In 2007, Alan Greenspan published a fascinating book that chronicled not only his own life, but the life of the monetary world in which he grew up, and in which he ultimately played a major role as Chairman of the Federal Reserve.
Mr. Greenspan’s keen observation of contemporary monetary history is demonstrated throughout the book. On page 92, Alan had this to report about the legendary Reagan tax cuts of the 1980’s:
“The cornerstone of the Reagan tax cuts was a bill that had been proposed by Congressman Jack Kemp and Senator William Roth. It called for a dramatic three-year, 30 percent rollback of taxes on both businesses and individuals and was designed to jolt the economy out of its slump, which was now entering its second year. I (Greenspan) believed that if spending was restrained as much as Reagan proposed, and as long as the Federal Reserve continued to enforce strict control of the money supply, the plan was credible, though it would be a hard sell. This was the consensus of the rest of the economic board as well.But (David) Stockman (Reagan’s Budget Director) and Don Regan, the incoming treasury secretary, were having doubts. They were leary of the growing federal deficit, already more than $50 billion a year, and they began quietly telling the President he ought to hold off on tax cuts. Instead, they wanted him to try getting Congress to cut spending first, then see whether the resulting savings would allow for tax reductions.”
Well good luck with that!
And gollee, that was about 39 years ago, and about 20 trillion $$ of federal deficit ago. . .
Ronald Reagan, God bless ‘im, was the last of the Mohicans of old-style let’s-try-to-balance-the-budget school.
Yet we still pay lip-service to that principle.
But--let's face it-- those days are gone forever. They went out with with saddle oxfords and gumball machines and Archie Bunker and 1-cent lollipops and debits on the left with credits on the right that balanced each other out.
Now Reagan, God rest his soul, is no longer with us, nor Kemp, and the world is a totally different place. Ronald Reagan was the last of a balancing breed that has vanished into fiscal history.
The cowboy hero has ridden into the sunset.
David Stockman is, however, still with us, and still living in the past, still harping, God bless ‘im, on old-hat financial and fiscal responsibility. Good luck with that, Dave!
In his most recent newsletter, David Stockman posted this assessment of our present situation:
“The Main Street economy is failing. But the Wall Street fantasy is thriving. You can lay responsibility for this dangerous disconnect at the doorstep of the Eccles Building.The Federal Reserve’s extreme monetary central planning regime long ago disabled capital markets and destroyed price discovery.Bubble Finance has euthanized workers and savers and lobotomized traders and speculators.And our monetary central planners know it.”
While Mr. Stockman’s assessment may very well be true, it may also be irrelevant.
The world . . . as it always does and always has, has changed.
Tap your ruby slippers together, David.
and close your eyes and realize: We’re not in Kansas any more. All the rules have changed. Take off your rose-colored glasses.
We’re not wheelin’ and dealin’ in ole Wall Street any more, or Peoria or Pittsburgh or Palm Springs. Now we are in, as Aldous Huxley once said, a Brave New World. . .
A world in which monetary markets and price discovery are no longer the primary determinants in the money game. . . a world that has, yes Virginia, yes Alice and yes Dorothy, been commandeered by a thunderous consumerist horde who have no wish to be bound by these old financial fuddy-duddy obsolete principles, a world that has been fundamentally transformed by Keyneseian realpolitic and by the pragmatic keep-bailing-this-boat central bankers of the world with their legions of yassah data-crunching technocrats to maintain the welfare of us all.
And we will never go back.
Because money itself is, and always has been, truth be told, worthless, being nothing more than klinky coins that can get you a wad of chewing gum, or paper bills that can get you a sugar-high from a vending machine, or electrons that can get you a charged-up night on the town, or a day in the sun, a week at Disney if you’re lucky, and a health-insured, social-security certified lifetime in this knave new world.
The “Capitalism” of Adam Smith and John Stuart Mill and Jacob Marley and JP Morgan and even Warren Buffet has . . . gone the way of the buffalo.
Now it’s just benevolent electrons whirling around the world taking care of everybody.
And when you finally see the writing on the wall, Dave, look at those deficits and . . . read ‘em and weep. Nobody cares about deficits any more.
The central bankers of the world will never have to face the music of fiscal responsibility that keeps ringing in your ears.
We’re never going back to the old balancing acts. Where we’re headed is. . . everybody gets a meal-ticket as long as all’s quiet on the Western front and the red sun still rises in the east. Welcome to the knave new world.