Feast of Famine
Last year, the head of the division at my college suggested that I attend with the other economics professor, who always goes to these annual events. Fortunately, the subject of my going this year did not come up when the registration period was open. I would have declined the opportunity, and that would have led to an uncomfortable exchange about matters I would rather not discuss anymore within the halls of academia.
You see, I cannot afford to drive clear to St. Louis, much less can I afford a hotel room. I am sure the school would have offered to pay my way, but I find that untenable: I would be taking money from taxpayers who finance the school; and, far worse, I would be taking money from tuition and other fees students pay. Having the school foot the bill for "professional" trips and other benefits doesn't seem to bother any college teacher I know, but the very thought deeply offends me. I am paid about $24,000 a year to teach courses at a level of quality that won me recognition as Faculty Member of the Year a few years back. My salary is the direct and fair compensation for what I do, and that salary already comes from the wallets of taxpayers and students. I feed at the bloated hog trough of public funds, which come from people who produce goods and services of great and small incremental values to the economy. I provide a derivative service, and I choose to do that where I am protected from the harsh pricing-for-value of free and private markets. That I would expect even greater rewards from the public treasure is, in my judgment, not just unethical, it is immoral. My academic colleagues who have no problem with taking a little extra here and there from department funds might want to take a good look in the parking lots at their schools to see the oceans of beat-up, barely drivable cars kids have; or maybe my fellow professors might want to try the mass transit system some students have to use so they can stand in the freezing cold or the sweltering heat just for the privilege of getting packed into rocking, nauseating buses with all manner of people by day or with the assortment of gang-bangers and mental cases that roam the aisles or sit in menacing silence on the buses at night.
Money for "professional development" comes from somewhere, and that somewhere is mostly from the pockets of people who can ill afford to pay for the fun masquerading as professional expenses of self-indulgent academics whose contributions to society are marginal at best.
Besides, were I to have gone to the meeting in St. Louis, I would have been compelled to cancel two days of classes. I need not watch the Weather Channel to know that Hell is not going to freeze over, so I'm not going to cancel a single class, much less two days of them. As I have told my students on many occasions, even if the Lord Jesus Christ, Himself, were to return in a clap of thunder and a bolt of lightning, I would tell Him to shut up and sit down until class was over. His rapture can wait; my lecture cannot.
Having taken that much-needed aside to storm about the hog trough of public higher education, my fellow economics professor, a conservative fellow still ranting about the outcome of the presidential election, assured me that I would be in his thoughts while he was in St. Louis. I told him that I would like to go because I had some questions for the people at the Fed. He told me that's why, if I did go, he would be sitting on the other side of the room. Although he and other conservative economists frequently tell me I just don't "get it," he avoids discussing economics with me. He knows very well that I am a fierce critic of the Federal Reserve Board and its monetary policy wing, the Federal Open Market Committee. He does not dispute my basis of criticism, although his reserve might be evidence of nothing more than his unwillingness to have me start whipping out charts showing how the Fed single-handedly created the so-called "credit crisis" by trying to prop up the failing economic policies of Bush and his Republican Congresses. I think he also doesn't want to hear me tear down one of his favorite icons, Alan Greenspan, a man so obsessed with politicizing his chairmanship of the Fed that he tried to derail President Clinton's successful economic policies and cover for Bush's catastrophically failed ones before they even began to fail, just to protect the Federal Reserve's power to manipulate the economy through open market operations that had been rendered impossible to carry out when the government stopped running budget deficits.
The Federal Reserve uses Treasury debt securities as the instruments to move money into and out of the banking system to alter the money supply. No Treasury debt securities being issued means no effective instruments the Fed can trade for money with banks. That means the end of the Federal Reserve as a source of economic policy, which it should not have, anyway, considering it comprises a body of unelected, unaccountable individuals who should be dedicated only to the tasks of maintaining aggregate price level stability (preventing inflations and deflations) and regulating and supervising member banks. In his day, former Fed Chairman Alan Greenspan bitched to Congress in the 1990s about "irrational exuberance" of the stock markets so he would have an excuse to start ratcheting up interest rates to kill the economic boom. He was convinced that the federal budget deficits were narrowing largely because of enhanced tax revenues from capital gains earned in the stock markets (a theme even some of my more astute friends seem to take as gospel, these days), so he figured that killing the stock market boom with a historically unprecedented string of discount rate increases would do the trick. All it did, instead, was kill the dot-com boom. Once George W. Bush got into office, Greenspan jumped on board a huge Republican-led tax cut package to deal with a "recession" that actually was not a recession by technical measures (see my article, "The Gospel for Impending Doom" about this and other points I make in this article). That one did the trick: federal tax revenues plunged under government expenditures, and so the Bush era of massive federal budget deficits was born, and that meant the U.S. Treasury was once again pouring out hundreds of billions of dollars in debt securities that the Federal Reserve could then buy up by printing money like there was no tomorrow to cart to the Treasury auctions. Thus was the Federal Reserve back in business as an unelected body with more short-term and long-term control over the U.S. economy than the President and the Congress put together.
Were I to have gone to St. Louis and participated in that very exciting question-and-answer session with the top Fed economists there, I would probably have prefaced my first question with the narrative of that last paragraph, above. It's not that those economists don't know exactly what's been going on, it's just that I would want to make sure they did not think I was too stupid to know how ugly the politicization of the Fed had become during the Bush era. In fact, a former fellow grad student who now works for one of the Federal Reserve district banks told me a few years back that the name "John Maynard Keynes" is not to be mentioned at his office. I thought the guy was joking, but he assured me that he was not. I asked him if he grasped the irony of a cabal of economists who all want to pretend they're conservative, strict monetarists when they're working under a Federal Reserve Board that has turned the Keynesian economics of aggregate demand management into a train wreck exercise in monetary stimulus gone mad. He did, indeed, see the irony, but he's not a man given to humor, so he didn't think it was nearly as funny as I did.
Were I to have been at that question-and-answer session at the St. Louis Fed, having made it past the formalities and preface as outlined above, I think I would have restricted myself to one, albeit multi-part and long-winded, question:
Sir, you let the broad monetary aggregate M3 grow at an increasing rate ever since you declared an end in mid-2004 to accommodative monetary policy. In fact, that measure of money, which includes M2 and M1, grew at such an alarming rate that, by the end of February of this year, it was approaching 20 percent growth on an annual basis. You were doing this in the very same period that you were holding the M1 monetary aggregate the kind of money everyday people and businesses use at a growth rate virtually indistinguishable from zero. In other words, the real economy of working people and productive enterprises was slowly being strangled for actual cash-money to conduct transactions because the real economy was growing at maybe around three percent, which was faster than the growth rate of the money they needed to provide liquidity for their transactions. Yet, at the same time, the monetary aggregate M3, which includes highly illiquid money that only huge financial institutions can turn into liquidity, was skyrocketing. (And, of course, M3 includes both M1 and M2, meaning that the top-end money Eurodollars, massive time deposits, and all of that pseudo-money was growing at a rate even faster than M3, itself, indicates.) So that means, not only was the base economy of the United States being starved of liquidity, but the very top end of the banking system was veritably swimming in a highly illiquid form of it.
So, then, how could all those inordinately large, very sophisticated financial institutions use that highly illiquid form of money that was growing at such a breath-taking rate? Ah, yes: they would have to use it as collateral for something more liquid, sort of like using the title on a car (something very illiquid) as collateral for a cash loan (something very liquid) at one of those quick-and-easy loan stores on the bad side of town. Right? Yes, right.
Oh, my goodness! So, that's why we had this sudden "crisis" in the credit markets with all those bad, bad derivative instruments! Those were the means by which the financial institutions could turn that sea of highly illiquid pseudo-money into real cash-money! And there the Federal Reserve was, letting M3 just grow and grow and grow at an accelerating rate.
And how did you people deal with this madness? Why, you stopped publishing the M3 monetary aggregate numbers in early March of 2006! You stopped publishing M3! By the Spring of this year, the situation was so ridiculous that a few rogue economists, myself included, were screaming our bloody heads off that this madness was about to take the economy down into a death spiral of inflation and recession. Shortly after that well, lo and behold! you Fed folks started ratcheting down the M3 growth rate and started pumping up M1. M3 is still growing at a rate well above 10 percent, though; but hey, at least you answered the phone call from Clueville. Unfortunately, by the time you started to stir from your let-the-banks-have-fun slumber, it was too late: now, we have a full-blown credit crisis in the financial services industry; we have a notional value of maybe $63 trillion in credit derivatives in the toilet that hardly anyone has even mentioned, yet; we have trillions of dollars in greenback overhang that will inevitably come back to bite us as rampant inflation; and now we're going to have a new President who will want the Fed to print money at an even more wildly out-of-control rate to pay for his New-and-Improved New Deal plans.
And as if all of this weren't enough, that President-elect has named the President of the Federal Reserve Bank of New York as his Secretary of the Treasury, and we all know that the Empire Bank is the only district bank with a permanent voting seat on the Federal Open Market Committee, and it's that same New York district bank where the Domestic Trading Desk resides, the DTC being the actual place where the Fed executes its open market operations to alter the nation's money supply. That means our President-elect has put in charge of the United States Treasury the Federal Reserve Board's very own bagman!
Okay, so here's my question, sir: Are you guys cool or WHAT?
If I, a normal citizen, were to have caused hundreds of trillions of dollars of irreparable damage to something I was in charge of protecting; if I, a normal citizen, were to have then tried to cover it up; and if I, a normal citizen, were to have then gone to Congress and said that what I had been responsible for protecting that I instead wrecked must be rescued and that I must be trusted with all the power I had before and more on top of that; if I, a normal citizen, had done all that, I would be sent to prison for the rest of my natural life. In fact, any normal citizen can do a couple thousand dollars worth of damage and go to prison under federal minimum sentencing guidelines. But you guys! you can blow away hundreds of trillions of dollars of economic value by letting huge financial institutions go bananas with pseudo-money you allowed to grow like a wildfire, and here you are sitting pretty down here in old St. Louie preaching your gospel of Federal Reserve propaganda to a bunch of fat-assed, over-paid, academic economists who got their trip here paid for by students and taxpayers.
Again, sir, I ask you: Are you guys cool or WHAT?
Given that security in the Federal Reserve district banks is top-notch, I'm pretty sure I wouldn't have gotten halfway through that rant before big men with lots of weaponry would have been called. These are all civilized people, and there's really no room for some malcontent who obviously doesn't understand the Big Picture, much less who's in charge when it comes to managing the U.S. economy.
The economist who went without me came back with all kinds of glowing stories about how great the whole affair was. He said that the chief economist looked like the very epitome of dork, and he said that the Bank President's speech was inspiring. He also said that the Fed economists who spoke were all very honest and had a lot to say about how much better the Fed has reacted to the current economic crisis than it did to the one that started in 1929.
That sort of got my attention. The Fed economists were comparing the economic crisis happening right now to the events that heralded the coming of the Great Depression?! That's sort of like going to my doctor about a headache and having the fellow start talking about my condition relative to having brain-eating worms. I wouldn't care if he had a favorable prognosis for me: he's finding his basis for assessing my problem in terms of worms eating my brain, for God's sake!
That point escaped my fellow economist. He was intent on telling me about the all-you-can-eat smorgasboard of incredible food the Fed provided for all the attendees at that conference. Apparently, it was simply awesome. They even had a huge selection of alcoholic beverages, including some of the great beers brewed right there in St. Louis. Food and booze for every economist there; and all the back-slapping camaraderie any academic could possibly hope to get with the big dogs of the Federal Reserve Bank of St. Louis.
How could any self-respecting economist come away from a deal like that with anything other than glowing praise for the Federal Reserve system and the dedicated men and women who serve it?
My colleagues are right: I really don't get it. I certainly didn't get the food, the booze, and the free trip to St. Louis; and, most importantly, I didn't get my chance to rip those incompetent, self-serving, destructive Federal Reserve automatons up one side and down the other.
I should have gotten the money together to go to that conference. I could have used my car to get a quick title loan at one of those quick-and-easy loan stores on the bad side of town. Maybe the government would have bailed me out when I couldn't repay. Then again, I think that $700 billion isn't supposed to go to irresponsible people like me.
After all, I can't even afford to drive to St. Louis for an all-you-can eat buffet of delicious food and fabulous propaganda. That makes me irrelevant.
Just like all of you who have read this article.
Welcome to the 21st Century. It's going to be a lot like the 20th Century, except that it's going to get bad a lot faster before it doesn't get any better a lot sooner.
The Dark Wraith will now go to the kitchen to prepare an all-you-can-eat buffet of Ramen noodles with fried Spam. Bon appétit.
Wrote Moody Blue:
Wrote Peter of Lone Tree:
Wrote Dark Wraith:
Wrote Moody Blue:
Wrote Dark Wraith:
Wrote Moody Blue:
Wrote Dark Wraith:
Wrote Dark Wraith:
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Wrote Dark Wraith:
Wrote Peter of Lone Tree:
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