As bad as things seem, I’ll have to say I feel privileged to live in a culture that can produce books like The Lords of Easy Money. The new book by Christopher Leonard is what I consider a real treasure to a rich culture. After reading it, it spawned in me an insatiable appetite for solving some of our modern problems, and right there in those pages, everything was clear to see. I took last week off everything essentially to read an additional 12 books of all types of wide-ranging subjects connected to the subject of the Federal Reserve and the history of Banking in America and the Constitutional problems that are part of it. I think I slept 3 hours last week as my reading list was very aggressive. Good books are better than sleep to me. We’ve all talked about this before, but never has there been a writer who was able to put their finger on the problem quite like Christopher Leonard has. For me, it was the big block in the puzzle that put everything else together, and I feel greatly enriched by it. Because of it, I am much more inclined than I was before toward the banking policies of Andrew Jackson as he let the charter expire for the second attempt to put centralized banking in charge of our central government. These subjects are too complicated for our news reporting, so they never get talked about, yet the corruption at play here is mind-blowing, and it is there that we must focus on in the future if we want to save our nation. I’ll have a lot to say about this book in the months to come, but for now, we’ll talk about the tip of the iceberg.
The problem starts with the American Constitution and Alexander Hamilton and his debates with Thomas Jefferson over the merits of centralized banking. Hamilton’s interpretation comes from Article 1 Section 8 at the very end, “to make all Laws which shall be necessary and proper for carrying into Execution and Foregoing powers, and all other Powers by this Constitution in the Government of the United States, or in any Department or Office thereof.” In other words, if the government thinks it needs it, it can have it. This is also why the duel between Aaron Burr and Hamilton should have happened on the day before Jefferson and Hamilton had this discussion. Hamilton’s argument opened the door to the kind of crazy lunacy regarding fiscal policy that we see today. Lucky for us, we have had great presidents, such as Jackson, who fought this battle before. It has taken a lot of time for the crooks and thieves of Wall Street and politics to become emboldened to the level they are now, to rob openly, loot, steal, and sell out our country in the fashion that The Lords of Easy Money articulates. But make no mistake about it, Christopher Leonard is not arguing against the Fed. He is, in fact, a Democrat. He’s not at all crazy about the Tea Party movement or President Trump. He wants the system to work. He actually makes an excellent argument for the Federal Reserve. Still, in the research he conducted, which went on for years, the actual Federal Reserve regional bank president Thomas Hoenig out of Kansas, Missouri, where this real glimpse into the problems of the Federal Reserve came to light and is the heart of the whole book.
The Federal Reserve has a consistent problem because it functions as many school boards do or any government that emphasizes consensus rather than dissent and argument. In the case of the Federal Reserve, all the bank presidents who end up on the FOMC (the Federal Open Market Commission) consist of 5 appointed positions; the other seven are rotated among the regional bank presidents. There is always one permanent seat for the Federal Reserve Chairman and another for the New York Federal Reserve. Around 2010, when Fed Chair Ben Bernanke began a policy of quantitative easing to deal with the crash of 2008, the only person on the FOMC committee to vote against it was Thomas Hoenig, which was embarrassing for Bernanke. They had always had consensus up to that point, at least what they showed the public. But Hoenig felt that the policy was dangerous, and he continued to vote that way until he retired eventually. But the Fed ignored his vote and kept the policy going anyway until things really exploded out of control after Covid came and did its damage, which is our present problem. The most obvious problem that comes to mind with this arrangement is that all the members have PHDs from socialist-oriented schools where Marxism is heavily studied. So they all think the same way. Thomas Hoenig was considered a soft “r” Republican, but they all essentially thought the same way about fiscal policy. The value of something was supposed to need Fed action for it to be useful. Rather than dealing with what elements of the economy create value, such as free people able to function and produce, the Fed believed that all activity was more or less fixed. It was their job to manipulate interest rates or print money to inspire growth. When you have 12 people who all think the same way on these matters, you will get what you are going to get.
In reaction to the housing bubble bursting in 2008 and the election of the socialist Barack Obama, who put tight controls on economic behavior, Ben Bernanke, then Janet Yellen, then Jerome Powell would turn to what they call ZIRP (zero interest rate policy) to flood the market with cheap money and to build up a massive asset bubble that Wall Street could count on a “Fed Put” strategy to bottom out the risks on an asset pricing strategy. For instance, to inspire the buy-up on all those risky mortgages after 2008 for which BlackRock became so wealthy, the Fed boosted the purchase with a public-private partnership that removed much of the risk by pumping up the potential losses with the money supply. There has never been a restoration to normal on the Fed’s balance sheet. What started as a mess on that balance sheet of 900 billion in inflated assets in 2009 ballooned to 4.5 trillion by the end of 2019. Now, after Covid, the balance sheet is at 8.2 trillion as of this writing, and it’s going up every month by 120 billion with no signs of an end to it. So now we have an asset bubble that is poised to burst at any moment, and the smoke and mirrors of the political arrangement between Congress, Wall Street, and the Fed is out of control and explains a lot of why major investors are putting so much effort into pumping up the Chinese economy. They are trying to hide the money they have gained during all this in a new economy for their own preservation. The whole situation truly is a mismanaged disaster. Of course, if money is all you care about, and you want to protect what you’ve built, China suddenly doesn’t look so bad. Why is everyone so upset over their human rights violations and communist central government?
But the first step is in understanding it all. I never was, and I’m not now a person who will say we shouldn’t have a Fed. There needs to be a way to manage the money of society. As I said in the video above, with space exploration coming on fast, spikes in the gold standard and other precious metals will need to be managed through a stabilized currency. But when you create something like the Fed and put a bunch of people trained in Marxism in charge of it, well, you get the failures of Marxism as a result. Rather than have people running these banks who actually understand the value of labor and how to apply it to actual assets made by the human mind, instead, they have created a bureaucratic nightmare that is poised to blow up out of this artificial asset bubble that they have made at the Fed and will cause significant harm to all the people who depended on the Fed to do the right thing. And in doing that right thing, Thomas Hoenig has told his story of how painful it was, which is the point of the excellent book, The Lords of Easy Money. This has been the smokescreen nobody wants to talk about, behind nearly every news story that they hope you never find out about—until it’s too late.