The Lords of Easy Money

The New York Times bestseller from business journalist Christopher Leonard infiltrates one of America's most mysterious institutions-the Federal Reserve-to show how its policies spearheaded by Chairman Jerome Powell over the past ten years have accelerated income inequality and put our country's economic stability at risk.

If you asked most people what forces led to today's unprecedented income inequality and financial crashes, no one would say the Federal Reserve. For most of its history, the Fed has enjoyed the fawning adoration of the press. When the economy grew, it was credited to the Fed. When the economy imploded in 2008, the Fed got credit for rescuing us.

But here, for the first time, is the inside story of how the Fed has reshaped the American economy for the worse. It all started on November 3, 2010, when the Fed began a radical intervention called quantitative easing. In just a few short years, the Fed more than quadrupled the money supply with one goal: to encourage banks and other investors to extend more risky debt. Leaders at the Fed knew that they were undertaking a bold experiment that would produce few real jobs, with long-term risks that were hard to measure. But the Fed proceeded anyway...and then found itself trapped. Once it printed all that money, there was no way to withdraw it from circulation. The Fed tried several times, only to see the market start to crash, at which point the Fed turned the money spigot back on. That's what it did when COVID hit, printing 300 years' worth of money in a few short months.

Which brings us to now: Ten years on, the gap between the rich and poor has grown dramatically, inflation is raging, and the stock market is driven by boom, busts, and bailouts. Middle-class Americans seem stuck in a stage of permanent stagnation, with wage gains wiped out by high prices even as they remain buried under credit card debt, car loan debt, and student debt. Meanwhile, the "too big to fail" banks remain bigger and more powerful than ever while the richest Americans enjoy the gains of a hyper-charged financial system.

The Lords of Easy Money "skillfully" (The Wall Street Journal) tells the "fascinating" (The New York Times) tale of how quantitative easing is imperiling the American economy through the story of the one man who tried to warn us. This is the first inside story of how we really got here-and why our economy rests on such unstable ground.

Autorentext

Christopher Leonard is a business reporter whose work has appeared in The New York Times, The Wall Street Journal, Fortune, and Bloomberg Businessweek. He is the New York Times bestselling author of The Meat Racket *and *Kochland, which won the J. Anthony Lukas Work-in-Progress Award.

Klappentext

The New York Times bestseller by business journalist Christopher Leonard infiltrates one of America’s most mysterious institutions — the Federal Reserve — to show how its policies over the past ten years have accelerated income inequality and put our country’s economic stability at risk.

Leseprobe
Chapter 1: Going Below Zero CHAPTER 1 GOING BELOW ZERO
(2010)

Thomas Hoenig woke up early on November 3, 2010, knowing what he had to do that day, and also knowing that he was almost certainly going to fail. He was going to cast a vote, and he was going to vote no. He was going to dissent, and he knew that this dissent would probably define his legacy. Hoenig was trying to stop something: A public policy that he believed could very well turn into a catastrophe. He believed it was his duty to do so. But the wheels were already turning to make this policy a reality, and the wheels were far more powerful than he was. The wheels were powered by the big banks on Wall Street, the stock market, and the leadership of America's Federal Reserve Bank. Everyone knew that Hoenig was going to lose that day, but he was going to vote no anyway.

HoenigI was sixty-four years old, and he was the president of the Federal Reserve Bank of Kansas City, a position that gave him extraordinary power over America's economic affairs. He was in Washington that morning because he sat on the Federal Reserve's powerful policy-making committee, which met every six weeks to effectively determine the value and quantity of American money. Most people in America don't think very much about money-meaning the actual currency, or that thing we call a dollar. The word dollar is, in fact, just a slang term for American currency, which is actually called a Federal Reserve note. People spend Federal Reserve notes every day (if they're lucky enough to have them), but they rarely think about the complex, largely invisible system that makes money appear out of thin air. This system is the U.S. Federal Reserve System. The Fed, America's central bank, is the only institution on Earth that can create U.S. dollars at will.

Because he was a senior official at the Federal Reserve, Thomas Hoenig had to think about money all the time. He thought about it in the same way that a very stressed-out building superintendent might think about plumbing and heating. Hoenig had to think about money as a system to be managed, and to be managed just right. When you ran the system that created money, you had to do your job carefully, with prudence and integrity, or else terrible things might happen. The building might flood or catch on fire.

This is why Hoenig felt so much pressure when he woke up that November morning in Washington, D.C. He was staying at a very nice hotel, called the Fairmont, where he always stayed when he traveled from his home in Kansas City to the nation's capital. Hoenig was in town for the regular meeting of the Federal Open Market Committee, or FOMC for short. When the committee met in Washington, its members voted and set the course of the Fed's actions. There were twelve members on the committee, which was run by the powerful chairman of the Federal Reserve.

For a year now, Hoenig had been voting no. If you tallied his votes during 2010, the tally would read: no, no, no, no, no, and no. His dissents had become expected, but they were also startling if you considered Tom Hoenig's character. He wasn't, by nature, anything close to a dissident. He was a rule-follower. He was born and raised in a small town, where he started working at the family plumbing shop before he was ten years old. He served as an artilleryman in Vietnam, and when he came home he didn't protest against the war. Instead, he studied economics and banking at Iowa State, earning a PhD. His first job out of school was as an economist with the Federal Reserve regional bank in Kansas City, in the supervision department. At the F