Swan Song Of The Central Bankers, Part 2: Yellen’s “My Girl”

Swan Song Of The Central Bankers, Part 2: Yellen’s “My Girl” by David Stockman – Contra Corner

If you wonder why things are going to get a lot worse before they get better—just consider the following tidbit from today’s political gleanings. It essentially cements the case that Washington is heading straight into a bond market conflagration that will wreak havoc on the Wall Street end of the Acela Corridor.

It seems that the secret force inside the White House for Janet Yellen’s reappointment last year, and source of Trump’s favorable nods in her direction on several occasions, was none other than the scourge of the Yellen-loving Washington/Wall Street ruling class, Steve Bannon.

That’s right. In another new insider account of the Trump White House, we learn that:

…….the former White House chief strategist and nationalist standard-bearer revealed that he urged Trump to reappoint former Fed Chairwoman Janet Yellen….The former chief strategist had expressed concerns that a more hawkish Fed chairman could hinder economic growth.

“The Breitbart posse is in love with Janet Yellen. If we get behind her, that is the signal of signals — the realignment of American politics, ” Bannon told the book’s author, Bloomberg’s Joshua Green, in September, several months before he stepped down from the conservative media outlet. “Yellen’s my girl.”

As it happened, of course, Bannon got his walking papers. But Trump did end up with his “girl”, albeit attired in Jerome Powell’s trousers and tie.

Still, the implications are staggering: The cult of central banking has now thoroughly buffaloed politicians from one end of the ideological spectrum to the other. Apparently, even the most intellectualized voice of anti-establishment populism of recent times does not know that “low interest rates” are not a gift for the state to properly give; and most certainly not the key to sustainable long-term growth.

Indeed, if there were one single thing a Republican government could do to stop the nation’s slide toward economic stasis, it would be to liberate the delicate mainspring of capitalism—-the money and capital markets—-from the suffocating and deforming rule of central bankers. The latter have destroyed honest price discovery, yet free market pricing of credit, carry, capital and risk is the sine qua none of vibrant capitalism and broad societal prosperity.

To be sure, the mainstream GOP lost track of that cardinal truth decades ago during the reign of Richard Nixon. Tricky Dick famously slammed shut the US gold window at Camp David in August 1971, thereby defaulting on the US obligation to keep the dollar convertible at $35 per ounce and the world currency system anchored to the ultimate monetary asset.

But the subsequent drift to fiat currency, dirty floats and the massive, worldwide expansion of central bank credit wasn’t really Nixon’s doing—-even if it did, in the first instance, conveniently liberate the Fed to gun the US economy into Nixon’s short-lived landslide of 1972.

In truth, however, the evil genius behind the catastrophic error of Camp David was Milton Friedman, and his errand boy in Nixon’s cabinet, George Schultz. The two were apostles of the free market when it came to commodities, wages, rents, goods, services and most anything else including gambling, prostitution and drugs. But not money.

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.