Throughout history, the allure of quick fixes and miraculous cures has captivated many. Who wouldn’t wish for a universal remedy to eliminate every ailment or discomfort? This desire has led some of the most brilliant minds to embrace dubious solutions for over two millennia.
Take bloodletting, for instance. From ancient times until the late 19th century, this practice was widely used to treat a vast array of ailments, including acne, asthma, cancer, epilepsy, gout, indigestion, insanity, leprosy, pneumonia, scurvy, and tuberculosis. Remarkably, it was even applied to address excessive bleeding.
The process was relatively straightforward. A surgeon, often a barber, would make an incision in a vein and drain blood from the patient in the belief that it would restore health. The underlying theory suggested that a sick person could be bled back to health, and inducing faintness through bloodletting was even seen as beneficial. Unfortunately, the outcomes were frequently disastrous.
On December 13, 1799, George Washington returned home after a cold winter ride with a sore throat and opted for bloodletting to treat it. Over ten hours, approximately 126 ounces of blood were drawn from him. The next day, the treatment achieved flawless success; Washington never dealt with a sore throat again. Unfortunately, his “cure” meant that he had passed away.
Wouldn’t a simple remedy like honey and lemon have been a better choice for his throat? While less potent, it certainly wouldn’t have resulted in such a permanent outcome.
Curing a Debt Problem with Credit
One might think that after millennia of failure, the practice of bloodletting would have been abandoned. Yet, it persisted well into the 17th century when doctors began to recognize its harmful effects. So why did it continue for another 200 years?
The answer appears to be a reluctance to confront their limitations. Despite a robust understanding of human anatomy, physicians were often unable to offer effective cures for numerous diseases. Thus, the prevailing belief was that it was preferable to administer bloodletting rather than leave a patient untreated.
Today, while many diseases still lack cures, significant advances have been made. Physicians no longer consider bloodletting a viable treatment option; only a charlatan would endorse such a barbaric practice.
Regrettably, the same cannot be said for modern monetary policy. We find ourselves under a regime characterized by blatant quackery. What else could explain the recommendation of ever-increasing credit expansion as a solution to a debt crisis?
This continuous increase in credit forms the backbone of today’s chaotic, debt-based fiat system, akin to the misguided approach of attempting to bleed a patient back to health. Such practices ensure a prolonged and painful decline.
Fed Quack Treatments are Causing the Stagnation
Recently, Fed Chair Janet Yellen, seeming to retract her 78-month strategy for the United States’ monetary policy, expressed some doubt. Remarkably, this was the well-crafted plan she had presented just last week, and it appears she may have reservations already.
During her speech at the National Association for Business Economics in Cleveland, Yellen remarked:
“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-term inflation expectations align with our inflation objective, or even the underlying forces driving inflation.”
“While we believe inflation will likely stabilize around 2 percent over the coming years, there is a substantial chance that it could diverge significantly.”
“In my view, this emphasizes the need for a gradual approach to adjustments. Acting too hastily risks overreacting to developments that may not materialize.”
While Yellen’s comments pertain to the pace of increasing the federal funds rate, we suspect similar reasoning will soon be applied to justify further asset purchases by the Fed.
The crux of the matter remains: the Fed relies on a single remedy for the economy’s stagnation. Despite frequent miscalculations, they remain steadfast in their belief that credit expansion is the ultimate solution.
Unfortunately, much like the bloodletting of the 19th century, their approach is quackery that has ensnared the economy in unsustainable debt levels. The practitioners of this flawed treatment seem unaware that their methods contribute to the very stagnation they aim to alleviate. Perhaps, just as with bloodletting, future generations will eventually recognize the folly of these policies.
Sincerely,
MN Gordon
for Economic Prism
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