We’ve Got It All Wrong

We’ve Got It All Wrong

Americans fear for their bank deposits. Your deposits are safe. However, you should fear the remedy. The Fed bail out from last Sunday could result in $1-2 trillion of additional public debt assuming that the Fed marks up the assets of and extends loans to all U.S. banks except J.P. Morgan, Bank of America, Wells Fargo and Citi.

All I heard last week is that the Fed should do more as it relates to U.S. Banks. That Government should do more. When I hear that sentiment I immediately know what your politics are. I immediately know whether you approve of the Nanny State or whether you prefer that Government stay out of your pocket. Government is the problem – both the fiscal side and the monetary side. You can’t have one without the other as the monetary side subsidizes every bad spending idea that has plagued the U.S. since the days of Woodrow Wilson.

The exorbitant cost of houses, food, automobiles, insurance – you name it, the cost of living – is a result of Government intervention. It’s nothing new, we have been suffering from Government intervention and massive spending since the days of Woodrow Wilson. This latest banking debacle is a direct result of the Fed’s easy monetary policy that has been easing since World War II. Monetary policy got a whole lot easier in 2009 with the bank bail outs and Quantitative Easing (QE). This imbued the Capital Markets with moral hazard and I believe that the Fed became the biggest market player by far in 2009. In 2020, The Fed’s role grew exponentially as the Government’s unwarranted COVID response gave it far more fiscal and monetary power than it enjoyed previously.

Now, at the first whiff of an economic downturn pundits and Americans are crying for another Government bailout. The problem is there is no free lunch. We pay a hefty price for Government action in the form of a devalued currency and a growing debt load which greatly hampers U.S. productivity. Heck, the U.S. Dollar has lost more than 98% of its value (as measured in Gold) since the U.S. came off of the Gold Standard in 1971. If we keep printing, bread will soon cost $15 per loaf, eggs $30 per dozen and houses $5,000 per square foot. We could fix our inflation problem immediately by putting the U.S. back on the Gold Standard which would tether the amount of Dollars in circulation to our Gold Reserves and therefore would restore purchasing power to the Dollar. However, that would prevent Government from running deficits (we are looking at a $2 trillion deficit this fiscal year-ending October), that are the result of various spending programs designed to buy votes – bail outs, QE, welfare etc. would be nothing more than bad memories from the past. Economic freedom would be restored. The standard of living would appreciate greatly for the average American.

  • Want to lower the cost of healthcare? Remove Government subsidies from the equation by going back on the Gold Standard.
  • Want to lower the cost of prescription medicine? Remove Government subsidies by going back on the Gold Standard.
  • Want to lower the cost of various assets? Get the Fed out of the business of artificially suppressing interest rates by going back on the Gold Standard.
  • Want to get teachers back teaching classes and workers back in the field? Eliminate welfare programs such as the Cares Act which caused these two specific problems. A return to the Gold Standard will solve these and other problems caused by Government spending.

In the meantime, I expect that Americans will clamor for Government intervention and sometime between now and March 2024 we will have another massive “stimulus” program that will add trillions in debt and further erode the standard of living. Hopefully Americans will start to put two and two together.

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