American Consequences - October 2017

DANIELLE DIMARTINO BOOTH: Wall Street has captured a lot of the benefits. And the federal government has captured a lot of the benefits. We’ve had one of the stealthiest and quietest expansions of the social safety net in the history of this country because of artificially low interest rates. So I would say that Uncle Sam and those on Wall Street have benefited to the greatest extent. Q: What role does the Fed play in allowing the total debt of our country, both public and private... as well as the banking system... to expand to unprecedented size? DANIELLE DIMARTINO BOOTH: In the current era, there’s a lot of the right hand not knowing what the left hand is doing. We have an overabundance of regulators in this country. I’ll give you one example from the book... On the day that the OCC was shutting down IndyMac during the height of the sub-prime crisis, Janet Yellen – of the San Francisco Fed, which she ran at the time – was attempting to extend it a line of credit. So there’s a lot of confusion among our regulators. There’s a lot of misunderstanding of the conventional versus the shadow banking system. And then you go back to what we were talking about earlier, and that is artificially low interest rates. We now have record levels of investment-grade corporate debt. We obviously have just surpassed the $20 trillion milestone in terms of U.S. government debt. And we have record levels of consumer credit outside of the mortgage arena.

Q: I’d like to start out with a question I wonder if you’ve ever been asked before... Do you believe that free market, unfettered capitalism is a moral system? DANIELLE DIMARTINO BOOTH: I think it’s the most moral system out there, because it’s based on something that I consider to be honest and true. And that is nature having its way with price discovery, which has been distorted and corrupted since Alan Greenspan took office just over 30 years ago. Q: I share your sentiments... And do you believe that what the Fed does is moral? DANIELLE DIMARTINO BOOTH: I do not. There’s a lot of happy news on the wires that median incomes have finally surpassed their 1999 levels. That’s good and well, except for the fact that Fed policy has led to record levels of wealth inequality. And to add insult to injury for your average working American, it’s fine that median incomes have finally surpassed prior levels, but the cost of housing has galloped way past that, negating the benefits of income gains. Housing is something that was terribly distorted by the Federal Reserve for two entire cycles. Now we have the cost to rent and to buy higher than it’s ever been. I consider the central bank potentially to initially have been well-intentioned, but no longer. They’re absolutely corrupt. Q: Who are the primary beneficiaries of the Federal Reserve? Who has captured that institution to their own advantage in our country?

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