Glass Steagall bank regulations kept our economy safe for over 50 years. Unfortunately, we trashed those for Clinton’s “Bank Modernization Act”. We need an iron wall between insurance companies and banks, and another iron wall between commercial banks and investment banks. Dirivatives and credit default swaps should be relegated to Las Vegas casinos. Hedge fund creeps should never be allowed their delayed interest income loophole. Those changes would make us a better country, but it probably won’t happen.
The whole banking industry went to Hell in a hand basket when Don Regan (Reagan's sidekick) set up the rules so the gangsters could loot the S&Ls which was the first step in stopping Mom & Pop businesses and first time home buyers from making their way in the world. The next step was to make us dependent on foreign manufacturing for all our needs and Super Stores for all our shopping.
We no longer manufacture anything nor do we provide meaningful work for our citizens. If you are on the inside track, you make money with money. The Rentier class owns most of America except a few blocks in our major cities which are just abandoned. Wall Street and the Stock Market and their financial parasites are all we have left. Just lines in a ledger or Bitcoins in a data stream. Wake up, America. The ship has sailed and you're not on it.
Ironically, the S&L crisis was largely a result of the collapse of the New Deal regulatory framework. The New Deal bank regulatory environment never contemplated double digit inflation and double digit interest rates.
The biggest part of the New Deal framework was a capping of deposit rates at 5% in order to prevent "ruinous competition." This is why you would get a toaster when you opened a savings account - banks weren't permitted to compete, and everyone paid the same rate. That worked until savers could make more in Treasuries and they pulled their money out of the banks. Deregulation was an attempt to prevent the banking system from collapsing due to a lack of deposits.
The banks were deregulated because the regulatory framework was untenable, not because of any sort of "free market" deregulatory zeal.
Banks have been paying almost nothing for interest on savings accounts for several years. The difference now is that they make so much on credit cards that they don’t care about no savings depositors.
My point is that the left has memory holed the "how we got here" part of deregulation. To them, everything was going swimmingly until Reagan came along and upset the apple cart.
Carter (not Reagan) deregulated the banks and it wasn't out of some sort of de-regulatory zeal. The New Deal regulatory framework failed miserably during the high inflation 1970s and almost sunk the banking system.
Because of his background, Carter recognized that farm banks cannot work the same as city banks. If farmers have a couple bad harvests, they need loans that don’t meet city bank standards. What is the alternative?…….letting farmers go broke?
and therein lies the problem. if one farmer has a bad harvest, they all do. and if no one can pay their loans, the bank fails.
But the impetus for banking deregulation was to keep the banking industry alive. Otherwise it would have collapsed as depositors pulled their money out in order to get better returns elsewhere.
Sometime there has to be a storming of the Bastille. Occupy was a sputter. The gassing and beating of protesters at the WTO meeting was a sputter. Trump’s election was a correction. The Jan. 6th protest was a pressure release. When do we finally storm the Bastille?
There is reporting this morning that former Pres. Obama is going to campaign for candidates, including "his party's nominees in some secretary of state races in key general election battleground " states. I guess a state's office in charge of counting the votes is worthy of an appearance by The Chosen One. The ballot box seems to be our final and disappearing bit of power we retain, for now.
Unfortunately, Soros went downballot and targeted DA elections with too much success, (SOS Template). We are living with what happened. If only the MSM would report it. I got my hackles up when Soros and Bloomberg heavily supported De Santis' opponent in FL Governor election in 2018, Gillum back when. I intuitively begn supporting De Santis even though I did not know how sensibly he would eventually govern after winning narrowly. We all know the sad Gillum saga now. Hope he can get his life together. In a Pollyannish way, I hold no malice. It does not help and wastes a lot of positive energy that is best spent elsewhere! :)
Anything that passes on a bi-partisan effort is guaranteed to screw the average public. The BMA led to economic ruination by 2008, and we've never really recovered from the 2008 crash. It's been one bubble after another to hide the fact that our country is in hock to everyone now. That's why our military is a mercenary army that never protects our borders but protects business interests of entities that aren't even American. That's why we shovel money all over the globe. That's not "foreign aid". That's paying the vig.
Glass Steagall didn't envision a global banking market and that is why it had to go. The rest of the world doesn't separate commercial and investment banking, nor does it even draw a distinction.
Had Glass Steagall stayed, "Wall Street" would have meant Barclay's, Nomura, Credit Suisse, and Deutsche Bank as US non-depository banks wouldn't be able to compete.
Totally agree - we all need independence. Probably a lot. How can you rely on trade partners that may apply sanctions and on supply chains that can just fail? Iraq could have treated its own water - basically you need sand and some power. They had engineers - good ones. But they decided on high tech imports and Madeleine Albright has explained the rest.
Right after Goldman Sachs received their bailout ... which they did not need ... and I found out GS was about to pay the money back, I bought some GS stock. Very timely purchase. Although I am not eligible for the Mitch and Nancy Club, it was plain as the eye could see (if you turned the Obedient MSM OFF)!
I had a very long answer for you ... not antagonistic, as I added quite a bit of personal experince which proved your point, since I know a lot of those involved over many years. Unfortunately, I pushed the wrong button and it all vanished (hope the FBI has not "Carter Paged" me, LOL.). Too tired to recreate it all now, 8G. But I am not going away. Enjoy your weekend, ETR! :)
Great interview! The sad reality is that when the fake economy of being close to the literal money printers overtakes the real economy of voluntary transactions of goods and services, the wheels come off the bus -- and the 'leaders' typically respond with even MORE money printing. This is where we've been (or been on the edge of) since 2008.
Edit: People should also remember that in the fall of 2019, the financial system was in serious trouble and the Fed was ALREADY injecting 'liquidity' into the system. Covid was a pretty convenient excuse to flood the system with trillions of dollars of cash. (Of course, only YOUR $1200 check caused inflation)
Great comment! You are probably already familiar with Fabio Vighi's work on this subject, but, if not, he's worth checking out, if only to compare notes. If you don't know Vighi, his writing can be found at the site Philosophical Salon. I'm a bit out of my depth with all of these fancy Fed-funded Ponzi schemes, but over-financialization seems like the multi-syllabical credit default swapstika sign of our times...
Thank you for the link! Fabio's mellow, like not anyone would ever imagine a "Marxist" professor would sound like. He's talking about today, not Karl Marx's imagined day. There's a difference. Funny that they both brought up Baudrillard, who is one of the funniest, and squirelliest (in a good way), post-Modern Frenchies out there. It takes some sense of humor with Baudrillard, who is clearly zooming off thoughts in whatever direction, because he seems to never know what time zone he's in, therefore, his thinkings are pretty fun--even if they are manifestly wrong. Thank you again for the link, Todd
Thank you for the reply. I just watched The Canadian Patriot's Matt Ehret on "Rogue News" channel's "Great Game This Week," which discusses all relevant topics in some detail. Matt Ehret's a Canadian piñata full of great historical info that generally gets glossed over. He makes a compelling case that the British Empire never went away, but merely changed its stripes, or false flag markings. I am not totally on-board with his ideas, but I think he makes a strong case for them, and admire the intellectual enthusiasm, certainly. VGuerilla, who runs "Rogue News," is always hilarious; "Bananastan," indeed! Todd
I’m pretty sure he’s not advocating for austerity like you libertarians want. We should pay for new deal social programs by taxing wasteful financial activities like monopolies, landlord rent extraction, compound interest etc. And stock buybacks should be outlawed.
The problem is the Fed financing wasteful predatory lending not social programs.
I first started trying to learn about the Fed back in 2010 when I first heard Ron Paul calling for auditing the Fed. He rang the alarm in a big way,but the media made him out to be a crank. There are too many times to count when the press has failed the American people. Think of all the good the press could do if they would just be curious, ask questions, and investigate.
IMO, the problem stems from the dual mandate from the 1970s, which tells the Fed to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates"
While these goals are laudable and come from good intentions, the net result has been that the Fed needs to keep the pedal to the metal as long as we are below full employment and inflation (solely as measured by CPI) is behaving.
This means "too much money chasing too few goods" is bad, but "too much money chasing too few assets" is ok.
And this explains the serial bubbles in gold and commodities (late 70s / early 80s), stocks (late 90s), residential real estate (mid '00s) and sovereign debt (now).
The late Fed Chairman William McChesney said in the 1950s that "the role of the Fed is to take away the punch bowl just as the party is getting going." The dual mandate eliminated that role. And the party has been raging ever since.
The ironic thing about this is that the dual mandate was intended to prevent inequality, by forcing the Fed to focus on workers as much as investors. In practice, it did the opposite of what was intended.
The FED blows asset bubbles like kids blow soap bubbles, but the kids know what they are doing. The FED economists just throw money at the problems, they don’t solve them. The bastards were more interested in goosing their stock portfolios than managing the economy. They knew neoliberal economics was a failure in 2008, but they doubled down on a failed framework rather than create a new better economic framework. And, the worst part is all of them fail upwards. They marginalized Hoenig who told them they were basically fools.
"The bastards were more interested in goosing their stock portfolios than managing the economy."
Serious question: Is managing the economy even what these people should be doing?
Maybe the last 15 years provide evidence that bankers and economists should not be managing the economy. Maybe the economy should be run by people who actually produce, and truly know how to produce, goods and services. These bankers. These economists. Mostly useless.
Just a simple surgeon here, but it seemed obvious for years that the FED was pumping to much liquidity into the system. Can’t say I’m surprised by our current inflationary situation. I absolutely LOVED the progressive economic theory that you could print as much money as you’d like. Brilliant!
BTW the real threat to democracy is fraudulent “fortified” elections.
MMT's primary cheerleaders are all products of the system that rewarded them their overpaid consultancy positions. You're right; it's not surprising at all.
Great question. The US govt is way to big and powerful. Whole departments could be eliminated. Cut all other departments by 20% to start. Devolve power to the states. Just for starters
I just "Sent" off an E-mail to Fabio Vighi, who has written quite a bit about the money-printing nonsense, particularly in relation to the Covid crisis, which was clearly used as a "cover story" for printing a crashing market out of crisis--at least for the moment--before reading this interview. So, some order of magnitude synchronicity there. However, I wonder why Mr Leonard would have included Jan 6 in his telling of the tale, unless this was an Editor's insistence issue, playing to the false binary around that event? Jan 6 was at most a mock-coup, and really, not even that, more a stampede of Wal-Mart shoppers (some Sam's Club) than anything else, shepherded by Federal agents as primary instigators (that's a claim, or opinion, but it seems fairly obvious that this was the case). In other words: Where were the guns? I am not in the least a "right-winger," MAGA Republican, Trumper, or anything of that ilk. Trump's obviously a useful faux-Populist, a perhaps unwitting tool of the Elite, himself a quasi-elite, used to discredit dissent of all stripes, whether legitimate or not. So, how does the Fed's QE really relate to Jan 6? Or, maybe the QE policy ultimately conditioned the fake-"insurrectionary" event of note? That correlation needs to be established, if only hypothetically...
Great article! For me the Buck stops @ 27 million more votes than ever before, including the 10 million more for Trump. By the way, I'm less than a month into doing a Substack, which currently is thrillingly known as "Todd's Newsletter." I've haven't figured the bells and whistles available yet, and a month away from getting down to the business of "customizing" my site (vacation). You might find my Substack article "Fourth Reich Biden" (Sept 5) of interest; also my Dissident Voice piece "The Capital Riot: Tourists, Terrorists, or Iranians-in-Disguise, Perhaps?" (February 24, 2021), where I take a unique angle on the issue of Fed involvement in the events of Jan 6 starring everyone's favorite Republican Senator, Susan Collins. Thank you for the link to your article, Todd
I read these interviews and think to myself, 'that Taibbi guy is pretty fuckin smart about a lot of different sectors'
Great interview. Also, even though I have a couple degrees, and had a thirty year executive career in a very complicated sector, I absorbed maybe 10-20% of the content of this interview.
I absorbed it largely because I'd already seen an earlier analysis that covers similar ground regarding the tech bubble bursting in the last few months:
When interest rates are rock-bottom low, deep-pocketed investors can take all sorts of chances on taking out loans and using them to buy stock in various companies all vying to be "the next big thing", because if even 1 of those stocks takes off, that will pay for the interest on the loan and also pay for all the other stocks that went nowhere.
As a result, low interest rates coupled with printing new money both flood the stock market (and land, crypto markets, etc.) with speculation and gambling, which pushes all the prices up. If interest rates are below companies' % target for annual dividends, then it's cheaper for the company to take out loans and buy back stock than it is to keep paying out dividends on those stocks. Those buybacks also drive the stock price up.
So in 3 ways (incentivizing speculative leveraged investing, incentivizing leveraged buybacks, and printing fucktons of new money), the Fed indirectly drove asset prices up into bubble territory, mostly in the stock market but also in land and other investment areas.
Mr. Leonard says this: "there’s a passage at the end that describes January 6th as an insurrection that endangered our democracy."
I am not looking to defend Jan. 6, but by the same token I'm not looking to play pile on.
It seems that Mr. Leonard's work shows, as does Matt's and others, that our democracy is indeed in danger. But that danger seems to have existed long before Jan. 6th. Its perpetrators are never brought before a Congressional Committee or locked in solitary for months while the media paints them as savages. They quietly chisel away at our country unnoticed or, more likely, are obfuscated & shielded by a compliant & cowed news media that finds feeding us a steady diet of crap much more profitable for them than actual journalism.
While I think Jan 6th was a strategic blunder, I also think that the revelation that the fucking FBI buried a relevant news story about a laptop in order to sway an election a much more egregious offense than anything that happened on Jan. 6th. Where's the committee looking at that?
It doesn't matter whether you give credence to Trump's blustering or the idea of 2000 mules, the burying of the Hunter Biden laptop story was election fraud.
And no matter how many times people like Hillary ramble on about how essential it is to "tell the American people the truth," without a functional news media that's not gonna happen anytime soon.
So now all the bat shit crazy talk about hyperinflation may not be as crazy as you think, right? After the Fed breaks the real estate market and the stock market what choice will they have but to print more money than ever before?
And where does all the bat shit crazy talk about The Great Reset take us now? Does it foretell a devaluation of all currencies, or maybe just all Western currencies?
I'm definitely inspired now to read the book, although from the interview I'm not quite seeing the connections. I suppose I'm deficient in understanding the role of lending in greasing the wheels of the upper levels of the economy and exactly how low interest rates necessarily widen the wealth gap. Does it have anything to do with stock buybacks, which were illegal until 1982? Is that a missing piece?
Monetary policy as currently implemented is just one gigantic black box in my life, surrounded by black boxes I can't begin to understand in any useful detail. I can only hope that Leonard's book will serve to pry this one open.
IMO the easy way to think about how Fed Exacerbates wealth inequality via negative real rates is to think of the poor worker (no real assets) literally unable to save any money - treading water, simply eating , paying rent , getting by. But those at the top of the income and wealth scales enjoy cheap borrowing to purchase stocks ,2nd and 3rd homes , land , knowing they will repay these obligations with devalued - ie inflated dollars. Highly recommend you read The Fiat Standard - Saefadean Ammous. - Austrian Economist. Fix the Money - Fix the World.
Exactly. And it's extremely likely that somebody who's poor could ALSO use a huge loan to gain wealth and provide value to the community, but he'll never get the chance because he's a poor risk.
I have been following this the last several years, mainly through market commentary by a fund sponsor, John Hussman, as hussmanfunds.com. But this interview, which makes me want to get and read the book, adds a whole additional dimension to my understanding.
The market has already gone down quite a bit this year, but given the historically unprecedented valuations - price relative to sales, to gross value added, you name it - it has much, much farther to go down.
A LOT of people are going to get screwed VERY badly.
Glass Steagall bank regulations kept our economy safe for over 50 years. Unfortunately, we trashed those for Clinton’s “Bank Modernization Act”. We need an iron wall between insurance companies and banks, and another iron wall between commercial banks and investment banks. Dirivatives and credit default swaps should be relegated to Las Vegas casinos. Hedge fund creeps should never be allowed their delayed interest income loophole. Those changes would make us a better country, but it probably won’t happen.
The whole banking industry went to Hell in a hand basket when Don Regan (Reagan's sidekick) set up the rules so the gangsters could loot the S&Ls which was the first step in stopping Mom & Pop businesses and first time home buyers from making their way in the world. The next step was to make us dependent on foreign manufacturing for all our needs and Super Stores for all our shopping.
We no longer manufacture anything nor do we provide meaningful work for our citizens. If you are on the inside track, you make money with money. The Rentier class owns most of America except a few blocks in our major cities which are just abandoned. Wall Street and the Stock Market and their financial parasites are all we have left. Just lines in a ledger or Bitcoins in a data stream. Wake up, America. The ship has sailed and you're not on it.
Ironically, the S&L crisis was largely a result of the collapse of the New Deal regulatory framework. The New Deal bank regulatory environment never contemplated double digit inflation and double digit interest rates.
The biggest part of the New Deal framework was a capping of deposit rates at 5% in order to prevent "ruinous competition." This is why you would get a toaster when you opened a savings account - banks weren't permitted to compete, and everyone paid the same rate. That worked until savers could make more in Treasuries and they pulled their money out of the banks. Deregulation was an attempt to prevent the banking system from collapsing due to a lack of deposits.
The banks were deregulated because the regulatory framework was untenable, not because of any sort of "free market" deregulatory zeal.
Banks have been paying almost nothing for interest on savings accounts for several years. The difference now is that they make so much on credit cards that they don’t care about no savings depositors.
My point is that the left has memory holed the "how we got here" part of deregulation. To them, everything was going swimmingly until Reagan came along and upset the apple cart.
Carter (not Reagan) deregulated the banks and it wasn't out of some sort of de-regulatory zeal. The New Deal regulatory framework failed miserably during the high inflation 1970s and almost sunk the banking system.
Carter also deregulated the trucking and airline industries.
Because of his background, Carter recognized that farm banks cannot work the same as city banks. If farmers have a couple bad harvests, they need loans that don’t meet city bank standards. What is the alternative?…….letting farmers go broke?
and therein lies the problem. if one farmer has a bad harvest, they all do. and if no one can pay their loans, the bank fails.
But the impetus for banking deregulation was to keep the banking industry alive. Otherwise it would have collapsed as depositors pulled their money out in order to get better returns elsewhere.
Sometime there has to be a storming of the Bastille. Occupy was a sputter. The gassing and beating of protesters at the WTO meeting was a sputter. Trump’s election was a correction. The Jan. 6th protest was a pressure release. When do we finally storm the Bastille?
It has to be changed at the ballot box or the game is up and we lose our Democracy.
There is reporting this morning that former Pres. Obama is going to campaign for candidates, including "his party's nominees in some secretary of state races in key general election battleground " states. I guess a state's office in charge of counting the votes is worthy of an appearance by The Chosen One. The ballot box seems to be our final and disappearing bit of power we retain, for now.
Unfortunately, Soros went downballot and targeted DA elections with too much success, (SOS Template). We are living with what happened. If only the MSM would report it. I got my hackles up when Soros and Bloomberg heavily supported De Santis' opponent in FL Governor election in 2018, Gillum back when. I intuitively begn supporting De Santis even though I did not know how sensibly he would eventually govern after winning narrowly. We all know the sad Gillum saga now. Hope he can get his life together. In a Pollyannish way, I hold no malice. It does not help and wastes a lot of positive energy that is best spent elsewhere! :)
Agreed - the people storming the Bastille didn't have the option of voting; that's what they were fighting for.
Anything that passes on a bi-partisan effort is guaranteed to screw the average public. The BMA led to economic ruination by 2008, and we've never really recovered from the 2008 crash. It's been one bubble after another to hide the fact that our country is in hock to everyone now. That's why our military is a mercenary army that never protects our borders but protects business interests of entities that aren't even American. That's why we shovel money all over the globe. That's not "foreign aid". That's paying the vig.
Grateful that the new BOA mortgage initiative is a "PILOT" program. Makes it sound less like a "Subprime" deja vu but demands looking into .... Oversight anyone? Ahhh the "vig" like in Vegas! https://www.nbcnews.com/business/consumer/bank-america-zero-down-payment-mortgage-first-time-buyers-details-rcna45662
Glass Steagall didn't envision a global banking market and that is why it had to go. The rest of the world doesn't separate commercial and investment banking, nor does it even draw a distinction.
Had Glass Steagall stayed, "Wall Street" would have meant Barclay's, Nomura, Credit Suisse, and Deutsche Bank as US non-depository banks wouldn't be able to compete.
Globalism is not a goal, it is a choice. The more global we become, the less control we have of our own country. Is it good or bad? Time will tell.
Totally agree - we all need independence. Probably a lot. How can you rely on trade partners that may apply sanctions and on supply chains that can just fail? Iraq could have treated its own water - basically you need sand and some power. They had engineers - good ones. But they decided on high tech imports and Madeleine Albright has explained the rest.
Correct on all counts.
Right after Goldman Sachs received their bailout ... which they did not need ... and I found out GS was about to pay the money back, I bought some GS stock. Very timely purchase. Although I am not eligible for the Mitch and Nancy Club, it was plain as the eye could see (if you turned the Obedient MSM OFF)!
I had a very long answer for you ... not antagonistic, as I added quite a bit of personal experince which proved your point, since I know a lot of those involved over many years. Unfortunately, I pushed the wrong button and it all vanished (hope the FBI has not "Carter Paged" me, LOL.). Too tired to recreate it all now, 8G. But I am not going away. Enjoy your weekend, ETR! :)
Great interview! The sad reality is that when the fake economy of being close to the literal money printers overtakes the real economy of voluntary transactions of goods and services, the wheels come off the bus -- and the 'leaders' typically respond with even MORE money printing. This is where we've been (or been on the edge of) since 2008.
Edit: People should also remember that in the fall of 2019, the financial system was in serious trouble and the Fed was ALREADY injecting 'liquidity' into the system. Covid was a pretty convenient excuse to flood the system with trillions of dollars of cash. (Of course, only YOUR $1200 check caused inflation)
https://www.cnn.com/2019/12/18/investing/fed-qe-overnight-lending-market/index.html
https://www.nytimes.com/2019/10/11/business/economy/federal-reserve-treasury-bills.html
Great comment! You are probably already familiar with Fabio Vighi's work on this subject, but, if not, he's worth checking out, if only to compare notes. If you don't know Vighi, his writing can be found at the site Philosophical Salon. I'm a bit out of my depth with all of these fancy Fed-funded Ponzi schemes, but over-financialization seems like the multi-syllabical credit default swapstika sign of our times...
Thanks for the tip! I'm terrible with names and don't recognize it -- I'll be sure to check him out!
Terrific interview with Vighi here:
https://outsidertheory.fireside.fm/monetary-long-covid
Thank you for the link! Fabio's mellow, like not anyone would ever imagine a "Marxist" professor would sound like. He's talking about today, not Karl Marx's imagined day. There's a difference. Funny that they both brought up Baudrillard, who is one of the funniest, and squirelliest (in a good way), post-Modern Frenchies out there. It takes some sense of humor with Baudrillard, who is clearly zooming off thoughts in whatever direction, because he seems to never know what time zone he's in, therefore, his thinkings are pretty fun--even if they are manifestly wrong. Thank you again for the link, Todd
Thank you for the reply. I just watched The Canadian Patriot's Matt Ehret on "Rogue News" channel's "Great Game This Week," which discusses all relevant topics in some detail. Matt Ehret's a Canadian piñata full of great historical info that generally gets glossed over. He makes a compelling case that the British Empire never went away, but merely changed its stripes, or false flag markings. I am not totally on-board with his ideas, but I think he makes a strong case for them, and admire the intellectual enthusiasm, certainly. VGuerilla, who runs "Rogue News," is always hilarious; "Bananastan," indeed! Todd
I’m pretty sure he’s not advocating for austerity like you libertarians want. We should pay for new deal social programs by taxing wasteful financial activities like monopolies, landlord rent extraction, compound interest etc. And stock buybacks should be outlawed.
The problem is the Fed financing wasteful predatory lending not social programs.
Yeah, that was the Fed trying to reduce its portfolio of MBS and Treasuries. Blew up the repo market instead.
I first started trying to learn about the Fed back in 2010 when I first heard Ron Paul calling for auditing the Fed. He rang the alarm in a big way,but the media made him out to be a crank. There are too many times to count when the press has failed the American people. Think of all the good the press could do if they would just be curious, ask questions, and investigate.
RON PAUL 2024!!!
IMO, the problem stems from the dual mandate from the 1970s, which tells the Fed to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates"
While these goals are laudable and come from good intentions, the net result has been that the Fed needs to keep the pedal to the metal as long as we are below full employment and inflation (solely as measured by CPI) is behaving.
This means "too much money chasing too few goods" is bad, but "too much money chasing too few assets" is ok.
And this explains the serial bubbles in gold and commodities (late 70s / early 80s), stocks (late 90s), residential real estate (mid '00s) and sovereign debt (now).
The late Fed Chairman William McChesney said in the 1950s that "the role of the Fed is to take away the punch bowl just as the party is getting going." The dual mandate eliminated that role. And the party has been raging ever since.
The ironic thing about this is that the dual mandate was intended to prevent inequality, by forcing the Fed to focus on workers as much as investors. In practice, it did the opposite of what was intended.
We should disband the FED. It was created to keep the economy from having cycles of booms and busts. It has completely failed.
The most far reaching story of the decade and it struggles to be heard.
The FED blows asset bubbles like kids blow soap bubbles, but the kids know what they are doing. The FED economists just throw money at the problems, they don’t solve them. The bastards were more interested in goosing their stock portfolios than managing the economy. They knew neoliberal economics was a failure in 2008, but they doubled down on a failed framework rather than create a new better economic framework. And, the worst part is all of them fail upwards. They marginalized Hoenig who told them they were basically fools.
"The bastards were more interested in goosing their stock portfolios than managing the economy."
Serious question: Is managing the economy even what these people should be doing?
Maybe the last 15 years provide evidence that bankers and economists should not be managing the economy. Maybe the economy should be run by people who actually produce, and truly know how to produce, goods and services. These bankers. These economists. Mostly useless.
Just a simple surgeon here, but it seemed obvious for years that the FED was pumping to much liquidity into the system. Can’t say I’m surprised by our current inflationary situation. I absolutely LOVED the progressive economic theory that you could print as much money as you’d like. Brilliant!
BTW the real threat to democracy is fraudulent “fortified” elections.
MMT's primary cheerleaders are all products of the system that rewarded them their overpaid consultancy positions. You're right; it's not surprising at all.
What would you do to control the multi-trillion-dollar slush fund that is the government?
Great question. The US govt is way to big and powerful. Whole departments could be eliminated. Cut all other departments by 20% to start. Devolve power to the states. Just for starters
I just "Sent" off an E-mail to Fabio Vighi, who has written quite a bit about the money-printing nonsense, particularly in relation to the Covid crisis, which was clearly used as a "cover story" for printing a crashing market out of crisis--at least for the moment--before reading this interview. So, some order of magnitude synchronicity there. However, I wonder why Mr Leonard would have included Jan 6 in his telling of the tale, unless this was an Editor's insistence issue, playing to the false binary around that event? Jan 6 was at most a mock-coup, and really, not even that, more a stampede of Wal-Mart shoppers (some Sam's Club) than anything else, shepherded by Federal agents as primary instigators (that's a claim, or opinion, but it seems fairly obvious that this was the case). In other words: Where were the guns? I am not in the least a "right-winger," MAGA Republican, Trumper, or anything of that ilk. Trump's obviously a useful faux-Populist, a perhaps unwitting tool of the Elite, himself a quasi-elite, used to discredit dissent of all stripes, whether legitimate or not. So, how does the Fed's QE really relate to Jan 6? Or, maybe the QE policy ultimately conditioned the fake-"insurrectionary" event of note? That correlation needs to be established, if only hypothetically...
I just wrote an article about this you might be interested in! Apologies that it's not nearly as good as your Vighi recommendation. 😄
https://simulationcommander.substack.com/p/bidens-extremist-maga-claims-lie
Great article! For me the Buck stops @ 27 million more votes than ever before, including the 10 million more for Trump. By the way, I'm less than a month into doing a Substack, which currently is thrillingly known as "Todd's Newsletter." I've haven't figured the bells and whistles available yet, and a month away from getting down to the business of "customizing" my site (vacation). You might find my Substack article "Fourth Reich Biden" (Sept 5) of interest; also my Dissident Voice piece "The Capital Riot: Tourists, Terrorists, or Iranians-in-Disguise, Perhaps?" (February 24, 2021), where I take a unique angle on the issue of Fed involvement in the events of Jan 6 starring everyone's favorite Republican Senator, Susan Collins. Thank you for the link to your article, Todd
I'll check them out! Thanks!
I read these interviews and think to myself, 'that Taibbi guy is pretty fuckin smart about a lot of different sectors'
Great interview. Also, even though I have a couple degrees, and had a thirty year executive career in a very complicated sector, I absorbed maybe 10-20% of the content of this interview.
I absorbed it largely because I'd already seen an earlier analysis that covers similar ground regarding the tech bubble bursting in the last few months:
When interest rates are rock-bottom low, deep-pocketed investors can take all sorts of chances on taking out loans and using them to buy stock in various companies all vying to be "the next big thing", because if even 1 of those stocks takes off, that will pay for the interest on the loan and also pay for all the other stocks that went nowhere.
As a result, low interest rates coupled with printing new money both flood the stock market (and land, crypto markets, etc.) with speculation and gambling, which pushes all the prices up. If interest rates are below companies' % target for annual dividends, then it's cheaper for the company to take out loans and buy back stock than it is to keep paying out dividends on those stocks. Those buybacks also drive the stock price up.
So in 3 ways (incentivizing speculative leveraged investing, incentivizing leveraged buybacks, and printing fucktons of new money), the Fed indirectly drove asset prices up into bubble territory, mostly in the stock market but also in land and other investment areas.
Yes, of all Matt's talents, his ability to break down and make clear the financial stuff is his strongest.
Mr. Leonard says this: "there’s a passage at the end that describes January 6th as an insurrection that endangered our democracy."
I am not looking to defend Jan. 6, but by the same token I'm not looking to play pile on.
It seems that Mr. Leonard's work shows, as does Matt's and others, that our democracy is indeed in danger. But that danger seems to have existed long before Jan. 6th. Its perpetrators are never brought before a Congressional Committee or locked in solitary for months while the media paints them as savages. They quietly chisel away at our country unnoticed or, more likely, are obfuscated & shielded by a compliant & cowed news media that finds feeding us a steady diet of crap much more profitable for them than actual journalism.
While I think Jan 6th was a strategic blunder, I also think that the revelation that the fucking FBI buried a relevant news story about a laptop in order to sway an election a much more egregious offense than anything that happened on Jan. 6th. Where's the committee looking at that?
It doesn't matter whether you give credence to Trump's blustering or the idea of 2000 mules, the burying of the Hunter Biden laptop story was election fraud.
And no matter how many times people like Hillary ramble on about how essential it is to "tell the American people the truth," without a functional news media that's not gonna happen anytime soon.
Damn straight. They never heard of "be careful what you wish for."
So now all the bat shit crazy talk about hyperinflation may not be as crazy as you think, right? After the Fed breaks the real estate market and the stock market what choice will they have but to print more money than ever before?
And where does all the bat shit crazy talk about The Great Reset take us now? Does it foretell a devaluation of all currencies, or maybe just all Western currencies?
Or when the petrodollar comes crashing down?
I'm definitely inspired now to read the book, although from the interview I'm not quite seeing the connections. I suppose I'm deficient in understanding the role of lending in greasing the wheels of the upper levels of the economy and exactly how low interest rates necessarily widen the wealth gap. Does it have anything to do with stock buybacks, which were illegal until 1982? Is that a missing piece?
Monetary policy as currently implemented is just one gigantic black box in my life, surrounded by black boxes I can't begin to understand in any useful detail. I can only hope that Leonard's book will serve to pry this one open.
Who gets the big loans, and what do they use the loans for?
Answer: People with lots of money already (or the politically connected), using it to earn more money.
IMO the easy way to think about how Fed Exacerbates wealth inequality via negative real rates is to think of the poor worker (no real assets) literally unable to save any money - treading water, simply eating , paying rent , getting by. But those at the top of the income and wealth scales enjoy cheap borrowing to purchase stocks ,2nd and 3rd homes , land , knowing they will repay these obligations with devalued - ie inflated dollars. Highly recommend you read The Fiat Standard - Saefadean Ammous. - Austrian Economist. Fix the Money - Fix the World.
Exactly. And it's extremely likely that somebody who's poor could ALSO use a huge loan to gain wealth and provide value to the community, but he'll never get the chance because he's a poor risk.
A very important article for our times.
I have been following this the last several years, mainly through market commentary by a fund sponsor, John Hussman, as hussmanfunds.com. But this interview, which makes me want to get and read the book, adds a whole additional dimension to my understanding.
The market has already gone down quite a bit this year, but given the historically unprecedented valuations - price relative to sales, to gross value added, you name it - it has much, much farther to go down.
A LOT of people are going to get screwed VERY badly.
Deeply repulsive war whore Glenn Beck is a grifter and liar. It is astonishing that he is still around -- only in the US.
Nah...not only in the US. Look to Canada, England, France...and a dozen or more smaller players. Grifting and lying isn't only an American obsession.
About strange nude man attack on Pelosi: Paul Pelosi was most likely attacked by a male prostitute
An unavoidable conclusion about Paul Pelosi
1. Assailant in his underpants
2. Paul Pelosi knows his name and tells police he’s a “friend.”
3. Assailant asks “where’s Nancy?” to make sure she’s not home.
4. Pelosi takes bathroom break from spat and makes 911 call
Conclusion: This guy was a sex partner or male prostitute!
End the fed.