By Jeffrey P. Snider, Alhambra Investment Partners
In August 1855, Abraham Lincoln wrote a letter to his good friend Joshua Speed who had lived in Springfield but had since returned to his childhood home in Kentucky. The Missouri Compromise of 1820 had recently been overturned in Congress by the Kansas-Nebraska Act and the nation was somewhat enthralled by the “know nothings” and their quasi-party. Lincoln had been mostly out of politics since his one term in the US Congress ended in March 1849.
In writing to Speed, Lincoln was excited by the political prospects of getting involved in the slavery question again. Speed had been raised on a plantation that had owned slaves and counted himself, as near as anyone might tell, as a straddling friend of both sides of the great divide; not unlike Lincoln’s eventual opponent Stephen Douglas who had engineered the Kansas-Nebraska Act. Lincoln was incensed that when Illinois legislature was called to Springfield to debate it, even though it was overwhelmingly in Democrat hands (as Lincoln writes) the Act was not willfully approved. It was instead supported by politics:
Douglas introduced the Nebraska bill in January. In February afterwards, there was a call session of the Illinois Legislature. Of the one hundred members composing the two branches of that body, about seventy were democrats. These latter held a caucus, in which the Nebraska bill was talked of, if not formally discussed. It was thereby discovered that just three, and no more, were in favor of the measure. In a day of two Dougla’s [sic] orders came on to have resolutions passed approving the bill; and they were passed by large majorities! The truth of this is vouched for by a bolting democratic member.
Lincoln’s charge to Joshua Speed was duplicity among not just politicians. “You say if Kansas fairly votes herself a free state, as a Christian you will rather rejoice at it. All decent slaveholders talk that way; and I do not doubt their candor. But they never vote that way.” Everyone says they are for freedom and liberty, but more often than not they act in self-interest, as they see it, alone. For Lincoln, his growing distaste led him in closing to admonish his friend:
When it comes to this I should prefer emigrating to some country where they make no pretence of loving liberty – to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocracy [sic] .
The great issues of our own time are not so momentous, at least not yet. However, the same human frailties are on display. Our so-called best and brightest preach similar self-devotion to freedom and free markets, and even call themselves great capitalists. But when given the chance, they do only the opposite. They talk free market and then turn central planner no matter how much their own central planning fails and fails continuously. An entire generation of Americans has grown up despising their idea of capitalism because they have been told since their birth that Wall Street is the heart of capitalism and Alan Greenspan (or Bernanke/Yellen/whomever) its high priest.
They turn to Bernie Sanders because why not? Capitalism, as they understand it from the media and mainstream, has failed them so thoroughly; doomed to a life unlike any other prior generation, they go to school, become enslaved in debt and have no thriving economy with which to achieve what used to be taken for granted. It has become so bad that nobody seems to even remember what actual economic growth looks like, and so the “great” economists of our time confirm that capitalism has failed in ironically their own failure. In other words, because “stimulus” never works, it has to be that capitalism failed; as if the world economy just suddenly one day forgot how to grow except in finance.
For their part, the central bankers keep all the trappings of capitalism, talking the talk and making the right sorts of gestures and references. They talk “libertarian” as Friedman and then act socialism as Keynes. No matter how little circumstances change, they never do. And that is the ultimate problem; central banks have hijacked capitalism in order to maintain their own authority, using the idea of free markets in order to undercut the very ideas of freedom and free markets. We know this because their only answer to every single problem is the same – them.
It has been already a lost decade which was predicted by the pioneering Japanese who destroyed their own markets long ago. They will not stop, a fact with which they openly admit. “We” accept it because of this myth, that central banks are inseparable from capitalism when in fact they are and always have been a severe perversion of it.
Bank of Japan Governor Haruhiko Kuroda said Thursday his aggressive easing policy has no “quantitative limit,” rejecting views that the central bank will run out of ammunition.
“There aren’t any such things as a quantitative limit or anything, any numbers we can’t overcome,” Kuroda said during a parliamentary session in reference to his policy stance and the BOJ’s present easing measures.
Translation: no matter what, he will not stop. He has utterly destroyed and impoverished Japan and still he will not stop. It is incompatible not just with capitalism but the very idea of limited government and democracy. There has to be limits, and the fact that there are not in this area is the whole problem to begin with. Financialism has taken over under the cover of freedom in exactly the same manner as Lincoln admonished of his friend Joshua Speed; they talk markets and act socialist. In the end, we get the socialist economy anyway while the next generation is brought up to hate capitalism because they think it is Wall Street, as if Too Big To Fail were capital itself.
In Federalist 51, James Madison wrote:
If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.
Central bankers believe themselves above such distinctions as if they were indeed angels, the modern incarnation of Platonic enlightened philosopher kings never held to such obligation or duty toward self-control and leaving only requirement to their own ideology. Kuroda’s words, for once, prove it in open declaration whereas it has already been proven in fact by continuous “stimulus” all over the world that doesn’t stimulate the slightest factor except continued deference to the idea of stimulus. Central bankers are not obliged, apparently, to notice the most obvious correlation of our time; that the more they do “stimulus” the less actual growth happens. The world did not suddenly forget how to grow, it has been buried by those that talk free markets and vote socialist. To think that so many young Americans think that is capitalism is plain criminal; not the least of which is that those same now turn to avowed socialism as their preferred answer to hidden socialism. For all the PR the Federal Reserve has done for itself (Great “Moderation”) on that count over the past few decades, in the end it is hard to blame these young people for thinking that way.
Central banks have proven by their own actions, not their words, that they will only allow “their” recovery which in the end means none. As I have written before, if they were given a choice of maintaining power and control but only leading to more lost decades, or stepping aside and being guaranteed a full and sustainable recovery, they would choose the former every single time. True global economic recovery is purely a political action now; central banks will not restrain themselves no matter how much their schemes backfire and create only more disruption and havoc.