“I want to see people get money.” – Donald J. Trump, U.S. President, September 17, 2020
“Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet.” – Steven Mnuchin, U.S. Secretary of the Treasury, September 14, 2020
Money for the People
The most virulent contagion affecting the American public today isn’t a physical illness; it’s something far graver than COVID-19. The affliction lies within the psyche of the populace.
This mindset stems from a deeply ingrained belief that the government possesses an unlimited reservoir of free money, leading many to expect that everyone—aside from the ultra-wealthy—should have access to it. In an environment where stimulus packages promise an easier life, why strive for self-sufficiency? This mentality gained significant traction in 2020.
For instance, just a year ago, many Americans believed they could depend on the enforced generosity of their fellow citizens, operating under the assumption that to compensate one, you must rob another. The CARES Act vividly demonstrated to Boobus americanus that an abundance of ‘free money for the people’ indeed comes from Washington. Sí se puede!
Recently, Congress played its part in maintaining this spectacle. The demand for stimulus is palpable, and Congress aims to meet this expectation in due course.
Clearly, there was no question surrounding the necessity of creating money via printing presses. Discussions revolved solely around the amount needed.
Speaker Nancy Pelosi seeks $3.4 trillion, while Senate Republicans propose a more modest $500 billion. Additionally, an entity known as the House Problem Solvers Caucus advocates for $2 trillion.
President Trump promotes the idea that Republicans should aim for “the much higher numbers,” reasoning that ultimately, “it all comes back to the USA anyway (one way or another!).”
Extreme Intervention
With only 12 days left in the U.S. fiscal year 2020, the budget deficit exceeds $3 trillion—more than double the previous record deficit of $1.4 trillion set in 2009. Let’s hope that the March to Common Ground stimulus agreement does not materialize.
The fiscal management of 2020 has been dismal. What possible benefit could another massive stimulus bill bring as we enter FY 2021? The longer Congress delays, the better.
Meanwhile, the Federal Reserve remains steadfast in executing extreme interventions within the financial markets. This commitment includes providing cheap and abundant credit indefinitely.
On Wednesday, after holding a two-day Federal Open Market Committee (FOMC) meeting, the Fed announced new projections, indicating that the federal funds rate will likely stay near zero until 2023. Additionally, the Fed plans to continue purchasing Treasuries and mortgage-backed securities at a rate of at least $120 billion monthly.
We’ll have to wait weeks for the minutes from the FOMC meeting to confirm this. However, it seems unlikely that they discussed the merits of ceasing QE, reducing the Fed’s balance sheet, or increasing the federal funds rate. Such measures appear unlikely until at least 2024.
The hidden agenda of this seemingly endless QE is to inflate stock prices, even amidst an economic crisis. Once again, Wall Street and major financial institutions receive unparalleled access to inexpensive credit. But where is this leading us?
How to Tackle the Depression Head On
The economic challenges we face are deeply intertwined with central government actions. Over the past four decades, the collaboration between the Fed and the Treasury to manipulate the financial system has resulted in a wealth concentration that is becoming increasingly blatant.
Clearly, something has gone drastically awry. The prevailing issue seems to be the virtual abandonment of sensible financial practices. Traditional standards and sound reasoning have been supplanted by misguided economists, unscrupulous politicians, and an ever-growing populace dependent on government support.
We exist in a realm of misinformation—a world that is bound to grow more deceptive as desperation-driven policies are implemented to maintain low interest rates, high asset prices, and keep Washington swindlers flush with printed money, all while ensuring the masses are fed and entertained. Yet, it’s crucial to understand that such deceit will only breed further deception.
People are clamoring for more resources. They are increasingly weary of wealth being disproportionately held by a select few and resentful of being marginalized.
It’s essential to clarify that these issues are not failures of capitalism; rather, they are symptomatic of America’s centrally planned economy. The debilitating effects of artificial money, regulatory chaos, and government dependency are insurmountable.
Yet, there is an alternative. In a January 22, 2014 article, Steve Forbes proposed a different approach to the current model:
“Vibrant economies, not central banks, create real money, and wealth is abundantly created when tax rates are low, money is stable and regulations are reasonable.”
It’s time to end the deception. Halt the stimulus efforts. Cease QE. Stabilize the money supply. Allow the markets to set interest rates.
Admittedly, this may lead us straight into a severe depression. However, the reality is that a depression is already upon us. Facing it honestly will yield better outcomes than attempting to evade it through deception and falsehoods.
Sincerely,
MN Gordon
for Economic Prism
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