Category Archives: capitalism

The Founder (2016)

A cynic might view John Lee Hooker’s portrait of Ray Kroc, The Founder, as an indictment of the American Dream itself. McDonald’s has come to signify everything illusory, toxic and and inhuman about American capitalism and idealism. Whether it’s Morgan Spurlock’s Supersize Me, Eric Schlosser’s Fast Food Nation, or any of the various #FightFor15 campaigns, the progressive Left has the fast food industry squarely in the crosshairs. Depending on the outrage du jour, the fast food industry is underpaying workers, poisoning the population with toxic food, contributing to the obesity epidemic, hastening the global warming crisis and propping up oversized agribusiness conglomerates. No other restaurant chain embodies all of this amoral rapacity, soulless industrialism, and ruthless expansionism more than McDonald’s. Of course, there is some truth to the charges leveled at McDonald’s and the fast food industry. However, as this film brilliantly illustrates, these qualities were features of Ray Kroc’s personality flaws and what he injected into the McDonald’s brand rather than design flaws in the fabric of American values or even the fast food industry.  

The Founder is a fairly straightforward historical biopic which, like its subject matter, succeeds on economical storytelling and tasty performances. It’s a fascinating story because it reveals how McDonald’s and fast food became synonymous with American values. More importantly, it shows how Ray Kroc deformed those values through his own ruthless ambition. 

Hollywood films often present their subjects through an ideological lens of progressive politics, and I suspect the filmmakers of The Founder had a similar aim. As long as you recognize that, the film presents some fairly decent lessons in market economics, industrial engineering of food production, contract law ethics, and brand building. The title of the film is very loaded because it draws up an assumption in your mind about its meaning. What Ray Kroc “founded” is not exactly what you might think.

Before McDonald’s, Ray Kroc was a mediocre traveling salesman trying to hock milkshake multimixers to the burgeoning fast food industry.  The drive in was the dominant model and it included features of the fast food experience that have been long consigned to the historical memory bin. Hamburgers and fries were served on washable dinnerware and delivered to your car by waitresses on roller skates. Ray Kroc had a mass market mentality, but no one in the middle American fast food business seemed to share it. His attempts to appeal to American ingenuity and Say’s Law fell on deaf ears.

Ray Kroc: But if ya had the Prince Castle, 5-spindle, multimixer… with patented direct-drive electric motor we’d greatly increase your ability to produce… delicious, frosty milkshakes, FAST. Mark my words. Dollars to donuts, you’ll be sellin’ more of those sons of bitches… then you can shake a stick at. You increase the supply, and the demand will follow… Increase supply, demand follows. Chicken, egg. Do you follow my logic? I know you do because you’re a bright, forward thinking guy who… knows a good idea when he hears one. So… What do you say? 

When Kroc receives an order for eight multimixers from a burger joint in San Bernardino, his hopes and curiosity intensify. Kroc arrives at McDonald’s and he is thunderstruck. He receives his order instantaneously, the wrappings are completely disposable, there’s no wait staff, and there’s a line of customers as far as the eye can see. However, all of this innovation came from the minds, sacrifices and work of Dick and Mac McDonald. Through a combination of ambition, courage, and Dick McDonald’s ruthless pursuit of cost savings and production efficiency, McDonald’s changed the fast food game for all time. Kroc is captivated and ingratiates himself with the McDonald brothers. 

Kroc pitches the McDonalds a national vision for the restaurant. The Golden Arches are more than just a visual brand; they are the symbolic glue between the Christian cross and the American flag. The McDonalds aren’t sold because they tried franchising the restaurant but couldn’t maintain quality control. Dick McDonald was a master of industrial food production and a capitalist through and through, but he didn’t want to lose control over the quality of the product. Being the more sentimental of the brothers, Mac sees a possibility for the kind of national success that eluded them and persuades his hard headed brother to sign a deal with Kroc.

Kroc returns to the Midwest with his sights set on complete domination. He makes appearances at Rotary clubs, churches and synagogues and begins recruiting families into the McDonald’s franchise with the fervor of an evangelist. Kroc may not have invented the food production system, but he did succeed in grafting the idea of McDonald’s to the psychological infrastructure of American ideals: family, opportunity, optimism. 

Despite his early success, his is unable to repay his business loans due to the small percentage allotted in his contract. He grows increasingly impatient with Dick McDonald’s insistence on quality control. Kroc really turns an ethical corner when he forms a real estate holding company at the advice of Harry Sonneborn.  By owning the land on which the franchises are built, he is guaranteed a larger revenue stream and capital base. Most importantly, it offers him leverage over the McDonalds. When he sees a possibility to cut costs with milkshake mix instead of real ice cream, Kroc sets himself on a collision course with the McDonalds. Kroc amasses enough power to buy his way out of his contract. Through the process, he kicks his wife of 39 years, Ethel Kroc, to the curb and courts the wife of franchisee, Rollie Smith. 

The film tips its partisan hand in a final scene which shows Kroc rehearsing a speech he’s preparing for an event in which Governor Ronald Reagan is scheduled to attend. Kroc is rehearsing all of the catch phrases and appeals to American ideals he perfected during McDonald’s ascent. When he finally approaches the part of the speech involving the first restaurant, he stammers and stumbles. Yes, we get it, folks. Republicans are shallow hypocrites who don’t uphold the ideals they espouse. But that’s a little too simplistic. Kroc won the McDonald’s enterprise, but he sacrificed its soul in the process. He took Dick McDonald’s industrial food production innovation and replaced it with a ruthless Benthamism. The McDonalds were the Jeffersonian capitalists who wanted to keep their idea regional and decentralized, but Kroc was the Hamiltonian who wanted a strong national identity for McDonald’s.

If you walk away from The Founder with the impression that American capitalism and idealism are false and hollow, you bought the cynicism that Hollywood is always selling. Fortunately, it’s a film that I believe has more meat on its bones than the average agitprop shit sandwich. Corruption, soulless industrialism, megalomaniacal ambition and hollow appeals to nationalism aren’t inextricably linked to capitalism. If that’s what the business is projecting into the world, that says more about the values of the individuals behind it. In the case of McDonald’s in its contemporary incarnation, the blame for these phenomena lies squarely at the feet of Ray Kroc. The McDonald brothers embodied American idealism without any grandiose speeches or national ambitions. Capitalism takes on the characteristics of the individuals behind it, and McDonald’s was ultimately hijacked by a particularly ruthless individual.  If there’s any overriding message of The Founder, that is surely it.  


Ben Mezrich: Once Upon a Time in Russia

Once Upon a Time in Russia is Ben Mezrich’s highly entertaining and informative account of the rise of the so-called Russian oligarchs who accumulated power after the collapse of the USSR. The allusion to the American Wild West is intentional since the period chronicled was nothing short of a seismic shift in Russian society. The story centers around the ascent of two of Russia’s most ambitious oligarchs, Boris Berezovsky and Roman Abramovich, and the complex web of power they wove in order to attain their respective positions. Within this sticky mass are dueling loyalties, inverted moral expectations, and internecine turf wars within and without the government. The book is refreshing because it opens a window of insight into the rise of private industrialists in a country which was (is) highly secretive and outlawed private industry for decades. Though it was certainly not as bloody and repressive as the Bolshevik regime, it was a period filled with plenty of violence and political intrigue in its own right.  Like Mezrich’s other novels, Once Upon a Time in Russia was culled from exclusive firsthand accounts of events, but it reads like a hardboiled political thriller/gangland novel.   

Imagine being an entrepreneur attempting to obtain some semblance of security for commerce and property rights after living under the bootheel of a corrupt kleptocracy which terrorized its own population for 70 years and you get a small sense of the challenges these men faced. Some people are likely to view the oligarchs as the corrupt gangsters who destabilized and terrorized, but in my estimation, this book paints a more nuanced picture. The new, quasi-liberal order in Russia was very fragile, and the only way they could push back against the resurgent Communist Party was buy patronage from the the Yeltsin government. 

You know you’re in for a juicy tale right off the bat. The book opens with a meeting of the oligarchs hosted by Vladimir Putin at none other than Joseph Stalin’s Moscow dacha.  Dashing all hopes that they had just bought themselves a yes-man, freshly installed president, Vladimir Putin, chose an appropriate venue to send the message that the oligarchs were subordinate to the Russian government. Not vice versa.

The story kicks into gear by taking us back to the beginning of Berezovsky’s story.  An assassination attempt on Berezovsky leaves him badly burned, his driver dead and his car a bombed out slag heap. Since he couldn’t get any business done without security, he enlisted the services of FSB agent, Alexander Litvinenko, and became what’s known in Russia as a krysha or “roof”. Taking private money under the table for security work was considered illegal, but given the porous nature of the state institutions in the early days of the newly liberalized Russian Republic, people were often willing to look the other way.

With Abramovich’s partnership and protection from Litvinenko, the two oligarchs set out to consolidate ownership of aluminum, oil, and most importantly, television. The remainder of the story weaves its way through the Yeltsin and Putin regimes as the oligarchs compete for political influence in the new and very tenuous capitalist order. It’s a race for survival and economic power, but the fate of the recently freed Russian economy hangs in the balance.  

As Berezovsky’s influence grew, his ties to Litvinenko came under scrutiny of the bureaucrats in the FSB who had ties to his political enemies and commercial rivals.  Litvinenko was ultimately given an order to execute Berezovsky, but couldn’t betray his trust or patronage.  Berezovsky used his growing influence to unseat the director of the FSB and replace him with an individual he believed to be a reliable yes-man: Vladimir Putin.  How much they had to learn about this former KGB administrator.

After Putin’s election, Berezovsky grew frustrated by his betrayal, and used his own influence in the Russian television station, ORT, to undermine public confidence in Putin. Berezovsky shamelessly exploited the Kursk submarine incident and attempted to make a random military accident a referendum on Putin’s leadership. This overt act of vindictiveness and dissidence forced Putin’s hand resulting in Berezovsky selling his shares in ORT and being exiled from his home country.   

Berezovsky’s antagonism towards the Putin regime threatened the stability of Abramovich’s active interests in oil and aluminum in Russia which sets the former krysha/protege relationship on a collision course.  The escalating tensions between these former business associates culminates in a civil suit over Berezovsky’s claim on assets accumulated during the active years of their partnership. 

Mezrich’s narrative seems to stick to the facts, but he compromises his own objectivity when describing the failing Communist regime as “right-wing”.  Communism is an ideology long associated with the political Left, and the Soviet Republic was, in fact, Marxist doctrine taken to its logical conclusion.  Throughout the book, he refers to Communist hardliners as “conservatives” while describing capitalist reformers as being for “democracy”.  Besides the fact that it distorts the historical legacy of European classical liberalism (and American constitutional conservatism by extension), he’s feeding the standard Right/Left false dichotomy of American politics which places the Left on the side of virtue, reason and decency and the Right on the side of authoritarianism, thuggery and resistance to change. Lenin believed in democracy, too, and it ultimately amounted to nothing. Democracy and economic freedom do not necessarily go hand in hand, and the American Left have more and more in common with the Bolsheviks with each passing election cycle as Bernie Sanders’ campaign amply attests.

Though it’s a minor detail, Mezrich also betrays his bias in his passing mention of Litvinenko’s conversion to Islam and apparent sympathy towards the Chechen Muslim separatists.  Litvinenko’s story certainly wasn’t the focus of the novel, but given the ever increasing prevalence of Islamic terrorism as well as the intensified focus on the connection between Islamic belief and acts of terror, Mezrich missed an opportunity to anchor this story more firmly into the debates of the present.  

Minor flaws notwithstanding, Once Upon a Time in Russia is an entertaining read which shines a light on a slice of history which, like Russian Communism itself, remains largely unknown to America and the West. Highly recommended.

The Big Short (2015)


Despite its own blatant obsession with profits and artifice disguised as substance, Hollywood has been deeply unkind to Wall Street in its films. It’s unsurprising given the fact that liberals have colonized Hollywood and an overwhelming majority of films and television shows have varying quantities of leftist editorial.  You’d assume they’d be nicer given that plenty of Wall Street hedge fund money flows into Hollywood. Perhaps the tone of reproach and recrimination that forms the backdrop of The Big Short can be attributed to Wall Street’s increasing reticence to fund Hollywood ventures. Regardless, The Big Short is filled to the brim with contempt for banking and partisan agitprop.

I went into the cinematic adaptation of The Big Short expecting it to have the same editorial flaws as the book and these expectations were confirmed. Unfortunately, the film exceeds the dishonesty of the book and makes additional errors which alternate between rehashing thinly veiled leftist talking points and acts of blatant deception. And the book is plenty dishonest all by itself.

Why grouse about it?  Because the film, like the book, wants to have its cake and eat it too. It wants to be big Hollywood entertainment while simultaneously convincing you that it’s being honest with you and giving a definitive, fact-based account of the housing crisis. It’s a movie that wants you to believe that it is a Smart, Hollywood Movie made by Smart, Educated People Who Get It and it’s exposing that stuff you always assumed was a bunch of shit, but it’s really here to confirm your bias! See? The New York Times and the Wall Street Journal agree, too!

The film deploys a number of techniques to insinuate its truthfulness. Just like House of Cards, The Big Short makes generous usage of the dramatic aside. The actors deliver little monologues directly to the audience which refer to the actual historical events to let you know that you’re being admitted into a circle of confidence and being given the straight dope.

In the book, Michael Lewis offers little explanatory passages throughout the book to help the reader understand the actual instruments and transactions being discussed. In the film, they use celebrity cameos and snarky text blocks. They’re lifting the veil of secrecy and demystifying all that Wall Street technobabble! Margot Robbie explains CDO tranches while luxuriating in a bubble bath! Anthony Bourdain makes an analogy between CDO’s and fish stew made with aged ingredients!  Selena Gomez breaks down synthetic CDO’s while playing blackjack! How droll!

Bear in mind that the film isn’t without entertainment value. Director Adam McKay has a track record in comedy and he wisely sought to emphasize the book’s bleak humor. As a piece of entertainment, The Big Short is a Wall Street movie that at least has a little fun with an admittedly gloomy topic.  I just wish it was as substantive, informative and morally righteous as its cheerleaders claim. 

The film’s partisan bias surfaces right away.  In a voiceover delivered by Jared Vennett (Deutsche Bank trader Gregg Lippman IRL), Ryan Gosling takes us back to the heady days of Salomon Brothers in the late 70’s and early 80’s where the mortgage-backed security had its humble origins.  We’re introduced to Lewis Ranieri, the presumed father of the MBS as recounted by Michael Lewis in Liar’s Poker.  Before mortgage securitization, Vennett says, banking was a boring profession. It was inhabited by losers. It was devoid of this absurd speculation with Byzantine instruments and impenetrable jargon.  It was boring. You got that, proles? Banking used to be boring.  Let’s make banking boring again, Comrades!  If only there was a politician with those aspirations.

The film also shamelessly deploys some blatantly partisan semantic dogwhistles. In Vennett’s initial pitch to FrontPoint Partners (the hedge fund run by Mark Baum who was played by Steve Carrell), he uses a jenga tower to explain the CDO. In his explanation, he says old fashioned mortgage-backed securities were backed by the government and were safe. But then along comes private market subprime bond securitization which introduces all these risky instruments into the system! Got that, proles? Government = safe and boring. Private market = unregulated, risky, unbridled, rapacious greed

If only it was actually true.  Let’s take a look at what Cameron Cowan of the American Securitization Forum had to say to the House of Representatives Subcommittee about the role of legislation and GSE’s on the expansion of the subprime mortgage securitization market back in 2003:

As part of the Tax Reform Act of 1986, Congress created the Real Estate Mortgage Investment Conduit (REMIC) to facilitate the issuance of CMOs. Today almost all CMOs are issued in the form of REMICs. In addition to varying maturities, REMICs can be issued with different risk characteristics. REMIC investors—in exchange for a higher coupon payment—can choose to take on greater credit risk. Along with a simplified tax treatment, these changes made the REMIC structure an indispensable feature of the MBS market. Fannie Mae and Freddie Mac are the largest issuers of this security.

Add to this home ownership mandates from HUD, the FHA and pieces of legislation like the Community Reinvestment Act, and you’ve got a pretty clear set of government mandates and incentives which provided more than enough fuel for a housing bubble.

The film is playing a very simple game of misdirection. Just because subprime mortgage bonds were underwritten by private institutions does not mean that private institutions created the conditions for the housing bubble.  Both the film and the book make no effort to distinguish between mortgage loan origination and securitization and the moral hazard that accompanies this separation. 

Just like the book, the film turns a completely blind eye to the role that monetary policy played in inflating the bubble. In a particularly revealing scene, a Goldman Sachs employee informs the “garage band hedge fund”, Cornwall Capital that they can buy credit default swaps because “If you give us free money, we’ll take it.” 

Of course, the filmmakers wanted to portray the dirty, evil greedy bankers as unscrupulous thieves.  But if you just reorient that statement and apply it to the relationship between the Federal Reserve and the banks, it’s actually remarkably accurate.  The Fed dispenses “free” money, and the banks take it

The film’s biggest partisan offense is McKay’s decision to swap Cornwall’s visit to the SEC with a visit to the Wall Street Journal. Cornwall wanted to expose the imminent housing collapse and they made their initial pitch to the press. In the film, their pleas are met with indifference by a Wall Street Journal reporter who’s so deep in the tank with the bigwigs, he can’t jeopardize his position to do the right thing.  Of course! Those bootlickers at the Journal aren’t going to have any courage. They’re toadies for the bankers! They were completely oblivious to the possibility of a housing bubble!

In the book [1] however, the WSJ connected them directly with the enforcement division of the SEC. And guess what?  Their case was treated with total indifference. 

They tried to make up for it in a scene involving a female college friend recently departed from the SEC.  In a poolside conversation at an extravagant industry conference in Las Vegas, the former SEC employee is basking in the sun in a sexy bathing suit listening to the impassioned pleas of Jamie Shipley and Charlie Geller. She confides that the SEC wasn’t pursuing enforcement actions because the funding dried up. 

Come on, guys. This is a bald-faced lie. Not only did SEC enforcement actions escalate during the Bush administration with nothing to show for it, but SEC agents were busy watching porn when the economy cratered. The SEC are not exactly the indispensable watchdogs that many politicians would lead you to believe.

They even sneaked in a line of incredulity when their friend flirts with a shirtless hunk from Goldman. “You mean there isn’t a law which prohibits you from seeking employment in the private sector?!”

Yes, we get it, McKay. You’re doing your best to include all the requisite talking points.  

Topping off this turd pile of talking points is the parting speech Mark Baum gives as he’s persuaded into selling FrontPoint’s position in credit default swaps just as the economy grinds to a halt. He anguishes over the decision because he knows that the crisis will be blamed on “immigrants and minorities.”  That’s right, you dirty conservative bastards.  Not only do you sanction unscrupulous Wall Street thievery, but you’re xenophobes and racists and you’ve screwed everything up for people who are just trying to get a modest piece of the American Dream.  Now shut up and get in line. 

The book and the film are remarkably unwilling to assign any real criticism towards the government. Both Lewis and the filmmakers seem intent on having you believe that the government played no role in encouraging mortgage securitization, home ownership, leveraged finance or excessive household debt.

In the last scene, Mike Burry as played by Christian Bale is typing up his final letter to his clients after banking $720 million from credit derivatives. In a voiceover, he inveighs against fraud and following authority.  On the surface, it’s a powerful screed, but like the remainder of the film, it’s shallow and slightly misleading.

Surely, we should repudiate fraud in business dealings, but if you aren’t going to discuss government fraud or how it contributes to a culture of fraud, the moral lesson seems unnecessarily selective and intellectually dishonest.  Unquestioned deference to authority is something that each person should challenge, but if your story about the 2008 financial collapse doesn’t question any government authority and heaps all of the blame at the feet of Wall Street, you might just be a partisan hack. 

[1] p. 166, The Big Short

Henry Hazlitt: Economics in One Lesson


This book holds a vaunted status amongst libertarians. Not only does it live up to its reputation, it’s a damn shame that this isn’t the go-to text for anyone seeking a rational and clear-headed approach to economics. 

Hazlitt builds his case by taking the central fallacy found throughout mainstream economics. This fallacy was famously revealed in the Frédéric Bastiat parable, That Which is Seen and That Which is Unseen, and he proceeds to apply it to each realm of economic life. By applying this logic, he demonstrates how the various manifestations of government intervention destroy wealth, savings, and positive incentives to work and produce.  

Stated very simply, the lesson is this: the effects of economic policy cannot be evaluated in terms of its effects on one group, but on all groups. 

Not only do these fallacies persist, but they are accumulating strength and being accorded cultish deference. 

Hazlitt covers all the bases in his analysis. He opens with the one-two punch of the fallacy of destruction followed by a withering exposé of the production disincentives resulting from taxes. Hazlitt runs a steamroller of truth over every conceivable government policy initiative and deformation. The effects of automation, subsidies, loan guarantees, tariffs, trade quotas, industrial policy, price fixing, rent control, minimum wage, and inflation are all explored. 

The opening chapter exposes the perverse obsession with destruction as an economic incentive that persists to this day.  One only needs to peruse the pages of Rolling Stone to find this doctrine in the insufferable moronic blathering of Jesse Myerson. He openly praises rioting as some kind of economic boon and mutates the broken windows fallacy into an ugly article of faith.

The chapter pertaining to the rise of automation is particularly fascinating since fantasies of a “post-labor” economy are gaining traction in the media. The widespread belief of the imminent arrival of a world in which robots displace human labor hinges on the assumption that there is a finite amount of work to be done in the first place. Or perhaps the public fails to grasp the role price floors on labor may have played in hastening the creation of the automation in the first place.  Either way, the belief of a Star Trek-like world of plenitude has taken root. 

On the issue of free trade, Hazlitt argues that people are correct to be suspicious of free trade agreements like the TPP and NAFTA, but are mistaken to attribute any benevolence to the very idea of a managed trade agreement in the first place. Especially if it’s cloaked in gauzy rhetoric about workers and the environment.

Just what the government planners mean by free trade in this connection I am not sure, but we can be sure of some of the things they do not mean. They do not mean the freedom of ordinary people to buy and sell, lend and borrow, at whatever prices or rates they like and wherever they find it most profitable to do so. They do not mean the freedom of the plain citizen to raise as much of a given crop as he wishes, to come and go at will, to settle where he pleases, to take his capital and other belongings with him. They mean, I suspect, the freedom of bureaucrats to settle these matters for him. And they tell him that if he docilely obeys the bureaucrats he will be rewarded by a rise in his living standards. But if the planners succeed in tying up the idea of international cooperation with the idea of increased State domination and control over economic life, the international controls of the future seem only too likely to follow the pattern of the past, in which case the plain man’s living standards will decline with his liberties.

His analysis of minimum wage is as elegant a refutation of minimum wage as you’ll ever read.  He argues that the minimum wage is more correctly viewed as a minimum price law.  If the price of labor is artificially raised, the price of production is raised. Populist politicians always attempt to sell minimum wage law as a boon for low skill labor and ignore the adverse effects.  Sadly, the fervor for this boondoggle remains as strong as ever.

The most potent analysis by far is the section dealing with inflation.  As we enter our 10th year of ZIRP administered by our allegedly benevolent overlords at the Fed, the ill gotten gains and economic perversions abound. While politicians beat the drums of hate and envy, they draw more support for further expropriation as a corrective. 

Economics in One Lesson is a timeless classic and the lesson contained in its pages burns with even greater urgency. It’s easy to look at the current state of affairs and despair, but Hazlitt ends with an optimistic note. The principles for which Hazlitt fought are indeed proliferating, but the voices agitating for socialism grow louder as well. The best defense against the lazy and callous recriminations of apparatchiks and statists is this righteous lightsaber of reason left for us by a Jedi master of economics. 

William Grieder: Secrets of the Temple


William Greider’s 1987 opus, Secrets of the Temple, is a remarkable investigation of the Federal Reserve which covers a lot of ground. It is an essential document of the modern history of the Federal Reserve which takes us inside the Fed under the leadership of Paul Volcker. It is a fairly extensive summary of the events, people and ideas which shaped the creation of the Federal Reserve. It is also an occasionally muddled and partisan analysis of the effects of central banking on the economy. Greider weaves all of these threads together to form a grand narrative which reaches back to the Middle Ages up to the heights of the Reagan administration. Perhaps most importantly, he exposes the policy actions and interventions which drive the boom-bust business cycles largely perceived as “capitalism”.

Greider reveals the impact of an institution which sits squarely at the center of American finance and politics whose power and primacy goes mostly unchallenged. Though Greider is no libertarian, his book validates libertarian arguments by uncovering several absurdities and deceptions in central banking and fiat currency. The deformations of central banking aren’t limited to the perverse incentives it breeds in the economy. Both parties have capitulated to the cult of monetary policy. The effects of regulatory capture within the Fed and its subsequent failure to regulate the banking industry it oversees are additional problems brought to light. He also exposes the illusion of an institution allegedly immune to partisan politics and pressure. Not only does the Fed fail at achieving its stated aims, but it aids and abets the banking cartel which owns it. Rather than mitigating the shocks of the business cycle, it exacerbates moral hazard and amplifies risk. It incentivizes speculation, misallocation and overconsumption. It destroys price discovery and capital formation, fuels the warfare/welfare state which feeds from it and aggrandizes the power of the State at the expense of the average citizen.

The book opens by describing the political and economic climate of 1979 which drove Jimmy Carter to makes his national appeal for sacrifice. The Iran hostage crisis, the OPEC oil embargo and record inflation were white hot political fires for which Carter was ill prepared.  From there, we enter the corridors of power on Capitol Hill travel through the canyons of Wall Street and take a seat inside the inner sanctum of the Eccles building. Using direct accounts from insiders, the negotiations and actions which shaped history are revealed.

This book is a rare feat from a liberal. It’s a polemic that addreses monetary policy and the role it plays in shaping economic outcomes and policy initiatives. Greider’s level of intellectual honesty remains very high while demonstrating the subordinate and deferential role party politics play in relation to Fed actions. There is a lot to praise in this book. Despite his pretensions of espousing radical thought, the conclusions he draws have proven themselves ineffectual.

Far and away, the most significant achievement of the work is the unveiling of the cultish mysticism which surrounds the Fed. He uncovers what I believe is the fundamental deception at the heart of all state power; the intentional conflation of statecraft with divine powers of insight and benevolence to lead the unwashed masses.

Richard Syron, former vice president of the Boston Fed and special assistant to Paul Volcker, likens the Federal Reserve to the Catholic Church:

The System is just like the Church.  That’s probably why I feel so comfortable with it. It’s got a pope, the chairman; and a college of cardinals, the governors and bank presidents; and a curia, the senior staff. The equivalent of the laity is the commercial banks. If you’re a naughty parishioner in the Catholic Church, you come to confession. In this system, if you’re naughty, you come to the discount window for a loan. We even have different orders of religious thought like Jesuits and Franciscans and Dominicans only we call them pragmatists and monetarists and neo-Keynesians.

Greider elaborates further:

But the Federal Reserve did also function in the realm of religion. Its mysterious powers of money creation, inherited from priestly forebears, shielded a complex bundle of social and psychological meanings. With its own form of secret incantation, the Federal Reserve presided over awesome social ritual, transactions so powerful and frightening they seemed to lie beyond common understanding.

He sums it up pretty effectively with one elegant sentence:

The money process, nonetheless still required a deep, unacknowledged act of faith, so mysterious that it could easily be confused with divine powers.

Herein, I contend, is the secret behind the great confidence game called fiat currency to which we so willingly submit.  Money has value because the almighty government say it does, Citizen.

In a subsequent chapter, he unravels the psychological and religious symbolism associated with money fairly convincingly. He traces money’s origins back to the Catholic Church. The observations of Marx, Veblen, and Freud are given an airing. Money’s mythic connections to the devil, including a theory tying it to the excrement of a child, are also considered. Since money was formerly controlled by the church, it was used primarily to instill guilt and control the masses. It’s little surprise that politicians and religious leaders are still keenly attuned to the psychological symbolism of money and exploit the guilt inducing power to their own ends.


Another one of the great masterstrokes of the book is how he reveals Democratic establishment’s utter fealty to Fed orthodoxy. Central banking has its origins in Progressive Era “reform”, and even if inadvertently, the Fed is exposed as a pretty blatant form of socialism.

The Federal Reserve is very much a product of Democratic policy. It was created by Democrats and has been shepherded by Democrats through the years. The responsibility for the creation of state sanctioned institutions which have polluted and deformed the incentives of the market and enshrined a culture of cronyism lies squarely at the Democrats’ feet. It is more than a little ironic that the party which actively foments antipathy towards capitalism and trades in on populist anger bears responsibility the current state of affairs. In his own words:

The Federal Reserve was, more profoundly, an important prototype for the modern liberal state. For the first time, a governing arrangement would explicitly mix public and private interests in a manner that was elaborated many times later in different ways.  However inadvertently or reluctantly, the creation of the central bank committed the federal government to a direct role in managing the private economy, and, once involved, it could no longer pretend to be aloof. It was, in fact, the beginning of the end of laissez-faire.

The conspicuous silence and knee-jerk defensiveness on all matters of monetary policy explains the ascendancy of a party which panders to the sensibilities of the working class and disaffected. The Democrats are happy to cater to the demands of the banking sector when the campaign coffers are lined.

A big turning point for the Democrats which illustrates this phenomenon was their role in passing the Monetary Control Act of 1980.  This law paved the way for a myriad of deformations. The abolition of Regulation Q disincentivized savings and increased speculation in the market. Regulatory capture of the Fed and moral hazard all increased as a byproduct of the deposit insurance limits for member banks.

The incident that perfectly captures the Democrats’ ignorance, mendacity and manipulativeness around monetary policy is Robert Byrd’s impotent attempt to rally legislative support to rein in the Fed in the wake of the 1981 contraction. The Balanced Monetary Policy Act of 1984  was simultaneously toothless, half-hearted and calculated. Nowadays, Democrats seem content to grill the Fed Chairman in committee simply to get a few sound bites worth of righteous indignation which can be transferred to a propaganda meme.  By conveniently sidestepping monetary policy, the Democrats focus exclusively on the perverse side effects and then shamelessly ply on populist fears and prejudices in order to accumulate more power for themselves. Whether it is actual or willful ignorance, intentional deflection or all three, the Democrats’ refusal to engage with issues of monetary policy reveal a party so craven in its lust for power, it is nothing less than a vile pathology.

He also gives a brief but detailed account of the formerly dueling orthodoxies of Keynesian fiscal stimulus versus Chicago school monetarism.  Two views which once represented two opposing poles in an ideological spectrum have joined forces in a harmonious union to stoke aggregate demand and create a “wealth effect”.

As Nancy Teeters, Jimmy Carter’s “liberal” appointment to the Board of Governors and doctrinaire Keynesian confirms:

I think I’m very much a central banker now. You’re in a position where your views on money, credit and banking are not really a reflection of your political party or your positions on economic issues. It’s not really a political job. I understand the whole milieu of what we’re doing, the continuous decisions, the mystique of central banking.

Bless you, Child.  The Lord will shower you with blessings for your service to His House.

Throughout the book, Greider repeatedly tries to draw a contrast between Volcker’s monetarist “restraint” and Teeters’ “courageous” Kenynesian desire to open the spigots, but it comes across as more partisan propaganda. As the past ten years alone of Fed policy attest, Volcker’s discipline feels like a modest attempt to stave off the parasitic addiction to monetary crack on which the banking sector so hungrily feeds.

Worse still, the bureaucrats are pretty open about the internal pressure to conform to the institutional orthodoxy based on salary increases.

Larry Roos, former president of the St. Louis Fed explains:

These are very real influences on how vociferous a Reserve Bank President is going to be about dissenting. It’s subtle, but it’s real. If one is a young, career oriented president who’s got a family to feed, he tends to be more moderate in his opposition to the governors than an older person like myself who’s more independent.

Excellent!  Pursue a career at the Fed so you can agree with the prevailing opinion of your superiors!

The details of Arthur Burns’ tenure are just as bleak.  By all accounts, Burns was a craven, manipulative autocrat who was intolerant of independent thought and was unafraid to manipulate both numbers and the will of his subordinates in order to get his way.  When the Carter administration was elected, he switched his demeanor and became an obsequious sycophant.

This culture of groupthink also resulted in regulatory capture.  The bank lending to LDC’s in the early 80’s and the subsequent squabbles over leverage and capital ratios eerily mirrors the squabbles over the same phenomena which arose in the wake of the 2008 collapse.

The Federal Reserve, for all its legendary power, behaved in this crucial matter much like other regulatory agencies of the federal government. It yielded to the ambitions of the industry it was supposed to regulate, instead of enforcing the larger public interest. Federal Reserve officials might worry that the largest commercial banks, the Fed’s primary constituency, were pursuing a dangerous course, but the Fed lacked the will to discipline them.

Greider never defines “public interest”, but complete intellectual honesty and philosophical consistency is apparently not his aim.

Despite his hackneyed and pious recriminations, his account of the collapse and bailout of Continental Illinois in 1982 foreshadows the collapse 2008. It further reinforces the perception that the Fed creates moral hazard and has no real ability to prevent reckless leverage or lending activities.  The playbook of events was a microcosm of everything that came to pass in the collapse of 2008 only on a much bigger scale.  Small bank borrows heavily from the Fed to finance some risky wildcat oil and gas deals, sells the loans upstream to some bigger banks resulting in “systemic risk”, FDIC and Fed step in to engineer a bailout in order to forestall additional panic. Debates between bureaucrats ensue with the head of the FDIC arguing for allowing a collapse and Volcker and dittoheads basically insisting that the government must forestall the impending financial contagion.  Sound familiar?

What is equally staggering about this account is the sheer folly of central planning. Chapter after chapter, one is left with the distinct impression that these alleged philosopher kings are simply megalomaniacal ideologues making it up as they go. If they aren’t kowtowing to political pressure, cloaking their actions in obfuscatory smokescreens or in the thrall of groupthink, they often seem to have no fucking clue what they’re doing. It’s as though they’re playing a game of economic whack-a-mole. Tighten here and hope for the best.  Loosen there because the first move didn’t produce the desired outcome. Should the Fed focus on money supply growth or GDP targets? Can the Fed accurately measure money aggregates? If the outcome produced perverse incentives, the administration would impose controls to offset the effects.  Rinse, repeat. His account of the disastrous credit controls and the subsequent erratic attempts to loosen the money supply in the run up to the 1980 election illustrates this phenomenon perfectly.

Despite all that is revealed, Mr. Greider is a liberal and his pro-statist bias surfaces on many occasions.

Greider is certainly not unbiased in his analysis of monetary history. Despite his expert deconstructions of the Fed and the illusory power it wields over the money supply, he takes a pretty standard view on numerous issues. He takes a standard post-Keynesian view that an inelastic hard money base is incompatible with an expanding economy and that deflationary cycles are always bad. He cites Lincoln’s expansion of the money supply with government specie to finance the Civil War as salutary, but describes the subsequent contraction and return to hard money as a catastrophe.

Though he appears to concede that the Fed induces business cycles, he seems totally fine with price controls and other fiscal countermeasures to offset the effects of monetary policy.

The 1981 inflation, for instance, was driven by escalating prices in oil and agriculture, both of which might have been contained temporarily by direct controls and other aggressive government policies. Some people would have been hurt but far fewer people.

His passing mention of the Fed’s role in fueling the run up of asset prices which lead to the crash of 1929 is remarkably casual and blasé:

The surplus money flowed, instead, into financial markets-artificially inflating financial values and fueling the run-up of stock prices that ended abruptly in the autumn of 1929.

My goodness. It’s almost as if history is repeating itself, isn’t it?

So just remember these rules, kids.  Money is illusory, and it’s evil. Proponents of hard money are evil and deflation is bad.  But government driven money supply expansion to finance war helps the middle class. And a Fed fueled frenzy of speculation which leads to a crash?  Nothing that can’t be mitigated by a few government controls or better policy if the Right People are in charge.

He even manages a very subtle, but very insidious inversion of conventional outlooks towards libertarian thought.  He takes the view that the credit boom of 1830 unleashed by the Jackson administration ushered in unprecedented capitalist progress.  At the same time, he cites Bray Hammond’s comments on this these actions as “reckless, booming anarchy” and appears to frame them as the sentiments of regressive, hidebound ideologue.  But it was this so-called “anarchy” which produced “fundamental progress” according to Greider.  While this concession towards the creative energy of capitalism is an admission one rarely hears from liberals these days and hardly an expression of anarchy in any way that modern libertarians advocate, he’s also validating the virtues of the expansion of credit by government fiat.

Another loathsome manifestation of his statist bias surfaces in his lionization of Charles W. Macune and the Texas Populists.  Aside from his laughable and contemptible reference to Keynes’ praise of the latter as “a brave army of heretics”,  he lays his cards on the table by saying that the government was “the ultimate guarantor of the future” which derives its power from the “mutual consent given by all.”

Bravo, William Greider.  Apparently, all heretical, transgressive and radical thinking are the product of seeking solutions from the institution which possesses the power to initiate violence. No, wait. I meant to say THE MUTUAL CONSENT GIVEN BY ALL.

He starts to pour it on thick in recounting the ascension of Marriner Eccles, the Republican Mormon from Utah who ran the Fed during FDR’s years, into the halls of power.

Greider claims that “Eccles had the uncommon courage to articulate this thinking before it became fashionable”.

Apparently, his “courage” amounted to vigorous support for the array of government fueled demand-side spending that was eventually codified in Keynes’ General Theory before Keynes’ famous work was even published.

Greider portrays Eccles as the true architect of the New Deal.  He lays out the entire contemporary progressive economic playbook. Everything from minimum wage to mortgage financing were included in his confirmation hearing and the FDR administration were more than happy to carry it out. The progressive economic playbook hasn’t really changed since then.

His analysis of the origins of so-called “supply side” economics is deeply partisan.  He makes repeat mentions of Andrew Mellon’s advocacy of lowered tax rates for the wealthy, but fails to mention that both JFK and Keynes advocated similar policies. He rationalizes the Reagan deficits and tax cuts and the attendant stimulation of aggregate demand as an inversion of Keynesian theory. However, he also fails to mention that Reagan’s expansion of the warfare state was in and of itself inherently Keynesian. It was simply an application of the theory which didn’t fit the progressive narrative or agenda.

His repeated conflation of hard money advocacy with “conservative” statist economic policy is also particularly odious.  Not only does he insinuate that Reagan’s closet belief in the gold standard was linked to the tax cutting agenda he eventually pursued, his portrayal of Jude Wanninski as a ideological zealot who infected the thinking of the administration reeks of partisanship.

He was a relentless advocate for gold. He was a close adviser to representative Jack Kemp and other conservative reformers. Now, with Ronald Reagan in power, Wanninski kibbitzed his friends in the White House and at the Treasury and and even dined infrequently with the chairman of the Federal Reserve. No one could say whether Wanninski had any influence on government policy, but important people listened to him.

And it doesn’t stop there.

These fetid piles of shite are further surpassed by his revolting attempts to inject gender politics into his argument.  He argues that Volcker’s policy of tough medicine in 1981 was somehow the product of the masculine culture at the Fed. He cites the theories of unnamed feminist critics and refers to some generic tendencies in women to be more attuned to compassion and negotiations.  He caps off this steaming pile of fecal matter by referring to Nancy Teeters’, the sole hardline Keynesian, as the lone voice of dissent in that time whose “bravery” in advocating for looser money would have forestalled economic devastation.

That’s right, proles.  The appointment of Janet Yellen has COMPLETELY changed the nature of the Fed. The policy initiatives are BRAND NEW in contrast to her male predecessor.

By Greider’s logic, she’s ushered in a whole new standard of idiotic pandering dressed up as compassion which we can totally attribute to the fact that she has a uterus.

Where’s Carmen Segarra when we need her? Clearly, we need a True Government Heroine.  Preferably, a strong womyn POC, too.  Because everyone knows that power is totally transformed by genitalia and skin color.

His most nauseating cop out by far is his idiotic and contemptible conflation of religion and free market economics.  Sadly, it’s a belief firmly held amongst progressives to this day, and somehow, the unclouded belief in the State is accorded total deference and escapes this very analysis.

Every important economic theory, one could say, relied upon an unstated subtext drawn from religious convictions. To declare correct principles for the functioning of the economy, one would first have to make certain assumptions about the larger nature of life itself-about God’s purpose and humanity’s obligations and the moral law that derived from the relationship of deity and mortals.

Perhaps it would be useful to examine how this analysis applies to progressives’ relationship to the STATE, Bill.  But no.  He pushes this moronic nonsense even further.

In this context, Keynes and his followers were the heretics. They were secular humanists who claimed men and women could manage human affairs for themselves.

The latter sentence would be a fantastic argument if it didn’t include deference to the doctrine of Keynesian statist economics, but that’s not what Greider is saying. He’s just flattering the smug elitism of modern progressives. He also seems conveniently oblivious to Keynes’ own warnings of the pernicious effects of inflation.

Still, Greider manages to drop many big truth bombs for those whose minds are open.  Not only does he cop to the drag the New Deal created for the economy, he reveals some other historical figures who adopted Keynesian policy to further their own political ambitions.

As it turns out, one the biggest proponents of Keynesian economics was none other than Adolf Hitler!

The pre-Keynes Keynesians included Adolf Hitler.  After 1933, Hitler initiated the Third Reich’s version of government-induced recovery-borrowing vast sums to build superhighways and armaments. He was so successful that by 1936 the Depression was substantially over for Nazi Germany.

Are you listening, Krugman fans?

For the inequality warriors, Greider thankfully points the finger of blame in the right direction.

If one viewed the Federal Reserve’s policy of high interest rates as an implicit government program for redistributing incomes, its magnitude by 1982 was approximately as great as all of the government’s other income-transfer programs combined, the redistribution of income that was explicit and controversial. The vast flow of money distributed to various beneficiaries through Social Security, veterans’ pensions, welfare and the rest came to $374 billion, now about the same as the income distributed to wealth holders through the high interest rates, $366 billion. Interest payments reached a record share of the nation’s personal income in 1982, more than 14 percent, almost doubled from 10 years before.

He spells out the mechanics of the con game in very explicit terms.

To economists, the effect was called “monetizing” the debt-a circular game in which the central bank bailed out the treasury by inflating the currency. The circle went like this: The executive branch borrowed money from the private sector by selling new Treasury notes and bonds.  The Fed then diluted the value of this debt by buying up old Treasury notes and bonds from the private sector and paying for them with newly created money.  The Federal Reserve, in effect, wound up holding more and more of the government’s debt paper in its own cloistered portfolio-and the private economy ended up with a bloated money supply.

He even gives a direct testimony from Stephen H. Axilrod explaining how the Fed, in its allegedly benevolent attempt to keep price inflation in check, artificially suppresses employment.

If you have a lot of demand, you’ve got to keep interest rates to keep the demand from overheating the economy. When you’re trying to wring out inflation, you have to keep the economy below its potential. The nasty way of putting that is you have to keep unemployment high.

Nowadays, all you hear from the intelligentsia and the apparatchiks is a lot of carefully crafted academic blathering about how the drop in the labor force participation rate is a natural phenomenon and can be attributed to generational attrition.  Right.

If one still isn’t convinced of the malevolent nature of the Fed after all these revelations, he explains how the bailout of Mexico resulting from the LDC debt crisis hobbled growth in these countries and disadvantaged American producers simultaneously.  If the dollar strengthened against international currencies, exports suffered. The contraction weakened demand for imports which subsequently thwarted debtor nations struggling to meet the terms of loans and punitive fiscal austerity mandates imposed by the Fed and IMF; a phenomenon that continues to play out on the international stage as Greece and Puerto Rico attest.

The main insight of this book which I hope that anyone who opposes the state war machine gleans from this book is the unholy alliance between central banking and the warfare state.

If anyone had any doubts that the apparatus of the central bank aids and abets the war machine of the state, this book should hopefully settle that score.  He doesn’t make it a centerpiece of his argument, but he lifts the veil enough for you to see it.

Every war, every one of them, was accompanied by a massive expansion of credit.  Generally, the State can’t get it through straight up taxation, so they get it by expanding the money supply.

Ultimately, Secrets of the Temple is rewarding, informative and deeply revealing book which is somewhat undermined by Mr. Greider’s muddled thinking, partisan biases, and deference to the authority of the State.

His prescriptions for higher inflation and a globally coordinated effort to ward off trade imbalances has played itself out to disastrous results on the international stage. In the wake of the Greenspan/Bernanke/Yellen era, those who share his convictions are stoking increasingly louder pleas from the population for ever increasing government involvement in economic life.

We’ve entered an era where the American Left has openly embraced a socialist running for president and policies that are exclusively focused on constraint of economic freedom. Confiscatory taxation and redistribution coupled with the strengthening of government cartels are standard articles of progressive faith. The unlimited expansion of the money supply with no apparent regard for hyperinflation is considered cutting-edge thought. Bill Greider’s book is refreshing because it is perhaps one of the last attempts by an intellectual of the Left to address monetary policy with an analysis which goes beyond smug condescension, avoidance or an open embrace of the printing press.  Perhaps it’s one of the Left’s last grasps at real honesty for a political coalition whose respect for human freedom is, at best, minimal and at worst, nonexistent.

A Most Violent Year (2014)


Despite the provocative title, this film is not the crime bloodbath you might presume. 

This film tells the story of Abel Morales, an immigrant businessman who is doing everything in his power to retain a sense of morality during one of New York City’s most violent years. 

That’s right.  This is a story of a virtuous, moral immigrant capitalist.  

Abel is besieged on all sides. His oil shipments are being hijacked.  He’s being investigated by an overzealous DA.  His loan funding dried up on a deal that would allow him to expand his business. His family is threatened.  

Just about everything that could break his spirit happens, and yet Abel remains unbowed. 

In my estimation, this film is a rare phenomenon.  Hollywood generally resorts to caricatures of capitalists and the business world in general and portrays them as soul crushing, greedy and corrupt.  

For once, we are given a film with a character who is doing everything in his power to walk the line when everything around him is putting him to the test. 

And he’s an immigrant to boot.  

It’s a great reminder that the free market is not inherently corrupt. Rather, it is the free market that challenges you to look within yourself to determine whether you have what it takes to live up to its promise.  

Jessica Chastain turns in another great performance as Abel’s tough-as-nails wife. 

Good stuff.