In November 2008, Rahm Emanuel, then Chief of Staff to President Obama, famously stated, “Rule one: Never let a crisis go to waste. They are opportunities to do big things.”
Emanuel’s comments came during a time when he sought to utilize the 2008 financial crisis as a chance to tap into the public treasury. The subsequent passage of the American Recovery and Reinvestment Act in February 2009 was a dream realized for Emanuel—an opportunity to implement significant changes.
Politically, the Recovery Act was a monumental success. Washington was empowered to disburse funds for favored projects on an unprecedented scale. For congress members, directing large sums to infrastructure, healthcare, energy, security, law enforcement, and more was a golden opportunity.
Some members even allocated funds for bridges and buildings bearing their names, a gesture that may have flattered their egos while simultaneously serving as a lasting symbol of their political maneuvering. Continue reading
Clear and careful thinking regarding the convoluted nature of current economic policy can lead to various stress-related physical ailments. A constant state of disbelief might result in dry eyes and slumped shoulders, while a healthy dose of skepticism could leave its mark with anxious furrows on one’s brow.
Yet, these small discomforts are a small price to pay for the amusement that arises when a central planner makes an offhand remark. Recently, Fed Chair Janet Yellen delivered a speech at the annual central banker meeting in Jackson Hole, Wyoming, where she commended herself and her peers for what she views as a successful implementation of financial regulations:
“The events of the [2008] crisis demanded action, and necessary reforms were executed, making the system safer.”
However, the basis on which Yellen asserts that these reforms have enhanced safety remains ambiguous. Continue reading
On a seemingly typical Monday morning, Senate Majority Leader Mitch McConnell appeared to be in a less than favorable mood. Who could blame him? His summer holiday had come to an abrupt end, and President Trump had been putting considerable pressure on him all month.
Furthermore, McConnell had to get up early and don a suit—an act resembling that of an ordinary employee. While many of his congressional colleagues enjoyed their summer recess, McConnell had pressing matters to address that could not wait for Congress to reconvene on September 5. He was scheduled to stand with Treasury Secretary Steven Mnuchin to publicly demonstrate unity in his home state of Kentucky.
Following a social media incident involving a dismissive comment made by Mnuchin’s new spouse and Mnuchin’s subsequent visit to Fort Knox to assure that the “gold is secure,” it was finally time for business to commence. Together, McConnell and Mnuchin held hands and confidently proclaimed that the U.S. government would raise the debt ceiling and prevent defaulting on its obligations. McConnell even made a bold statement: Continue reading
This week marked a notable milestone in the collective pursuit of financial stability among the American populace. According to a report released by the Federal Reserve Bank of New York, total U.S. household debt has soared to an unprecedented $12.84 trillion during the second quarter, reflecting a staggering $552 billion increase from the previous year.
This marks the second consecutive quarter in which U.S. household debt has reached a record high. This achievement is significant for a number of reasons.
First, it indicates that U.S. household debt is on the rise again, reverting back to its upward trajectory that persisted uninterrupted from the end of World War II until the onset of the Financial Crisis in late 2008. Second, it suggests that, similar to the S&P 500, new record highs are being reached with remarkable consistency. Could this be mere coincidence?
Most likely, it’s not coincidence at all. It is probable that the substantial amounts of liquidity injected by central banks into the financial system over the past decade have fostered an environment of cheap credit, propelling both stock prices and household debt levels to new heights. Continue reading
