When I refer to Fed chairman Powell or to the Fed governors, collectively, as morons, I’m not suggesting that readers take this characterization literally. Indeed, most of them have IQs that are probably twice the 51-70 range that would categorize a person clinically as a moron. (It is only when casting aspersions on politicians, some of whom demonstrate persuasively and often that their IQs are in the 26-50 range, that the term “imbecile” may be construed literally.)
To give economists their due — even economists like Powell and ‘Easy Al’ Greenspan, who were elevated to positions of leadership by, mostly, political imbeciles — the men (and woman: Janet Yellen ) who inventively script U.S. monetary policy are intelligent and well-schooled. It is only when they attempt to bend their knowledge toward the running of the economy that we see clear evidence of impaired thinking. How else to characterize the moronic idea that the more we borrow, the richer we become? And yet, so devoted are economists to this crackpot idea that they would set it aside only temporarily when it appears to beckon disaster. They tighten, that is, only to set up the next stage of easing. This has been the Fed’s MO since the central bank was created in 1913 as an instrument financiers could use to steal from the rest of us without detection. The ruse has succeeded to a degree that even the greediest of them may never have imagined, but at the cost of creating increasingly devastating boom-and-bust economic cycles over the last hundred years.
We’re All Bozos
We are all complicit, to be sure, since the Fed is able to ‘manage our expectations’ only because tens of millions of Americans think and act like economic morons. For instance, we borrow against inflated home values to buy worthless college degrees for our kids. And we factor those grotesquely inflated prices into our retirement plans. We continue to elect like-minded politicians who act as though we will never have to repay tens of trillions in debt that has piled up in the public and private pension systems, as well as in Medicare and the Social Security System. And we pretend that ‘forgiving’ $1.8Tr in college loans will have no economic consequences or an impact on lenders who would have to eat every penny of the loss.
Like all Ponzi schemes, the epic fraud that has buttressed our economic lives and the illusion of vast prosperity for decades will continue to work as long as asset values are inflating. But, as the ruinous outcomes that befell Bernie Madoff, Sam Bankman-Fried and their victims attest, the delusion that the financial systems is solvent cannot persist forever. Globally, the daisy chain of superleveraged debt from derivatives exceeds two quadrillion dollars. Even someone with an IQ of 80 would recognize that there is something gravely wrong when a $200 trillion global economy requires a banking edifice ten times that size to support it. An epiphany awaits, and don’t kid yourself if you think the balance sheet will settle via hyperinflation in favor of debtors. A hellish debt deflation is coming, and it needs only the catalyst of a bear market in stocks to come bearing down on us full-force.