Submitted by David Stockman – The Contra Corner Blog
Well now. We actually got our money’s worth last night.
Almost with out exception the GOP candidates conveyed a compelling message that the state is not our savior, while the CNBC moderators spent the night fumbling with fantasy football and inanities about which vitamin supplements Ben Carson has used or endorsed.
But this was about more than tone. The interaction between the candidates and the CNBC moderators revealed the yawning gap between the bubble world at the intersection of Washington and Wall Street and the hard scrabble reality of economic stagnation and political alienation on main street America.
Yes, the CNBC moderators engaged in a deplorable display of gotcha journalism punctuated by a snarky self-righteousness that was downright offensive. John Harwood is surely secretly on the payroll of the Democratic National Committee and it was more than obvious why Becky Quick excels at serving tea to blathering old crony capitalist fools like Warren Buffett.
So they deserved the Cruz missile that came flying at them mid-way through the debate.
At that point the Senator from Texas had had enough, especially from Carl Quintanilla. The latter has spend years on CNBC commentating about the “market”, but wouldn’t know honest capitalism is if slapped him upside the head, and has apparently never meet a Washington intervention that he didn’t cheer on as something to help the stock averages go higher:
Let me say something at the outset. The questions that have been asked so far in this debate illustrate why the American people don’t trust the media. This is not a cage match. And if you look at he questions—Donald Trump, are you a comic book villain? Ben Carson, can you do math?… Marco Rubio, why don’t you resign? Jeb Bush, why have your numbers fallen? How about talking about substantive issues?”
Nor did the Texas Senator let up:
“Carl, I’m not finished yet. The contrast with the Democratic debate, where every thought and question form the media was ‘Which of you is more handsome and wise”
As one pundit put it afterwards, “given the grievous injuries inflicted on Team CNBC” by Cruz and the rest of the candidates, the only thing left to do was to “shoot the wounded”.
Actually, there is rather more. Last night was billed as a debate on domestic issues and the economy, and CNBC is the communications medium of record about the daily comings and goings of the US economy and the financial markets at its center. Yet not one of the three moderators during the entire two hour period asked a question about the elephant in the room.
They had to bring in from the sidelines the intrepid Rick Santelli to even get the Federal Reserve on the table. Its almost as if the CNBC commentators work on the set of the Truman Show and have no clue that it’s all make believe.
In the alternative, call this condition Bubble Blindness. It’s a contagious ideological disease that afflicts the entire corridor from Wall Street to Washington, and CNBC is the infected host that propagates it.
The fact is, the monetary madness in the Eccles Building is destroying free market capitalism by systematically and massively falsifying the prices of financial assets, and fueling a relentless, debilitating accumulation of debt throughout the warp and woof of the American economy and the rest of the world; and it’s simultaneously extinguishing political democracy by deeply subsidizing our crushing $19 trillion national debt.
The GOP politicians appropriately sputtered last night about the bipartisan beltway scam rammed through the House yesterday by Johnny Lawnchair, but they were given no opportunity by their clueless moderators to explore exactly why this kind of taxpayer betrayal happens over and over.
Well, there is a simple answer. The Fed’s elephantine $4.5 trillion balance sheet represents the greatest fiscal fraud ever conceived. Last year it paid the US Treasury approximately $100 billion in absolutely phony profits scalped from its massive trove of Treasury debt and quasi-government GSE paper.
That is, over time Uncle Sam has purchased $4.5 trillion worth of real economic resources——in the form of goods, services, salaries and transfer payments——from the US economy, which were paid for with IOUs.
Under an honest financial regime these obligations would be eventually redeemed in equivalent goods and services, thereby causing a transfer from private to public use and a reallocation of savings from productive investment to the balance sheet of the state.
But no more. The Fed’s massive purchases of the public debt are funded not with society’s real savings from current income and production, but from fiat credits it conjures out of thin air.
And then the monetary charlatans behind the curtain at the Fed add insult to injury. Every year they send back to the US treasury the coupons earned on these airballs, causing the politicians to think the national debt is no problem; and that they can buy aircraft carriers and GS-15 salaries indefinitely while booking a “profit” on their borrowings.
Folks, this is just plain madness. Back in 1989 when the real median household income first hit its current level of about $54,000, this entire monetization scam would have been considered beyond the pale by even the inhabitants of the Eccles Building, and most certainly by everyone else in Washington——from the US Treasury, to the Congressional budget committees, to the summer interns in the Rayburn Building.
But after 25 years of central bank induced financialization of the US economy, there has developed a cult of the stock market and a Wall Street regime of relentless financial gambling in the guise of “investment”. Consequently, the massive aritificial inflation of financial asset values is not even recognized by CNBC and its fellow travelers in the main stream financial press—to say nothing of the very prosperous punters who inhabit the casino.
But here’s the thing. How did the real median household income stagnate at $54,000 while the real value of the S&P 500 soared by nearly 4X during the era of Bubble Finance?
Likewise, how did the aggregate “market cap” of US debt and business equity soar from 200% to 540% of GDP when main street living standards were not rising at all? Could it be that something rotten and deformed has been injected into the very financial bloodstream of American capitalism—-something which the CNBC cheerleaders dare not acknowledge or even allow conservative politicians to explore in a public forum?
Worse still, this entire Fed-driven regime of Bubble Finance has inculcated in the casino and its media megaphones the insidious notion that the arms and agencies of government exist for one purpose above all others. Namely, to do “whatever it takes” to keep the bubble inflated and the stock market averages rising—–preferably every single day the market is open.
There was no more dramatic demonstration of that proposition than after the Wall Street meltdown in September 2008 when the as yet un-house broken GOP had had the courage to vote down TARP.
But when they were dragged back into the House chambers by Goldman Sachs and its plenipotentiaries in the US Treasury, the message was unmistakable. On one side of the CNBC screen was the House electronic voting board and on the other side was the second-by-second path of the S&P 500. And delivering the voice-over narrative were the same clowns who could not even mention the Fed last night. The US Congress dare not vote down TARP again, they fulminated.
It obviously didn’t. Yet right then and there the conservative opposition was broken, and the present statist regime of Bubble Finance was off to the races.
During the coming decade the nation will be battered and shattered by a monumental fiscal crisis and the bankruptcy of the bogus “trust funds” which now pay out upwards of $2 trillion per year to 70 million citizens. At length, the bearers of pitchforks and torches descending on Washington will surely ask how this all happened.
But they will not need to look much beyond last night’s debate for the answers. The nation’s fiscal process has been literally shutdown by the Fed and the Wall Street gamblers and media cheerleaders who insouciantly and relentlessly demand of Washington that it do “whatever it takes” to keep the bubble inflated.
As a result, we have had the absurdity of 82 months of ZIRP and a orgy of public debt monetization that has driven the weighted average cost of the Federal debt to a mere 1.75%. That’s close enough to free for government purposes—–so exactly which heroic politicians are going to fall on the sword to stop the debt machine when they can kick the can without visible consequences?
And when a few courageous remnants of fiscal sanity like Senators Cruz and Rand Paul have had the nerve to resist still another increase in the public debt ceiling, they have been treated as pariahs by Wall Street and the kind of snarky financial media types on display last night.
The fact is, the President has clear constitutional powers to prioritize spending in the absence of an increase in the debt ceiling. That is, he can pay the interest on the debt, keep the Veterans hospitals open, send out the social security checks and prioritize any other category of spending that he chooses from the current inflow of tax revenues, and for as long as it takes to legislate an honest fiscal retrenchment.
Needless to say, that would create howls of pain from the Federal vendors who wouldn’t get paid, the state and local governments which would have to wait for their grant payments and the Federal employees who would be put on furlough.
But that is not the reason that Mitch McConnell and Johnny Lawnchair have capitulated every time a debt ceiling crisis has reached the boiling point. That kind of action-forcing circumstance was managed by Washington innumerable times in the pre-Bubble Finance world, including on upwards of a dozen occasions during my time in the Reagan White House.
But back then no one thought that Wall Street would have a hissy fit if the government was shutdown for a few days or if the fiscal gravy train was temporarily put on hold; nor did politicians much care if it did.
My goodness. Paul Volcker had taught Wall Street a thing or two about the requisites of financial discipline in any event.
No, what is different now is that the establishment GOP politicians are petrified of a stock market collapse, and have been brow-beaten into the false belief that a government shutdown will create severe political costs.
Baloney. Even the totally botched affair in October 2013 created no lasting damage—-as attested to by the GOP sweep in the 2014 elections.
At the end of the day, all the hyperventilation about the political costs of a government shutdown or the forced prioritization of spending in the absence of a debt ceiling increase is pure Wall Street propaganda; and its an untruth amplified and repeated endlessly, loudly and often hysterically by its financial media handmaidens.
At least last night some GOP politicians gave it back to them good and hard.
So maybe there is some hope for release from the destructive pall of Bubble Finance, after all.