Happy 245th, America. What did we get you for your birthday?
Well, everyone’s (least) favorite Amazon founder is primed to go all Life on Mars (or as my daughter calls him, “Jeffery Bagels”), America’s formerly favorite TV dad – the pudding-poppin’, handsy octogenarian – is inexplicably free and we can count nearly 200 Americans shot over July 4th weekend (as fireworks take too much patience?).
But in reality, these cases of indulgence and idiocy only directly affect a fraction of the populace. Meanwhile, there’s one heaving economic golem lurking behind the stage, pulling our Chinese-made purse strings as our financial fates hang in precarious balance. And its gross negligence and denial could spell doom for all Americans.
I’m speaking, naturally, of the Federal Reserve.
The world of money is forever shrouded in fancy language, so much so that us simple-minded laymen are often too eye-bleedingly bored to begin to grasp it. Instead of breaking through the density of the jargon, we should be grateful to have any currency.
Akin to the high priests of centuries ago, the world’s financial wizards of today have the same sales pitch to the public that the clergy hocked: You don’t understand this shit. Only we’re literate enough to interpret the good word (or the CPI report).
I’m not sure if you remember books, America, but it’s what people used to sink their faces into to avoid dealing with family and strangers. Our editor-in-chief, P.J. O’Rourke, has written a few in his time, and he’s re-releasing his bestselling Eat the Rich, complete with a new chapter to take on the absurdity of 2021 economics. And as an American Consequences subscriber, you can have access to the newly released edition for free! Claim Your Copy Now.
And just as medieval Europeans requested indulgences (loans) and begged for forgiveness (debt) from the Vatican, we’re meant to believe that only bankers and economists can manage the fickle flame that is the Prometheus’ fire we call money.
But anyone can read the Bible. Or take an econ class. God, like money, is an elaborate fiction meant to keep us in our place while striving to work toward something or serve someone. And both mind a ledger, keeping track of dollars and souls as humanity hums along.
And now, the gods of the Fed are convincing us Americans that they know what’s best for us with an economic landscape bordering on Apocalypse Now.
Pent-up demand is scorching a summer-spending surge. Oil may reach $100 a barrel by the fall. Bitcoin’s seeming inevitability but constant volatility and the proliferation of meme stocks muddy the markets.
Meanwhile, our stimulus-injected economy has national debt eclipsing our GDP, while rising inflation and low interest rates warn of a potential crash by the end of 2021.
But let’s go back.
Jekyll and Hyde
The conception of the Fed transpired in 1910 at the not-at-all-ominously-named Jekyll Island Club, a posh coastal Georgia resort. Who was in the room? Attendees included representatives for JPMorgan, Nelson Rockefeller’s grandfather, and economic luminaries of the time. The Internet would dub this an Illuminati meeting now – if you can imagine Warren Buffett, Mark Zuckerberg, and Elon Musk all hopping on a call using the new video-chat platform Lucifer’s Plaything.
These early-20th-century oligarchs convened in secrecy in the wake of the Panic of 1907 (it seems we’re always having these). They dreamt up a national central bank, imagining a beast that controlled the U.S.’s money and credit supply while offering a smash-in-case-of-emergency Hail Mary option for overleveraged, at-risk financial institutions.
Now, in a Schoolhouse Rock sort of way, think of the Treasury as America’s accountant – making the Fed our national money manager (or investor). When they leverage national debt, it’s an expensive way of saying, “Yes, you can borrow that, Beijing.”
But the Founders made no mention of a Federal Reserve. It’s a relatively recent invention, born out of crisis-induced reactionary measures. And the Fed always monopolizes the headlines when America’s financially hemorrhaging, be it with its big-bank bailout of 2008 or its post-pandemic printing press now.
Fed officials had one pandemic chorus throughout the COVID economic dip (unlike the CDC’s back-and-forth). The Federal Reserve ensured full-on-liquidity-injecting mode until the health calamity passed us. Waiting until the crisis curdled into our collective traumatized consciousness, lost but not forgotten.
Low interest rates. Stimulus checks for everyone. $120 billion in monthly bond-buying. America’s finances were on fire. So, the Fed broke the glass, pulled the alarm, and flooded the market with capital.
But now, as we’re in this post-COVID age, central bankers seem lost in the discord of disagreement about how to move forward. There’s increasing division in the Fed regarding its response to the self-induced wounds of soaring asset values and commodity prices.
The Federal Reserve operates under the dual mandate of dampening inflation and minimizing unemployment. By its own litmus test, it’s failing. And worse, it’s in denial.
It’s not Tesla, Ford, Nikola, or any name you know. Get the full story on this $4 stock set up to profit due to the supercharged electric vehicle market.
Fed Chair Jerome Powell tacitly acknowledges that inflation is now a possibility. It’s also possible for me to be a congressman, but as the Facebook trolls will remind me, that ain’t happening.
Powell’s trying to hush an understandably panicked America in the backseat, like a booze-soaked dad on a bender, swerving the puke-green wood-paneled station wagon on Route 66, careening off the Grand Canyon while slurring to his kids that Disneyland’s coming up soon. Are we there yet?
Bank on It: Reserving a Place in Hell
Whether the Fed pulls its emergency support too early or too late for our economy is a moot point.
The economic pain is coming – it’s just a matter of when and how much. But this is always the case. The life cycles of money are just that – cyclical.
From the Great Panic of 1907 to the financial crisis of 2008 to the clusterfuck we find ourselves in now, we have an uncanny capacity to be awestruck every time this happens.
And yet it happens, every time. Nearly every American decade is marked by a recession. While every boom needs a bust and every life a death, we should stop referring to the inevitable as an emergency and call it for what it is: nature.
A proper libertarian believes that free markets are capable of self-correction in times like this. They’d scoff at the mere existence of the Fed: a private-public bastard stepchild who wields all the monetary power of Oz. They’d roll their eyes at this obscene centralization of banking still around a century later, noting that if bitcoin is any indicator, money is moving toward being further decentralized, put in Americans’ hands without the unholy gatekeepers in the way.
Distilled to tweet length, the Fed is an unsightly marriage of power-drunk bankers and politicians (with a winking academic’s approval) designed to enrich their self-serving interests.
If we have to serve someone or something, let it be ourselves. And while money may be fiction (it’s real enough), it’s time this country writes another narrative.