“Money For Nothing: Inside the Federal
“Money For Nothing” is a documentary
about economics. If that sounds a
little dry, it is, though they try very hard to provide some “fun” visuals
while the “suits” are speaking. It’s
almost as if they don’t really expect us to understand, so they’re trying
to “dumb it down,” but in the end, they seem to be much better at
describing the current situation than offering any real solutions.
We begin with a brief history, how the
Panic of 1907 resulted in the creation of the Federal Reserve Bank, but they
blew their first crisis, when the Roaring Twenties bubble burst, and we had
the Great Depression.
The outbreak of World War II, of course,
meant rapid economic recovery, and afterwards, unparalleled prosperity.
Toward the end of the War, in 1944, the Allied economic summit resulted
in the rest of the world’s currencies being tied to the dollar, but that was
supposed to be OK, because the dollar was still undergirded by the gold
standard. In the postwar era, we had an
ideal situation: low interest rates, a
growing economy, low unemployment, and low inflation.
But something happened in the 1960’s.
LBJ’s Great Society, combined with an expensive, protracted, and
increasingly unpopular war in
, resulted not only in societal unrest, but also the beginning of steady
inflation, and rising joblessness (especially for returning veterans, many of
whom suffered from undiagnosed PTSD). It
was Richard Nixon who formally broke us away from the gold standard, which
then meant that our currency was guaranteed by….nothing.
Nothing, that is, except everyone’s implicit faith in the system.
To someone steeped in the Christian
tradition, this scenario sounds a lot like the Church:
our primary currency is faith. Without
it, we cannot sustain ourselves. (Interesting
that the “God” analogy would later be used to describe Alan Greenspan, but
that’s getting ahead of our story.)
Anyway, most of us remember the very
high inflation and very high interest rates of the 1970’s.
Remember the long lines for gasoline? Remember
14%, or higher, interest for standard fixed-rate home mortgages?
Jimmy Carter got blamed, but the Fed policy, or lack of it, had
something to do with the crisis.
Paul Volcker then took the reins, and by
manipulating the Fed’s interest rate which it charged other banks, and
therefore regulating the money supply itself, the economy finally righted
itself, until the out-of-control dot-com 90’s, which produced another
crisis. Greenspan, having taken over
for Volker, got this one right, but according to this documentary, that gave
him too much hubris, because when the runaway speculation fueled the stock
market rise of the early 2000’s, everyone just wanted to get on board the
We all know what happened with the
sub-prime lending fiasco, and how banks sold bad loans to each other, loans
that were basically unsecured and without collateral, so when the bubble burst
in 2007, we had many foreclosures, and the steep declines of both the housing
market and the stock market.
Ben Bernanke, now the Fed Chairman,
responded by asking the U.S. government to essentially bail out the big
banking and lending institutions that were considered too big and important to
fail, and the government complied. But this merely encouraged the risk-takers,
because now they had a safety net. The
Fed has responded to the threat of inflation by lowering interest rates to
virtually zero, which now means they have no other tricks in their bag.
So, according to these doomsayers, we are headed for another crisis.
The trouble is, they don’t tell us
what we’re supposed to do about it, other than somehow produce an economy
that prospers because of real production growth rather than the false upward
valuation of stocks. Fine, easy to say,
but everybody seems better at pointing fingers than offering any real
solutions. Yes, it’s informative, but
not very helpful.
Kind of like saying the Church in
is in decline, and we need to figure out something constructive to do about
it. Duh. That part is obvious.
But how about suggesting a specific solution instead of just pointing
out the history of the problem?
Dr. Ronald P. Salfen, Minister, St.
Stephen’s Presbyterian Church,