I'm John Bachelor with John Cochran, senior fellow at the Hoover Institution.

He's in Palo Alto, California, where it's a balmy day as it always is in wonderful California.

He's an adjunct scholar at the Cato Institute, author of the fiscal theory of the price level,

and also of an op-ed recently in the Wall Street Journal that

flabbergasted me and I'm glad I can say this to you John. Never, never have I heard

anyone praise the Federal Reserve, especially this Federal Reserve.

What did they do right on?

Well, I tell you, it was Christmas,

and I've written lots of op-eds critical of the feds.

I felt, you know, say something nice once in Waffle. And they have done something, which I think is. something

and they have done something which I think is is very good.

It's kind of under the radar screen

but they get a lot of criticism for it.

So reserves are accounts that banks have at the Fed, and that's the really the money, the most important money in the US.

Banks use that, for example, if I write you a check, then the banks clear that by transferring reserves at the Fed.

The Fed started paying interest on reserves and allowing banks to have enormous amounts of these reserves.

They used to have like 10 to 50 billion, Now they have 3,000 billion. Just immense quantity

reserves. This was very controversial. Lots of people thought it will give you hyper-inflation.

It doesn't. It's worked beautifully. So interest on reserves and lots and lots of reserves

are a great system.

It's made the financial system much safer

because banks that are sitting on reserves at the Fed

...