Federal Reserve

Review of David Stockman's The Great Deformation.

"The main theme of The Great Deformation is stated clearly on the first page of the introduction, where Stockman explains how “fiscal cliffs as far as the eye can see” are “the result of the capture of the state, especially its central bank, the Federal Reserve, by crony capitalist forces deeply inimical to free markets and democracy.” This statement suggests a great irony in that it was the “Chicago School” economists who championed the “capture theory of regu­lation” with regard to such industries as interstate trucking and airlines, but ignored the biggest and most important regulatory capture of all—the creation of the Fed."

No wonder the establishment went nuts over this book.

"Nor was a bailout of the insurance company, AIG necessary. At the time, Stockman writes, 90 percent of AIG was solvent, yet it was handed $180 billion in taxpayer funds. The sole purpose of the bailouts, Stockman documents, was “all about protecting short-term earnings and current-year executive and trader bonuses.” In other words, the sole purpose of the government’s monetary and fiscal policies during that time was to guarantee the eye-popping bonuses that Wall Street One-Percenters paid to themselves to guarantee that these extraordinarily wealthy multimillionaires would continue to flood the Democratic and Republican Parties with campaign “contributions” to help guarantee the reelection of every last congressional incumbent."

That's not surprising.

"The most scathing condemnation of the Republican Party occurs in Stockman’s seventh chapter, in which he explains how “free-market” economists like Milton Friedman and George Shultz (“who had… perfected his patented craft of explaining things to presidents exactly as they preferred to hear them”) supported Richard Nixon’s decision to separate the dollar from gold once and for all in 1972. The result was “a forty-year spree of global debt creation, financial speculation, and massive economic imbalance…” The main purpose of Nixon’s election-year decision was to eliminate any and all constraints on federal spending in the short term to ensure his reelection. It worked well for him." 

Typical politician.

Summary of Ben Bernanke's tenure is not pretty.