Introduction
Those who’ve not studied finance tend to have a quaint view of banks. Buildings with tall ceilings, hushed conversations and middle-aged tellers distributing crisp banknotes, cheap lollipops and unsolicited financial advice. Simplicity and hometown values, that’s how these stalwart institutions present themselves.
A bank’s actual operations (at least for the more significant concerns) are not quite that simple though. Fractional reserve lending, derivatives trading, mortgage-backed securities, leverage, the repo market, primary dealers, loan-deposit ratios, etc.
So it was that in 2008 the Fed birthed a bailout program that was able to hide behind a veil of arcane language and indecipherable technicals. People understood, on some level, that the bankers had taken unnecessary risks, but unpacking the magnitude of their stupidity required so much specialized knowledge that it took us years to even partially understand.
The 2008 bailouts were reviled, camps took root in Zuccotti park, and books were written. However, as chewy as the meat was, the American populace, by and large, swallowed it.
This time will be different.
United Airlines is not a bank. United Airlines, KFC, Wendy’s, Papa John’s, and all the other corporate government darlings believe in multi-million dollar CEO salaries, profits over the environment, profits over humanity, profits over everything.
For example, airline executives, in a stroke of unmatched genius, found that in addition to checked baggage, they could charge for carry-ons. If they could charge for the air they surely would.
“In the event of an emergency, masks will drop down for all those who paid for disaster mitigation service. If you failed to pay for DMS, please help your more prudent neighbor attach their mask.”
Unlike the inner machinations of a bank, Americans understand mega-corporations. That’s why the reaction to the Federal Reserve’s stimulus plan (once people are allowed to leave their homes and act on their intentions) is going to be momentous.
It just can’t sit right with most folks that while they’re forced out of a job, forced to stack their bills somewhere out of sight and hit the ignore button when the landlord calls, that poorly run “too big to fails” will be receiving hundreds of billions of dollars’ worth of bailouts - again.
The Cantillon Effect
The Cantillon effect describes the mechanism by which those close to the source of the money benefit the most.
How that applies to our current situation:
The Federal reserve prints trillions of dollars which they use to bailout companies like Shake Shack and prop up the markets (the Fed is now buying junk bonds and has not explicitly ruled out buying securities… Unprecedented is a word that’s becoming the new precedent).
Financial institutions like banks, who own nearly 70% of big company stocks, benefit from rising asset prices. They also benefit as they can spend the “new” dollars before inflation rises.
The rest of us, who own only a small percentage of assets, and must spend our dollars as inflation increases, experience little benefit. Our wages stagnate and our rent goes up as our buying power is reduced by inflation.
At this juncture a point needs to be made: what the author is attempting to construct is not a tirade against capitalism or the wealthy. This is not a call to socialism or to ransack mansions and redistribute the wealth through forceful means (has that ever worked?).
This is a callout of false capitalism. In a true capitalist society, firms fail and the wealthy keep or lose their riches by their own competence.
But we don’t have true capitalism anymore. If you’d suggested six months ago that the Fed would begin buying junk bonds you’d have been hauled off…
What we have is a system whereby the likes of American Airlines can mismanage their operations and just when it looks like it’s all going to hell (i.e., firms that deserve to fail are going to fail, people that should lose money are going to lose money), the Federal reserve steps in to keep the party going.
This is what must end because this is not capitalism as the founding fathers imagined it, this is corporate socialism at the expense of the individual.
Instead of saving money so that they could survive a downturn, the airlines spent most of their cash buying back their own stock. They knew well that in the event of a crash (has there ever been a bull market that lasted forever) the government would step in to save them.
Cruise lines register their ships in Panama and other foreign countries to avoid paying American taxes. When a pandemic destroys their business, they’re happy to petition for an American bailout though.
The list goes on and the longer you look the more obvious it becomes: the actions of the United States government and the Federal Reserve are intended to benefit those at the top, to hell with the rest.
To end this section, it must be mentioned that the Federal reserve is governed by unelected officials. If the American populace is displeased with their actions they have little recourse. Several hundred years ago Jefferson predicted the situation we’re in today.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around (these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered."
Currency Shall be Given Back to the People, to Whom It Belongs
After recovering from 2008, the stock market went on a rally of historic proportions. Big financial institutions, who own most of the stock market, enjoyed tremendous inflation in asset valuations. In contrast, the rest of us who don’t own 70% of large corporations’ shares, were blessed with stagnating wages and job loss due to automation and overseas manufacturing.
In the cycle we’re in now, the Fed is pumping, at the very least, two to three times more liquidity into the market than in 2008 and they’re not even done yet. What will be the result?
The increasingly corrupted, corporate-friendly American government has for decades acted with impunity because there was no alternative. This is no longer the case. Today there is Bitcoin, today there is an alternative to a financial system that is clearly broken.
- The Fed can mint as many dollars as it wants, only 21 million Bitcoin will ever be created.
- Every year the dollar inflates, punishing savers. Every four years, the issuance rate of Bitcoin is cut in half, rewarding savers.
- The ostensibly independent Fed can manipulate the dollar at will. Bitcoin is governed by code that no single entity, organization, government, individual, fraudster, politician, or false capitalist can change.
- The United States government has weaponized the dollar, sending countries like Iran and Cuba to the timeout corner. Bitcoin is censorship resistant and can be sent to any corner of the globe at any time for a fee so small it’s not enough to buy a bag of peanuts.
- Quantitative easing at the Fed, quantitative tightening at the Bitcoin factory.
"The issuing power of currency shall be taken from the banks and restored to the people, to whom it properly belongs,” stated Thomas Jefferson. With Bitcoin, the American populace no longer has to be subservient to the monetary whims of unelected kleptocrats.
Every person who buys Bitcoin is voting for change, they are removing themselves from this farcical financial charade that the United Corporations of America has become. No more corporate socialism, it’s time for Plan Ƀ.
The Numbers Don’t Lie
On a balmy November afternoon in New York, fifty years in the future, an inquisitive grandchild is going to ask us when we knew a revolution was coming. It will take a moment to consider the variables, but in a few moments, the answer will become evident; we will describe to this bright youth the picture above.
We will describe years of rising inequality, stagnating wages, the staggering cost of a college education, real estate prices so high an entire generation couldn’t afford to get married and start a family. We’ll describe how the rich were getting richer, the poor poorer, and how on the day that we lost our job, the Dow Jones Industrial Average had its best week in 82 years.
We may share some other statistics to drive home the point. The stimulus bill, the first of the stimulus bills, was worth $2.2 trillion. At the time, there were about 200,000,000 adults in America. If we’d have given the money to them, every adult would have received $11,000.
Instead of that, everyone who didn’t make a lot of money got $1,200 plus a bit more if they had kids. People who made more money, some of whom were also struggling ($1,200 in Alabama is not equal to $1,200 in Seattle), got nothing. Where did the rest go?
We knew that the money paid for some good programs. Loans to small businesses, increased unemployment payments, and the like. But the problem was that we’d lost faith in our institutions. As a country, we no longer believed that whatever the government was doing was going to benefit us.
It’s funny, we’ll say as the rocking chair glides on the deck, growing up we’d learned that good Americans pay their taxes. We’d been taught that it was our duty as citizens to support our government.
Then a man got on television and said that our banking system, the Federal Reserve, has unlimited money and can print as much of it as it wants. When we heard that we asked ourselves: if they can print all those dollars, what the hell have we been paying taxes for this whole time?
More to the point, why have we been paying taxes so that when push comes to shove, the government can bailout ineptly managed big businesses? That was the day, my dear grandchild, when a generation lost what little faith they had left in the system.
