Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, recently called for another, “more restrictive lockdown, state by state, for up to six weeks,” in order to “save lives, and save the economy.”
By “more restrictive,” Kashkari and his co-author mean, “mandate sheltering in place for everyone but the truly essential workers ….” Most people would be allowed to leave home only for “food shopping and visits to doctors and pharmacies while wearing masks and washing hands frequently.”
Setting aside whether six weeks of Vitamin-D deprivation will “save lives,” it’s not clear how another round of lockdowns — more restrictive than the last — can save the economy. As the authors noted, “an estimated 30 million Americans are (already) collecting unemployment.” How will those millions who are already unemployed — and the millions more who would likely become unemployed — survive? The same answer we’ve been given since government untethered the dollar from gold back in 1971: borrowing and spending.
We already know that Kashkari fully endorses this approach: back in March on “60 Minutes” he said, “there is an infinite amount of cash in the Federal Reserve. We will do whatever we need to do to make sure there’s enough cash in the banking system.”
In March we’d just tapped into that “infinite amount” of cash to the tune of $2.3 trillion. The debt has since grown by $3 trillion, bringing the total to $26.5 trillion. Nonetheless, Kashkari and his co-author say “traditional concerns about racking up too much government debt do not apply” today. Why? Because any borrowing can and will be financed by those who — unfairly in their view — have managed a savings rate of 20% during this crisis. “(W)e can finance the added deficits for COVID-19 relief from our own domestic savings. Those savings end up funding investment in the economy.”
By “investment in the economy,” he apparently means redistribution from the savings of some, to fund consumption by others, many of whom are being forced to stay home. How will this “end up” happening? Are prudent savers going to be asked to donate all or part of their savings to make this happen? Will savers choose, for patriotic reasons, to buy government bonds? Or maybe The Fed will finally succeed in transforming the dollar into one no one wants anymore.
Is it even possible today to make an informed choice about whether one wishes to donate (or “invest”) to make another, stricter lockdown financially feasible? The Centers for Disease Control and the World Health Organization currently control the narrative about the danger the coronavirus really poses to the average individual, as well as information about how one can mitigate that risk. There’s been an informational lockdown — enforced by government agencies’ allies in the media and established “social” media publishers — keeping us from evaluating our ongoing risk, as well as data about promising treatments or potential cures.
According to these authorities, we should all remain afraid, hopeless. Dare we say malleable?
Perhaps the Fed will go the route of the “gentle nudge,” steering financial policy so that nothing but government bonds offers any promise of return whatsoever, so any saver is all but forced to buy them? As it stands, MAGA+F seem to be propping up the entire stock market right now, keeping it at least flat overall. But another, stricter lockdown might decimate those, too, so that “savers” would be left with no choice.
With $26.5 trillion in debt, we’re already beyond the point where we can even hope to raise taxes enough to ever pay it back. How much more would Kashkari and his comrades plan to borrow without our consent during this round, while telling us the borrowing means (only!) that prudent Americans’ savings will “end up” being consumed by those forced not to work?
Medical professionals are learning about the “cytokine storm” arising in some who, when infected by the novel coronavirus, are already suffering from “metabolic derangement.” In just a few short months, they’ve even started to discover ways to prevent and treat it. Economists and central planners, by contrast, have been creating conditions of continually increasing monetary derangement since 1971. Perhaps, if Americans really appreciated the fiat-money storm that’s coming, we would muster the courage to demand a strict monetary lockdown: a plan to phase out The Fed — and the whole fiat money system with it.
In its place, we would have an honest form of money based on consent and trust (either Bitcoin, or a gold-backed currency impervious to debasement). Then, as a consequence, we’d have government spending on only those things that the taxpayers explicitly agreed were “truly essential.” And ordinary Americans could finally turn the tables on central planners like Kashkari, putting them out of a job. For a change.
(Jeffrey Wernick is the Parler chief operating officer and Amy Peikoff is the Parler chief policy officer.)
