The Beasts We Feed

By David Stockman  |  October 17, 2018

The damage done by the Federal Reserve to America’s political, economic, and social fabric is immeasurable. That might make it irreparable, too.

So, when I hear the Donald say, “My biggest threat is the Fed,” I have but line to give.

Brother, you should really know the road before you hit it…

The Donald of the campaign trail used to tweet-roast those responsible for bubbles and bailouts and Main Street’s destruction.

And he MAGA’d his way all the way to 1600 Pennsylvania Avenue.

Now – enjoying the glow of that bubble on Wall Street, settling into power in Imperial Washington – the self-described “low-interest man” in the White House is making yet another war.

And it’s not going to end well.

This is “irony”: Without the Fed, the Donald would still be in Queens managing the remnants of Fred Trump’s apartment portfolio.

He might be the biggest beneficiary of Bubble Finance on the planet. He owes his wealth to it, and he owes his power to it.

But he’s not the only one.

Indeed, one of his few potential rivals as poster-boy for Bubble Finance is actually similarly outposted in the Imperial City.

The Mainstream Media framed Amazon.com (Nasdaq: AMZN) founder and The Washington Post owner Jeff Bezos as the “good guy” a couple weeks ago when he announced his new $15-per-hour minimum wage for his warehouse workers.

The very same day, The New York Times had exposed the allegedly illicit, if not fraudulent, origins of “bad guy” Trump’s fortune.

First, let’s dump these simplistic white hat-black hat/good-versus-evil juxtapositions.

Both of these guys got fabulously rich as members of America’s Lucky Speculator’s Club.

Absent the mania fostered by the Fed’s easy money, Bezos would be worth a few billion, maybe, certainly not $140 billion.

And he’d be struggling to control labor costs in his e-commerce empire, not offering himself up for sainthood to the Bernie Sanders crowd.

Here’s the nature of our present duopoly: Bezos has already destroyed millions of U.S. jobs – and he’s the “good guy.”

Wall Street values AMZN at absurd levels because they’re fascinated by things like “Day 1” philosophies. Imperial Washington loves him because his newspaper says “Democracy Dies in Darkness.”

All that appeal to elite biases enables Bezos to mow down existing retail capacity at will because he can price like a predator and not worry about profits.

So, he proposes to bump wages by a couple bucks per hour.

Small retailers have already slashed prices to compete with Amazon. Now, they’ll have to bloat their wage bills to maintain high-cost service levels. That’s the only thing, in some instances, bringing people into their stores.

This is a formula for terminal margin squeeze. But you can’t attribute it to the workings of a free market.

Bezos’s $15 gambit is, in a word, bullshit.

Amazon can afford it because it doesn’t have to post any earnings to speak of.

And it will mean some modest income gains for the 50% of its work force that earned less than $28,000, or the equivalent of $14 per hour on a full-time basis, last year.

But this isn’t about “corporate responsibility.” Nor is there any real “social awareness” going on.

Bezos certainly signaled some virtues. But it’s just another way to kill competition and destroy Main Street.

And it’s aided and abetted – and encouraged! – by Bubble Finance.

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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.MORE FROM AUTHOR