest.

That has been shortened over the course of decades to lend like crazy at a low rate of interest.

That is the modern variant on the Badget Doctrine.

It's impossible really to get a full, fully understand what Badgett was driving at unless you

recall that he was operating in the time with the Gold Standard, the classical Gold Standard. So you lend it a high rate of interest because you

wanted to conserve money. It couldn't just be printed or materialized on a computer screen.

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