Trump baffles conservative elites: how with such a talented field of candidates we could we end up with an isolationist, big-government, trade-war nominee?
But give the American people this much credit: they understand the economic game has been rigged: that while the crony capitalists are still getting richer, ordinary Americans and their children face a bleak economic future.
Give Trump credit for flagging the problem in an interview with The Hill last October accusing Federal Reserve Chairwoman Janet Yellen, of keeping interest rates low in order to shield Obama from having to leave office during a recession.
“She’s keeping the economy going, barely,” Trump said.
“You know who gets hurt the most?” he pointed out, “People who practice the American dream and … worked all their lives to save and now what happens is they’re being forced into an inflated stock market and at some point they’ll get wiped out.”
Trump makes an important point. But his answer suggests a belief in the power of the Fed to keep the economy going. After the slowest recovery in a hundred years, the Fed’s power has been discredited.
Trump’s explanations — it’s China’s fault and Mexican immigrants’ fault — are false. Likewise Bernie Sanders and Hillary Clinton blame Chinese “currency manipulators” and U.S. multinational corporations or Congress’ failure to give even more money to the government to spend. All these provide alibis for the extended failure of Obamanomics and the continuing failure of the Fed and its manipulations of monopoly money.
The American people cannot eat alibis. Conservatives we need to answer the American people’s question: why has Main Street’s economy stagnated and what must we do to restore growth?
Yes, tax and regulatory reform are needed. But Republicans rarely mention one crucial cause of a global economy in decline: Both parties have made the Federal Reserve an unaccountable Fourth Branch of government in charge of growth, a god of growth that has manifestly failed in growing anything other than its own powers.
The first step to restoring a vigorous and growing economy, however, is to surrender the fantasy that manipulating government monopoly money can do anything for real growth in jobs and opportunities. Manipulated near-zero interest rates mean free money for the government and its privileged supporters. When anything is free, as David Malpass says, “it is distributed by queues, and only the advantaged folks at the front of the line get any.”
Monopoly money goes first to the government and then to banks to-big-to-fail, corporations larded up with K-street lobbyists, Silicon Valley sellers of perpetual-motion-machines plugged into government power, climate change cultists thronging federally funded universities, ethanol hustlers on corporate mega-farms, class action lawyers and litigators, windmill Quixotes and sun-henge solar worshippers. Monopoly money goes not to innovation and job creation but to influence and precedence.
For entrepreneurs to control capital, interest rates must reflect its real cost rather than merely the costs of printing money. Otherwise the money printers dominate investment decisions: Wall Street is corrupted by Washington, Silicon Valley is gelded, and Main Street is pushed aside. It’s a sweet deal, or so it may seem while it lasts, but the rise of both Trump and Sanders is an urgent warning: the political alternatives to a genuinely free enterprise system are not going to be good for anyone.
Without growth, citizens find their horizons close in on them in a zero sum world where they can only win by preying on others. But growth is not automatic. It depends on justice. Republicans cannot shirk the claims of justice made by the Trump movement.
Justice is not spontaneous; it is what politicians such as Ronald Reagan or Benjamin Netanyahu achieve through visionary and prophetic leadership under the law. It is what soldiers and police defend with their lives. It is what mothers and fathers in a fabric of families offer to their children as a path to the future. It is what judges and bureaucrats and teachers ideally provide in their daily administration of the rules of the society.
Stifling opportunity and growth for most Americans today is a gross injustice, affecting the distribution of wealth, the exercise of power, the management of learning, and the administration of law. It is an injustice so vast that its shape is hard to see from within its increasingly suffocating confines. It is a giant sell-out to the regulatory state. It springs from an implicit campaign among U.S. elites, multinational corporations, universities, financial institutions, and government bureaucracies to capture and occupy the commanding heights of the culture and economy while protecting themselves from exposure to its risks.
Over the last decade, finance has become an entente between government and banks, focused on precisely the least successful U.S. sectors. As Eric Janszen has pointed out: “[T]he incursion of finance into every aspect of American business and economic life…changed the way consumers buy automobiles and U.S. automakers run their businesses, the way students pay for school and universities fund their operations, the way homes are financed and consumer goods acquired. In short, credit became the biggest American business of all … The entire economic system has been glued together by one profound fantasy: Finance can substitute for production and credit for real savings … [But] governments can- not print either wealth or purchasing power. These must be earned.”
This shift in the distribution of wealth springs from our reliance on the Fed to magically manipulate growth into being. It is flagrantly unjust because it was mostly unearned by any acceptance of entrepreneurial risk or creative contribution. Productivity is the test. While wealth was being redistributed upwards, productivity growth in the U.S. economy rapidly converged with interest rates at near zero.
With money as a manipulable instrument of elite control and enrichment, government as much as guaranteed the privileged precincts of finance, real estate, insurance, alternative energy, agriculture, and education. But if investments are guaranteed, they cannot yield learning or growth. They are by definition both unjust and sterile. On this injustice has been founded an alibi economy of “secular stagnation.” It reflects a great monetary coup and it must be reversed.
That is the truth behind the trumpery: to make America great again, we must admit the increasingly obvious truth that monetary manipulation cannot create growth or opportunity; we must take our economy back from our unelected Fourth Branch of government and their monopoly money.
Could Trump emerge from behind his wall of anti-free trade words to be the one candidate who take on the myth of the Fed?
George Gilder is the author, most recently, of The Scandal of Money: Why Wall Street Recovers But the Economy Never Does.