Month: June 2014

Guest Post by David Stockman

 The Mythical Banking Crisis and the Failure of the New Deal

The Great Depression thus did not represent the failure of capitalism or some inherent suicidal tendency of the free market to plunge into cyclical depression—absent the constant ministrations of the state through monetary, fiscal, tax and regulatory interventions.  Instead, the Great Depression was a unique historical occurrence—the delayed consequence of the monumental folly of the Great War, abetted by the financial deformations spawned by modern central banking.

But ironically, the “failure of capitalism” explanation of the Great Depression is exactly what enabled the Warfare State to thrive and dominate the rest of the 20^th century because it gave birth to what have become its twin handmaidens—-Keynesian economics and monetary central planning. Together, these two doctrines eroded and eventually destroyed the great policy barrier—-that is, the old-time religion of balanced budgets— that had kept America a relatively peaceful Republic until 1914.

To be sure, under Mellon’s tutelage, Harding, Coolidge and Hoover strove mightily, and on paper successfully, to restore the pre-1914 status quo ante on the fiscal front.  But it was a pyrrhic victory—since Mellon’s surpluses rested on an artificially booming, bubbling economy that was destined to hit the wall.

The Hoover Recovery of 1932

Worse still, Hoover’s bitter-end fidelity to fiscal orthodoxy, as embodied in his infamous balanced budget of June 1932, got blamed for prolonging the depression.  Yet, as I have demonstrated in the chapter of my book called “New Deal Myths of Recovery”, the Great Depression was already over by early summer 1932.

At that point, powerful natural forces of capitalist regeneration had come to the fore. Thus, during the six month leading up to the November 1932 election, freight loadings rose by 20 percent, industrial production by 21 percent, construction contract awards gained 30 percent, unemployment dropped by nearly one million, wholesale prices rebounded by 20 percent and the battered stock market was up by 40 percent.

So Hoover’s fiscal policies were blackened not by the facts of the day, but by the subsequent ukase of the Keynesian professoriat. Indeed, the  “Hoover recovery” would be celebrated in the history books even today if it had not been interrupted in the winter of 1932-1933 by a faux “banking crisis” which was entirely the doing of President-elect Roosevelt and the loose-talking economic statist at the core of his transition team, especially Columbia professors Moley and Tugwell.

The Pre-1933 Banking Failures Were Caused By Insolvency

The truth of the so-called banking crisis is that the artificial economic boom of 1914-1929 had generated a drastic proliferation of banks in the farm country and in the booming new industrial centers like Chicago, Detroit, Youngtown and Toledo, along with vast amounts of poorly underwritten debt on real estate and businesses.

When the bubble burst in 1929, the financial system experienced the time-honored capitalist cure—-a sweeping liquidation of bad debts and under-capitalized banks.  Not only was this an unavoidable and healthy purge of economic rot, but also reflected the fact that the legions of banks which failed were flat-out insolvent and should have been closed.

Indeed, 10,000 of the 12,000 banks shuttered during the years before 1933 were tiny rural banks located in communities of less than 2,500.  Most had been chartered with trivial amounts of capital under lax state banking laws, and amounted to get-rich-quick schemes which proliferated during the export boom.

Indeed, a single startling statistic puts paid to the whole New Deal mythology that FDR rescued the banking system after a veritable heart attack: to wit, losses at failed US banks during the entire 12-year period ending in 1932 amounted to only 2-3 percent of deposits. There never was a sweeping contagion of failure in the banking system.

Milton Friedman’s Huge Error: The Fed Did Not Cause the Bank Runs of 1930-1933

Nor did the Fed’s alleged failure to undertake a massive bond-buying program in 1930-1932 to pump cash into the banking system constitute the monumental monetary policy error that Milton Friedman so dogmatically claimed, and which has become the raison d’etre of contemporary central banking.

In fact, fifty years after the fact, Bubbles Ben 2.0 essentially zeroxed the errors in Friedman’s treatise and got awarded a PhD for this tommyrot by Professor Stanley Fischer of MIT, who Obama has now seen fit to make Vice-Chairman of the Fed. Bernanke then passed himself off as a scholar of the Great Depression and a Friedman disciple, thereby bamboozling the ever gullible Bush White House into appointing a rank money-printer and Keynesian to head the Fed.

Bernanke then proceeded to follow Friedman’s bad advice about 1932 and flooded the banking system with money during the so-called financial crisis, and thereby bailed out the rot on Wall Street instead of purging it as the Board of Governors had the good sense to do in the early 1930s.

But…I digress—slightly!

In fact, it is important to refute the scary bedtime stories that have been handed down about the pre-New Deal banking crisis because they are the predicate for the Fed’s current lunacy of QE, ZIRP and massive monetization of the public debt, which, in turn, enables the perpetual deficit finance on which the Warfare State vitally depends.

The Unnecessary February 1933 Bank Panic: FDR’s 10-Day Fumble

In truth, the banking liquidation was over by Election Day, failures and losses had virtually disappeared, and as late as the first week of February 1933, according the Fed’s daily currency reports, there were no unusual demands for cash.

The legendary “bank runs” occurred almost entirely during the last two weeks before FDR’s inauguration. The trigger was Henry Ford’s vicious spat with his former partner and then Michigan Senator, James Couzens, over responsibility for the failure of a go-go banking group in Detroit that had been started by his son Edsel and Goldman Sachs.  Always Goldman!

The hapless Herbert Hoover secretly wrote FDR begging him to cooperate in resolving the Michigan banking crisis. Instead, Roosevelt failed to answer the President’s letter for two weeks; lost Carter Glass as his Treasury Secretary because the President-elect refused to affirm his commitment to the sound money platform on which he had campaigned; and allowed Tugwell to leak to the press a radical plan to reflate the economy by reneging on the dollar’s 100-year old linkage to one-twentieth ounce of gold.

Within days there was a massive run on gold at the New York Fed and a scramble for cash at teller windows across the land. Unlike historians today, citizens back then knew that the Fed could not legally issue more currency unless it had 40 percent gold-backing—hence the sudden outbreak of currency hoarding.

In this context, the daily figures for currency outstanding give ringing evidence of FDR’s culpability for the midnight-hour run on the banks.  After rising by a trivial $8 million per day in early in the month, cash outstanding rose by $200 million per day by late February and by a staggering half billion dollars on the day before the FDR’s inauguration. All told, 80 percent of the increase in currency outstanding—from $5.6 billion to $7.5 billion—occurred in the last ten days before FDR took office.

Then, even more fantastically, nearly all of the hoarded cash flowed back into the banking system on its own when 95 percent of the banks were re-opened in an “as is, where is” condition during the three weeks after FDR’s inauguration.  Moreover, the mass re-opening scheme was actually drafted and executed by Hoover hold-overs at the Treasury, and had been completely accomplished before the heralded banking reforms of the New Deal and deposit insurance had even had Congressional hearings.

In short, the banking system never did really collapse and the true problem was bad debt and insolvency—not Fed errors or an existential crisis of capitalism.

New Deal: Political Gong Show

Beyond that, the New Deal was a political gong show that amounted to a grab-bag of statist gimcrack. The mild fascism of the NRA and AAA caused the economy to further contract, not recover. The legendary WPA cycled violently between 1 million make-work jobs in the off-years and 3 million make-vote jobs in the election years—-before even a Democratic Congress was compelled to shut it down in a torrent of corruption in 1939.

Likewise, the TVA was a senseless boondoggle and environmental curse; the Wagner Act paved the way for the kind of coercive, monopolistic industrial unionism that resulted in “Rust Bucket America” five decades later; and the legacy of New Deal housing stimulants like Fannie Mae speaks for itself.

Finally, universal social insurance enacted in 1935 was actually a fiscal doomsday machine. When in the context of modern political democracy the state offers universal transfer payments to its citizenry without proof of need it thereby offers to bankrupt itself—eventually.

To be sure, during the middle 1930s, the natural rebound of the nation’s capitalist economy continued where the Hoover Recovery left off— notwithstanding the New Deal headwinds.  Yet the evidence that FDR’s policies retarded recovery screams out of the last year of pre-war data for 1939:  GDP at $90 billion was still 12 percent below 1929, while manufacturing value added was off by 20 percent and business investment by 40 percent.

Most telling of all was private non-farm man-hours worked: the 1939 level was still 15 percent lower than what the BLS recorded in 1929.

How FDR Torpedoed Recovery and Sowed the Seeds of Autarky, Rearmament, Revanchism and War 

So the New Deal did nothing to help the domestic economy. But FDR did personally torpedo world recovery and paved the way toward WWII with his so-called “bombshell” message to the London Economic Conference in July 1933. The latter had been the world’s last best hope for rescue of the failed task of post-war resumption. Specifically, the conferees had shaped a plan for restoring convertibility by means of pegging the pound sterling at a lower exchange rate to the dollar and gold, thereby alleviating the beggar-thy-neighbor pressure on the remaining gold standard countries like France, the Netherlands and Sweden.

In turn, monetary stabilization would pave the way for reduction of Smoot-Hawley instigated tariff barriers and the restoration of global trade and capital flows.

The American delegation led by the magnificent statesman, Cordell Hall, had molded a tentative agreement among the British and French, and thereby had attained a crucial inflection point in the post-war struggle for resumption of the old international order. Yet FDR defied his advisors to the very last man, including the nationalistic and protectionist-minded Raymond Moley, who the President had sent to London as his personal emissary.

Roosevelt’s message, penned by moonlight on the luxurious yacht of his chum, Vincent Astor, was undoubtedly the most intemperate, incoherent and bombastic communique ever publicly issued by a US President. It not only stunned the assembled world leaders gathered in London and killed the monetary stabilization agreement on the spot, but it also locked in a destructive worldwide regime of economic nationalism and autarky.

Accordingly, high tariffs and trade subsidies, state-dominated recovery and rearmament programs and manipulated currencies became universal after the London Conference failed, leaving international financial markets demoralized and chaotic.

The irony was that the Great Depression was the step-child of the Great War.  American entry had unnecessarily extended it; had greatly amplified its destructive impact on the liberal international order; and had contributed a witch’s brew of Wilsonian nostrums to a Carthaginian peace that laid the planking for a new world war.  FDR then delivered the coup de grace,  extinguishing  the last hope for resumption and insuring that autarky, revanchism and rearmament would hurtle the world to an even greater eruption of carnage, and an even more debilitating rendition of the Warfare State.

 Krugman’s Lie: WWII Was Not A Splendid Exercise in Keynesian Debt Finance

World War II soon delivered another blow to the old-time fiscal religion. Not only did that vast expansion of war production fuel the illusion that New Deal statism had alleviated an endemic crisis of capitalism, but it also became heralded as a splendid exercise in Keynesian deficit finance when, in fact, it was nothing of the kind.

The national debt did soar from less than 50 percent of GDP in 1938 to nearly 120 percent at the 1945 peak. But this was not your Krugman’s benign debt ratio— or proof that the recent surge to $17 trillion of national debt has been done before and had been proven harmless.

Instead, the 1945 ratio was an artifact of a command and control war economy which had banished civilian goods including new cars, houses and most consumer durables, and tightly rationed everything else including sugar, butter, meat, tires, shoes, shirts, bicycles, peanut brittle and candied yams.

With retail shelves empty the household savings rate soared from 4 percent in 1938-1939 to an astounding 35 percent of disposable income by the end of the war.

Consequently, the Keynesians have never acknowledged the single most salient statistic about the war debt: namely, that the debt burden actually fell during the war, with the ratio of total credit market debt to GDP declining from 210 percent in 1938 to 190 percent at the 1945 peak!

This obviously happened because household and business debt was virtually eliminated by the wartime savings spree; households paid off what debts they had left after the liquidation of the 1930s depression and business generally had no ability to borrow except for war production. Thus, the private  debt ratio plunged from 150 percent of GDP to barely 60 percent, thereby making massive headroom in the nation’s bloated savings pool for the temporary surge of public debt.

In short, the nation did not borrow its way to victory via a Keynesian miracle.  Measured GDP did rise smartly because half of it was non-recurring war expenditure. But even then, the truth is that the American economy “regimented” and “saved” its way through the war.

Supplementing the aforementioned “voluntary” savings spree were “mandatory savings” in the form of a staggering increase in taxation.  Confiscatory levies on the wealthy and merely onerous taxation on everyone else caused the tax take to rise from 8 percent to a never again equaled 25 percent of GDP.

Compare that to the opposite circumstances of January 2013. Urged on by the Keynesian stimulators and election-minded “progressive” politicians, Obama signed a permanent extension of the unaffordable Bush tax cuts for the “bottom” 98 percent of households at a cost of $4 trillion in added national debt over the next decade. But unlike 1945, this came at a time when household, business and financial sector debt was 260 percent of GDP, not 60 percent.

Yet professor Krugman said don’t sweat it! FDR proved the national debt doesn’t matter. That wasn’t remotely true—but the persistence of this canard amounts to one more nail in the coffin of fiscal rectitude, and still another illusion that perpetuates the nation’s trillion dollar Warfare State.

 Triumph of The Permanent Warfare State

After America’s earlier wars there occurred a swift and near total demobilization: the Union Army of 2 million had been reduced to 24,000 within months of Appomattox, and the 3 million called to arms by Woodrow Wilson was down to 50,000 within a few years of the armistice.

By contrast, the American Warfare State became permanent and self-fueling after World War II. So doing, it both catalyzed new extensions of Keynesian statism and monetary central planning and simultaneously flourished from their rise.

How Truman Lost the Battle To Contain the Warfare State

President Eisenhower famously warned about the dangers of the military-industrial complex in his 1961 farewell, but it was Harry Truman who first felt the sting of its political power. Truman was an old-fashioned budget balancer and made remarkable strides in the immediate post-war years toward traditional demobilization— cutting military spending from $70 billion to $15 billion by 1948 and balancing the Federal budget two years in a row.

Unfortunately, his government was still crawling with warriors—like Admiral Leahey and General Curtis LeMay and civilian hardliners like Secretaries Forrestal and Acheson—-who had thrived during WWII and were looking for new enemies to vanquish. Moreover, the unschooled haberdasher and machine politician from Missouri had made it far easier for them with his deplorable decision to drop atom bombs on an already beaten Japan.

There is now plenty of evidence from the archives of both sides that Truman’s brusque treatment of Stalin at Potsdam (July 1945) based on his “atomic secret” was the catalyst that began the Cold War. Thereafter, Tuman’s unwillingness to over-ride the brass and the hardliners and negotiate international control of atomic weapons—eloquently urged by the legendary statesman, Henry Stimson, in his last cabinet meeting after serving presidents for half a century—assured a nuclear arms race and perpetual cold war.

Indeed, upon Truman’s rejection of Stimson’s plea, another Cabinet participant presciently queried, “…. (so) the arms race is on, is that right?”

Truman famously agreed and insisted “but we should stay ahead”.  Except that he could not both continue the demobilization and stay ahead in the arms race and nascent cold war.

So by spring 1950 Truman had already lost the battle. His government had become increasingly populated with hardliners in response to alleged Soviet provocations.  In fact, fearful of encirclement yet again and Truman’s atomic diplomacy, Stalin was brutally collecting upon his eastern European territorial winnings from Yalta—even as the Republican Right went on a jihad about the “loss” of China.

In that context, the cold warriors led by Paul Nitze at State and the Keynesian professoriat represented by CEA Chairman Leon Keyserling effected a fatal alliance. In that truly insidious policy document known as NSC-68, they proclaimed a Soviet agenda to conquer the world, which was balderdash, and averred that a massive increase in cold war defense spending would levitate the American economy, which was lunacy.

The Pointless “Police Action” in Korea and Full Blast Rearmament

Soon an inconsequential civil war on the barren Korean peninsula between two brutal tyrants became a flash point in the Cold War, causing military re-mobilization and sending the defense budget soaring five-fold to more than $60 billion. Harry Truman, the resolute  budget balancer, avoided a torrent of red ink only by seizing on the moment of domestic fear, when the “chicoms” came flooding across the Yalu River, to re-impose FDR’s  onerous wartime taxes.

In my book, I gave Truman the hero award for insisting that an elective war be financed with current taxes.

But I also give him a villains badge for succumbing to the war-mongers, and for invading Asian rice paddies that posed no threat to American security. Indeed, they might just as well have become a province of China’s “red capitalism”, which both the Keynesians and Wall Street now tell us is an economic cat’s meow.

Thereafter the “begats” went full retard, old testament-style. To be sure, the great General Dwight Eisenhower held-back the tide for a time and had no trouble seeing the folly of a land-war in Asia. So he did quickly end the hideously named “police action” in Korea after 58,000 American soldiers and upwards of a million civilians had been killed. He also had the strategic vision to see the folly of NSC-68, which called for massive conventional military capacity to fight multiple land and air wars all over the planet.

Instead, Eisenhower drastically downsized the army, shelved naval plans for a massive armada of supercarriers, and cut Truman’s bloated war budget from $500 billion in today’s money to $370 billion based on the gutsy doctrine of massive nuclear retaliation and the correct perception that the Soviets were not suicidal.

By decisively throttling the Warfare State, President Eisenhower gave brief reprieve to the old time fiscal religion.  He balanced his budgets repeatedly, refused to reduce Truman’s war taxes until reductions were earned with spending cuts, shrunk the total Federal budget in constant dollars for the last time ever, and over his eight year term held average new public borrowing to a miniscule 0.4 percent of GDP.

The Detestable Dulles Brothers and the Origins of Cold War Imperialism

Yet in his endless quest to economize, Eisenhower carried a good thing too far by delegating cold war fighting to the seemingly low-cost cloak-and-dagger operations of the detestable Dulles brothers. Unfortunately, to this very day the Warfare State flourishes from the bitter harvest planted by the Allen’s CIA and Foster’s bully-boy diplomacy throughout the developing world.

The untoward legacy of the 1953 coup against Mossadeq in Iran is obvious. But it was no less stupid than the Dulles brothers’ senseless assault on Nasserism, which brought the Soviets into the Middle East and turned it into a permanent armed camp.

But the most abominable Dulles legacy was the insanity of Vietnam. Not only did it saddle America with culpability for an outright genocide, but it set-off a string of economic calamities that spelled the final doom of the old time fiscal religion and extinguished what remained of sound money doctrine at the Fed.

In quick sequence, Kennedy gifted Washington’s politicians with the Keynesian gospel of full-employment deficits; Johnson’s guns and butter then engendered a flood of red ink;  and thereafter the White House broke the will and integrity of the great Fed Chairman, William McChesney Martin, thereby busting the financial discipline of the Bretton Woods gold standard with a battering ram of unwanted off-shore dollars.

It was Nixon who committed the final abomination of Camp David in August 1971 by defaulting on the nation’s obligation to live within its means and redeem dollars for gold at $35 per ounce. Adhering to the canons of sound money, of course, would have caused a deep recession after a decade of fiscal excess —and that, in turn, might have spared the nation of Nixon’s horrific second term.

Instead of post-Vietnam Peace, Friedman’s Folly

It also would have put the Democrats’ peacenik wing in power, thereby exposing the Warfare State to an existential challenge at just the right moment— to wit, when it was on its heels from the Vietnam fiasco. But instead of serendipity, we got Milton Friedman’s Folly—-that is, floating fiat money and a central bank unshackled from the anchor of  gold.

Ironically, the great libertarian’s monetary recipe amounted to statist management of our massive capitalist economy. This would be accomplished through the wisdom of 12 monetary eunuchs ensconced in the Eccles Building where they were to occupy themselves playing scrabble and reading book reviews, while occasionally adjusting the money supply dials exactly in accordance with the Friedmanite formula.

It didn’t work out that way. The cowardly Dr. Arthur Burns quickly became a mad money printer and we were presently off to the 1970s races of double-digit inflation. And soon enough there arose the hoary legend that this calamity of central banking was actually caused by high oil prices and the machinations of the former camel-drivers who had recently conquered the oil-rich lands of eastern Arabia.

Thus, thanks to the abominations of Camp David, the Warfare State got two massive boosts which have carried it far toward its current trillion dollar girth.

First, instead of a house cleaning by the likes of Frank Church, Nixon’s re-election eventually brought the Yale skull and bones back to the CIA. There, during his brief but destructive tenure, Poppy Bush rummaged up the neo-con “B team” and paved the way for the massive Reagan defense build-up a few years later.

The B team’s report falsely painted lurid imagery of an Evil Empire bent on a nuclear war-winning strategy, when, in truth, the Soviet Union was already a beached whale of decaying state socialism.

Secondly, Washington went into the misbegotten business of fighting so-called high oil prices by massive policing of the Persian Gulf. This soon evolved into rampant meddling in the region, including military alliances with an endless stable of corrupt sheikhs, princes, emirs, dictators and despots—-with the despicable royal family of Saudi Arabia in the lead.

By the late 1970s, moreover, Washington had become so mesmerized by the Keynesian predicate—that is, the notion that the state must constantly maneuver to levitate the GDP—that it didn’t even know that American prosperity did not depend on carrier battle groups cruising the straits of Hormuz or alliances with despots.

The simple and pacific solution was free market pricing—the sure fire route to new supplies, alternative energy and more efficient consumption. The truth is, there never was an OPEC cartel—just the Saudi royal family, whose greed and intoxication with decadent opulence apparently knows no bounds.

If they threatened to hold-back production, we should have let the global market price work its magic, meaning probably less GDP in 1974 and more by 1994. The intra-temporal distribution of GDP is a matter for the market to decide, not the state. Accordingly, it should never have been an excuse to arm and ally with the sordid despots of Riyadh, nor to keep them on the throne to avert a Shia uprising in the eastern oil provinces.

Twenty million everyday Saudis would have been every bit as eager for the oil revenues as 2,000  gluttonous princes.

Reagan’s Presidency: Final Apotheosis of The Warfare State

Regrettably the Reagan Presidency brought on the final apotheosis of the American Warfare State. The massive $1.5 trillion defense build-up launched without shred of analysis in February 1981 was not only an unnecessary and utter waste, but it also left four legacies that enabled today’s trillion dollar Warfare State, and which now propel the nation on its appointed path toward fiscal bankruptcy.

First, the only politician of modern times who honestly campaigned against Big Government and the national debt was reduced to enunciating pure fiscal babble once in office. Ronald Reagan was so mesmerized by the brass and so bamboozled by the neo-cons’ scary bedtime stories about the Soviets that he not only gave the Pentagon a blank check, but he then proclaimed that there was no deficit problem because the flood of red ink on his watch amounted to necessary and excusable “war debt”.

Secondly, when the national debt skyrocketed from $1 trillion to $3.5 trillion during the Reagan-Bush era, the GOP interred the old time fiscal religion once and for all and proclaimed the modest debt fueled boom of those years as a victory for tax-cutting and the gospel of painless growth. So with two fiscal free lunch parties now in incumbent in the machinery of governance, the Warfare State was unleashed like never before.

Indeed, in due course the fatuous Dick Cheney proclaimed that Reagan proved deficits don’t matter, and then charted the most reckless fiscal course in modern history: massive tax cuts and a doubling of the defense budget during the midst of a Fed induced credit boom that was destined to collapse.

When it did, the Federal deficit surged to nearly 10 percent of GDP—even before Obama’s Keynesian witch doctors got their hands in the public till.

The War Machine the Gipper Built: Armada of Invasion and Occupation

Thirdly, the massive Reagan defense buildup did not go to countering the alleged strategic nuclear threat posed by the Evil Empire because there wasn’t one in the first place, and there was not much to spend it on anyway—-except the rank fantasy of Star Wars which even the Congressional porkers couldn’t abide.

Instead, the Pentagon poured hundreds of billions into a vast conventional war machine, including  the 600-ship Navy and its 13 lethal carrier-battle groups; 12,000 new tanks and armored fighting vehicles; 16,000 fighters, bombers, attack helicopters, close air support and transport planes; and a blizzard of cruise missiles and electronic warfare suites.

All of this soon proved well suited to wars of invasion and occupation in the lands of the unwilling and among the desert and mountain redoubts of the mostly unarmed.

In short, the wherewithal for the pointless invasions of 1991, 2001 and 2003 and all the lesser American aggressions in-between and after was requisitioned during the Reagan defense spending binge to thwart an enemy of liberty that had already failed by eating its own cooking.

Finally, if the truth be told the Reagan White House could not get rid of Paul Volcker soon enough. Doing so in 1987, it removed from what was already a rogue central bank the last vestige of sound money discipline and fearless independence from Wall Street.

Treasury Secretary Jim Baker, a policy descendent of John Connally, wanted low interest rates, a weak dollar and a politically pliant  disposition at the Fed.  Alan Greenspan 2.0 accomplished all of the above and much more, turning the Fed into a pliant tool of GOP triumphalism and Wall Street speculation—even as he spent 19 years in the Eccles Building  institutionalization the destruction of  the very doctrines of sound finance and gold-backed money about which Greenspan 1.0 had written so eloquently before he came to Washington.

Now caught up fueling a repetitive and destructive cycle of financial bubbles and busts, the Greenspan-Bernanke-Yellen Fed has taken monetary central planning into the deep waters of wanton monetization of the public debt.

Under these circumstances there is no fiscal governance—-just an inexorable drift toward monetary catastrophe. In the interim, our senseless and dangerous trillion dollar Warfare State rolls on.

Keynesian statism and monetary central planning  have triumphed, meaning that the American Republic has no remaining fiscal defenses, nor immunities from its extractions.

The good Ben (Franklin that is) said,” Sir you have a Republic if you can keep it”.

We apparently haven’t.