by Matthew Piepenburg, Gold Switzerland:
Below, we consider just how far America has fallen from its founding vision (and something we can do about it).
Union Matters—Poor Ol’ Jefferson
When sitting down to “channel the people’s will” through his own pen, the author of the American Declaration of Independence, Virginian Thomas Jefferson, had one key principle and theme in mind, namely: Union.
According to University of Virginia scholars, Garry Gallagher and John Nau, this concept of Union was premised upon the ideals (and “experiment”) of: 1) equality (despite, of course, can-kicking the slavery issue…); 2) compromise and 3) a fundamental disdain for any form of coercion (or “capture”) by a centralized body (or bodies) within an otherwise fragile republic based upon a federalist structure.
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Here, of course, is not the place to unpack or debate the myriad concepts of a republic, federalism, or even constitutional democracy.
However, one issue of economic relevance worth raising today is the core and defining fear shared by America’s founding fathers, namely the fear that critical notions of equality and our three branches of government could one day be captured/coerced by bad actors and hence destroy the experiment of striving/evolving toward equality and union, however imperfect its growing pains.
Captured by a Private Bank
Which brings us to our central bank, whose power over the price (interest rate controls) and supply (balance sheet size) of the world reserve currency, has effectively and constructively become a fourth branch of government.
This centralizing central bank has not only been the direct and empirical cause of historical wealth inequality in America, but has now fully “captured” (i.e., taken centralized control of) the American economy in general and the price control of global bond and currency markets in particular.
The entire world, most of which is directly or indirectly pegged to the price and supply of the USD, literally sits on the edge of its seat to see what the FOMC will (or will not do) with the price and supply of a now weaponized and entirely “captured” USD.
In other words, Jefferson, whose admirable memorial stands just a few blocks from the Treasury Department and an easy walk from the impressive Eccles Building, would be shaking his head in despair if he were alive today.
Or stated more simply, America has sunken, irrevocably it seems, from its original and enlightened ideals of equality.
After all, when a post-08 central bank creates a zero-rate-driven and QE 1-4+ equity bubble, 90% of whose riches were enjoyed by only the top 10% of its population, we see just how “unequal” such coercive institutions can be…
Needless to say, no one in DC, and certainly not Powell, will confess that such centralization of power (and “free” markets) by unelected private bankers is a mark of feudalism rather than capitalism, and a carefully veiled symbol of authoritarianism hiding in “Federal” clothing.
[The Federal Reserve, I’ll remind again, is neither federal nor a reserve, nor even constitutional, despite its address on Constitution Ave…]
No Profiles in Courage
Nor are our lobbied politicians, who collectively know less about history, economics or basic math than just about any college freshman, asking themselves “what they can do for their country” …
Instead, they have been doing a heck of a lot of thinking about how to brand themselves for re-election and maintaining their power.
Toward this end, these “profiles in zero courage” (although Santos will likely claim he also has a PhD in applied math from MIT) have been making promises their budgets can’t pay for.
Thereafter, they blindly fill this deficit “gap” with trillions of annual IOUs (i.e., USTs) per year which are then paid for with inflationary money clicked out of thin air by the IT wizards at the Fed.
Farce After Farce After Farce
Of course, it is such magical money, and not COVID, Putin, global warming or little green men from Mars, which explains our farcically under-reported (i.e., openly dishonest) inflation rate, which if measured by the same CPI scale Volcker used, would place US inflation at well above 11% today, and not the open lie of headline 3.7%.
Such actual rather than “official” inflation means that every single IOU issued by Uncle Sam is a negative-yielding bond, and hence by definition, puts them technically and already in default.
Others Are Catching On
The rest of the world, including the growing BRICS+ nations, knows this, which explains why central banks have been net-sellers of USTs since 2014 and why de-dollarization is not just a concept but a steady reality today.
In short, demand for, as well as trust in, the great “risk free return” of the most important sovereign bond in the world (which is now mathematically “return free risk”) has been tanking while central bank gold-purchasing has been breaking records.
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