- If you want to understand America’s dangerously deepening travails, you have to start at the Federal Reserve’s Eccles Building.
- How do we get 50 million unemployed… the stock market at record highs… companies trashing their balance sheets to buy back stock and do vastly overpriced M&A deals… doctors and politicians savaging the economy and the livelihoods of millions… and Washington going incontinent on the fiscal front? The answer is simple: the rapidly-spreading dysfunction is rooted in the giant financial fraud embedded in the Federal Reserve’s $7 trillion balance sheet.
- Even if you believe that a regular infusion of money is needed to catalyze the wheels of capitalist growth (we don’t), there is absolutely no economic logic that says the central bank’s balance sheet should grow by orders of magnitude faster than GDP over an extended period of time.
- During the past 17 years, the Fed’s balance sheet has risen to 983% of its starting value, even as GDP has risen to only 192%.
- It turned the financial and economic world upside down. That’s because the effect was to systematically suppress the cost of debt and speculation and drastically inflate the value of financial assets. As a result, everyone got false price signals and changed their behavior accordingly:
- Wall Street investors became leveraged speculators;
- Corporate business builders become financial engineers;
- Middle-class households became debt slaves living hand-to-mouth on borrowed money; and
- Washington’s politicians became free lunch spendthrifts piling on public debt like there was no tomorrow.
The Fed is now a rogue institution that comprises a clear and present danger to the future of prosperity and liberty in America.