In Animal Spirits, economists George Akerlof and Robert Shiller make the case for why government is needed to restore confidence in the economy.
John Maynard Keynes coined the phrase “Animal Spirits” in his 1936 publication, The General Theory of Employment, Interest, and Money. His theme was that the emotional state of financial decision makers was the primary provocateur of consumer confidence—hence, market sentiment.
Let me be blunt: The only function the Fed has ever had is to finance the never-ending expansion of the Deep State. All this talk of fighting the Last Mile of Inflation is nothing more than attempts at tweaking the rheostat of Animal Spirits.
The chart below illustrates the inflation-adjusted prices of the S&P 500 stock market index since 1927. Notice that after each Fed-induced “taming of inflation”, prices have assumed a new, higher level of Support.
The same can be said for a gallon of gas.
Here is what Warren Buffett had to say about taxation through inflation:
The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5 percent passbook account whether she pays 100 percent income tax on her interest income during a period of zero inflation, or pays no income taxes during years of 5 percent inflation.1
What have we gotten for all the resources our Sovereign has conscripted?
Boom and Bust 2
Think of the financial bubble as a fire.
The oxygen for the boom is marketability—the ease with which an asset can be freely bought and sold. [The NYSE trades $18.9 billion per day, on average]
Speculation is analogous to heat. Once a bubble is under way, professional speculators may purchase an asset they know to be overpriced, planning to re-sell the asset to “a greater fool”. [MarketWatch provides an example.]
The fuel for the bubble is money and credit.
And there is no greater engine for creating money and credit than the Federal Reserve and the current guiding-philosophy of Modern Monetary Theory.
The Deep State’s war on Capitalism and the Constitution
Historians tell us that Feudalism died around the 15th century. Yet, it takes little imagination to find Feudalism in our present-day governance, in every sense of the word, including vassalage, fee estate, wardship, and forfeiture. Since nuclear weapons have (almost) made world wars a prohibitive tool in acquiring “cooperation”, modern-day Feudal Lords have had to resort to presenting the State Almighty as the only counterbalance to everyday crises (whether natural or manmade).
Today’s most ardent proponents of Democracy tout the wonders of (occasional) voting to guide the actions of the Ministers of State—voting we are permitted to exercise in accord with the whims of those very same Ministers. Yet, under Capitalism, billions of votes are cast every day to include or discard the myriad of goods and services that improve and/or ameliorate everyday crises. And that is what the Lords can not abide.
The Last Line of Defense is the House
Article 1, Section 9, stipulates that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” And the Supreme Court has ruled (in U.S. v. Butler, 1936) that Congress does not have the right to regulate areas of local control directly, but that it has only the right to “provide for the general welfare” through the “taxing and spending” provisions.
Yet, can anyone deny that the Deep State has purchased the fealty of citizens through regulations (How many), bailouts (Too-Big-to-Fail), and “Never let a crisis go to waste”. The last one gave us pandemic giveaways, destructive mandates, and fraudulent elections.
How billions in COVID-19 pandemic relief aid was stolen or wasted.
COVID-19 scale of education loss “nearly insurmountable”.
Suitcases stuffed with ballots in Fulton County GA.
Duplicate ballots and dead people voting.
Ballot counting issues in Arizona.
Only one element of the Deep State is absolutely essential to the Revolution: faux money from the Federal Reserve. But faux money will not always be necessary. Once the Deep State feels confident in the efficacy of the “knock in the night”, the Fed will become obsolete. (All of our exchanges will be monitored digitally.)
Replace the Fed with a Computer
In the Real Economy—the one inhabited by non-elites—money must be a reliable system of value that facilitates the exchange of goods and services. To do that, money supply growth must be maintained within a range of 2-4% [Milton Friedman’s “K-Percent Rule”]. Otherwise, we will continue to experience what we have been experiencing since at least 1929.
[For a more fulsome explanation of how the Fed funds the Deep State, watch “How to Cure Inflation”, Free to Choose.]
This phase of the construction of a New World Order is reaching a point of no return. If the House GOP does not exercise the Power of the Purse to downsize the Budget of the Regulatory State, our Constitutional Miracle will cease to be.
Buffett, Warren. “How Inflation Swindles the Equity Investor” (Fortune, May 1977).
Quinn, William & Turner, John D. Boom and Bust. Cambridge University Press 2020.