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July 27, 2022 - Bannon's War Room
47:46
Battleground EP 103: The Lords Of Easy Money
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christopher leonard
26:10
s
steve bannon
16:30
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Speaker Time Text
steve bannon ▲ ● ▼
This is what you're fighting for.
I mean, every day you're out there.
What they're doing is blowing people off.
If you continue to look the other way and shut up, then the oppressors, the authoritarians, get total control and total power.
Because this is just like in Arizona.
This is just like in Georgia.
It's another element that backs them into a corner and shows their lies and misrepresentations.
This is why this audience is going to have to get engaged.
As we've told you, this is the fight.
unidentified
All this nonsense, all this spin, they can't handle the truth.
War Room Battleground.
steve bannon ▲ ● ▼
Here's your host, Stephen K. Bannon.
Welcome to the Battleground.
It's Wednesday, 27 July, the year of our Lord 2022.
As we went through an extraordinary depth in the last hour was the Federal Reserve Chairman's Jay Powell's announced today, I think 75 basis points.
He also made a startling statement, did not think the country was in a recession.
And more importantly, he says, I don't put a lot of stock in initial GDP reports coming out of the Fed.
OK, I guess the first time I've heard a Fed chairman say that.
But we're in unique and extraordinary times.
And you know there's been a lot of spinning, a lot of spinning and changing of nomenclature and definitions and up is down and down is up, all that.
So what I wanted to do for an entire hour, and I haven't had the opportunity in this entire year, To do this, particularly with a book.
And I happen, I've had this gentleman on a couple of times before.
It's Christopher Leonard.
The book is The Lords of Easy Money.
And people know, and booksellers, publishers come to me.
Look at this.
I've got my notes all over the place.
Because we saw a lot of books here in the War Room.
You know, we have an audience that's not just engaged, but are real readers.
This book, Lords of Easy Money, is at least up to the 27th of July, the Year of Our Lord 2022, on the show that's the biggest bookseller by far, and I'll take on all comers in that.
We'll talk to all publishers.
This is the book of the year.
And why is it the book of the year?
Because it has taken an institution that's absolutely not just central, I would say dominant, more dominant institutionally in American life than the Supreme Court.
And I don't say that lightly.
And what shocks me and stuns me is that its dominance and its importance is very rarely talked about, but particularly not explained.
And I believe that when we talk about democracy and anti-democratic institutions, and you talk about deep state and all this kind of nomenclature, the swamp, I say, put all that stuff aside.
That's like St.
Paul's, when I thought like a child, I reasoned like a child, and I acted like a child.
We now need to start talking like adults.
We have an institution that has essentially a dominance, not just on our financial system, But it has a dominance in each and every one of yours, not just the country's economic place, but your life.
Your life.
You can think of any institution in the world, from the church, to the courts, to across the board.
The single most dominant institution in your life is the institution that controls the money of this country.
Now, who knew this?
I'll tell you who knew it.
It's the founders of our nation, all the way up.
If you go back, and that's why at Birchgold, if you go to birchgold.com slash Bannon, I've got the first part of this, I think seven or eight part series.
It's been the biggest, you know, paper that Birch has ever put out.
It's totally free.
And I said the end of the dollar empire.
And I started, and I started the first, the first part was just to look at the, from the founding of the country all the way up to the founding of the Federal Reserve in what, 1913, I think it was.
The entire country's politics to a large extent was debates on the concentration of finance, the concentration of wealth, and who controlled currency, and what was currency, and we're going to have central banks.
That all went away from the Federal Reserve.
Since then it has, it's been taken out of The politics of the nation.
The politics of Andrew Jackson.
The politics of William Jennings Bryan.
The politics of, quite frankly, Abraham Lincoln.
So it's been extraordinary.
And that's why this book is so powerful.
This book not only is a great primer, To understand money and to understand the flow of capital and how it affects your life.
It also talks about the history and most important talks about the modern history.
When I say the modern history for me it's really from the financial crash of 2008 going forward because that crisis is unresolved today.
One of the reasons that I say that right now the world is on an abyss of a financial catastrophe is that we have not We have not gotten to the heart of what the problem was for the financial crash of 2008.
In fact, we exacerbated, I believe, that problem with results of what is the Federal Reserve.
Let me bring in Christopher Leonard, the author of The Lords of Easy Money, How the Federal Reserve Broke the American Economy.
Walk me through that subtitle in your thesis.
What's your theory of the case?
Chris, as I've got to know you, you're the farthest thing from a bomb thrower.
You're the anti-Steve Bannon.
You're steady Eddie.
You're a journalist.
You go where the facts are.
Your hair is never on fire.
But you wrote a book, as I say, that if enough people read this book and embrace this book and understand this book, This is the kind of document you base a revolution on.
The Lords of Easy Money.
How the Federal Reserve broke the American economy.
Christopher Leonard, the author, explain to our audience what that means.
christopher leonard ▲ ● ▼
Yeah, thank you for that.
I really appreciate it.
And that was a great background, a kind of history to get us up to this point.
As you know, you know, this book, it walks through the history of the Fed, but it really looks at what the Federal Reserve has done over the last 10 years, which is Unprecedented in the history of the Fed.
The Fed has really broken the graph of history.
It has engaged in a series of unprecedented and really truly radical experiments in printing money, and we can walk through all of this.
But you know, you're asking me about that subtitle, How the Fed Broke the American Economy, and that's a very confrontational subtitle, and I really stand behind it more and more every day.
The Fed broke the economy in a few key ways.
First of all, The Fed's actions helped widen wealth inequality probably more than any single institution in the United States.
The Fed drove the gap between the very, very richest and everybody else to its widest point in history through its money printing, and we'll talk about how that works.
But then, secondly, by doing this over a decade, by pumping money into Wall Street, by boosting stock market prices, corporate debt markets, and all the rest of it, The Fed has put us in a terribly fragile position.
They have created enormous asset bubbles on Wall Street.
It's what the hedge fund types call the so-called everything bubble.
And that's what's left us in such a precarious state today, where the Fed is being forced to try to fight inflation by tightening the money supply, but in doing so it's really risking a massive financial crisis.
So that's how the Fed has broken the economy.
It's enriched the rich and it's made our financial system so fragile today.
steve bannon ▲ ● ▼
Chris, one question before we go back into the history of it.
How does any institution have this power?
When you say they went on these radical experiments, for the average viewer, and our viewer is at a level of sophistication more than just regular cable TV or certain of these shows.
And I think much more sophisticated than what's watching business TV.
When you say radical experiments, and they've done more radical experiments for free money, how does this institution have the power to do radical experiments that they don't have accountability or at least have to get permission to do that, sir?
christopher leonard ▲ ● ▼
That is literally the $8 trillion question, and I'll explain that.
And what you're talking about here is the very structure and the power of the Fed.
So let's go back to the very beginning.
Congress created the Fed in 1913.
in a way that insulated the Fed from voters, okay?
Congress intentionally gave the Fed tremendous power and tremendous insulation from democratic pressures, and there's a reason for that, okay?
They formed the Fed to do something truly extraordinary, which is to create the national currency of the United States.
Before the Fed, there were literally thousands of currencies in the U.S.
It sounds kind of crazy now, but each bank would essentially issue its own currency, and we had a ton of financial volatility.
So eventually, Congress created this institution that would create a unified and single currency.
That thing we call a dollar is actually a U.S.
Federal Reserve note.
And to manage a currency, Sometimes you have to do hard things.
Sometimes you have to tighten the money supply, for example, to fight inflation, but that can create a recession.
So that's why Congress said, okay, we're not going to have these folks who run the Fed be elected officials.
They're going to be appointed by the president.
They're going to be approved by the Senate, but they're going to operate without democratic influence or voter influence.
Of course, the wall between voters and the Fed is never impermeable or perfect, but that's how they set it up.
You know, for decades, the Fed used its power, I'd call it within kind of a narrow lane, if you will.
You know, the Fed tried to manage the currency.
It bailed out banks when there was a banking panic.
But what we've seen, particularly since the 1990s, is that the footprint of the Fed has just grown ever and ever larger.
And Congress has essentially given more and more power to the Fed.
More and more of our economic policy is sort of handed over to the central bank.
And so what you have by 2010 is this institution with just tremendous latitude to act, okay, and a governing board that never faces voters.
And you've got a Congress who's sort of sitting on the sidelines saying, okay, Fed, we're going to leave the jobs programs to you.
We're going to leave the job of economic development to you.
And so The Fed has really taken this power and run with it in, as I've said, just an unprecedented way.
steve bannon ▲ ● ▼
When you talk about jobs, when they first start up, they were focused on the currency and also inflation.
But they got added a second mandate with jobs.
And then recently with, I think it was Jamie Raskin's wife, one of the reasons she was turned down.
At the Fed, they wanted to actually add another ESG.
They wanted to actually bring in another whole aspect that the Fed would do.
When did they get added this issue about in full employment and jobs?
And do you think that that's too complicated?
Can you really do both?
Can you really manage the currency and worry about inflation and trying to keep inflation low and worry about the business cycle at the same time you're trying to worry about employment?
christopher leonard ▲ ● ▼
You can't, and it's been proven right from the outset.
So this is a great question.
Let's back up to 1978.
That's when the Fed was given this thing that they call the so-called dual mandate, which means the Fed is mandated to fight inflation and keep the currency stable.
But on the other hand, it's mandated to make sure the unemployment rate is low, to create as many jobs as possible.
Now, This was passed in 1978, and then the chairman of the Fed in 1980 was this guy named Paul Volcker, who we'll talk about.
He was the guy who literally doubled interest rates to stop the great inflation of the 1970s, and in doing so, he threw the dual mandate out the window.
He raised interest rates to stabilize the currency.
But he plunged the nation into a recession with a 10% unemployment rate.
Absolute brutal recession.
And, you know, Congress called him in front of a committee and said, hey, how can you be doing this?
And he said, well, you know, the dual mandate, it really all depends on the scale of time at which you consider it.
Like, we're going to create a recession, but it's for the long term stability and eventually the jobs will come back.
So the so-called dual mandate is really in the eye of the beholder.
In essence, to manage the currency, you've got to create unemployment, and to create unemployment, sometimes you've got to let a little bit of inflation happen.
But if we could, really quickly, I just want to emphasize how different the last decade has been.
The Fed can boost jobs, essentially, or boost economic growth.
By cutting interest rates.
At least typically, that's what it did, okay?
It makes it easier and cheaper to borrow money, which is supposed to fuel economic growth.
You know, you can measure the amount of money the Fed is printing by looking at the size of the so-called Fed's balance sheet.
I know that sounds like a technical term, but basically, when the Fed creates money, its balance sheet increases, and we can talk about the mechanics of that.
But the Fed's balance sheet Increased really slowly and incrementally for about a century, okay?
The Fed created a little bit more money and a little bit more money each year until the total pool of money was about 900 billion dollars in the US.
Now, we're talking here about the original pool of dollars created by the Fed.
They can call it the monetary base.
So, 900 billion dollars in about a century.
And then, Between 2008 and 2014, the Fed creates $3.5 trillion.
So that's three and a half centuries' worth of money printing in a few short years.
And that was really just the beginning.
When COVID hit, the Fed printed another north of $3 trillion.
You know, over the last ten years, the Fed has created eight trillion more dollars, and so when you look at the size of the balance sheet, it creeps up slowly, and then over the last decade, it just explodes upward.
unidentified
So this is just one of the indications we're talking about.
steve bannon ▲ ● ▼
I want to slow down for a second, because this is very important, and I want the audience to understand.
For the first century, we have a monetary base of $900 billion.
That's the money in circulation.
They had these crises in 2008.
They immediately start creating money, and we'll walk through the mechanism of how they do that, of $3.5 trillion.
The pandemic, the CCP virus, and other three.
The balance sheet of the Federal Reserve, and just to put it in perspective, when the financial crisis happened in 2008, When the guys went to the, when the head of the Federal Reserve and the Secretary of Treasury was, Bernanke was the Fed Chair and Hank Paulson was the Treasurer, they went to see Bush because they had this immediate problem.
The balance sheet of the Fed was $880 billion.
$880 billion.
dollars. Eight hundred and eighty billion dollars. Today as we sit here it's north of nine trillion dollars. Who gives them authorization to create that money and how they actually create it?
I think what's so scary about your book Is that, particularly Jay Powell and these guys during the COVID crisis, if they want to create a trillion dollars, they just create a trillion dollars.
What is absolutely stunning is who authorized and who's responsible, because this is what's causing a lot of the inflation today, going from really $880 billion in the September of 2008 to the $9 trillion you have on the balance sheet today, who authorized it?
How did they create it?
And who's accountable or responsible for that, sir?
christopher leonard ▲ ● ▼
Let me start, please, with how they create it.
Because to me, this is just so key.
One of the things I really love to do is to understand the plumbing of the American political economy.
You know, the mechanics of how things work.
Because when you study that, you can really see who wins and who loses.
And it's very helpful to understand how it works for our discussion.
So, we talk about the Fed printing money.
It's amazing how it does it.
The Fed doesn't print money by making dollars just appear inside the checking account of Steve Bannon or Chris Leonard.
When the Fed was created, the framers basically made the Fed Subservient or behind Wall Street, if you will.
You've probably heard of the famous meeting of these bankers on Jekyll Island off the coast of Georgia when they got together and kind of created the architecture of the Fed.
They did not want the Fed as a government-run central bank to displace Wall Street.
So here was the compromise they come up with.
To create money, the Federal Reserve essentially buys things from a group of 24 selected banks.
are called primary dealers, and they're the usual suspects.
Goldman Sachs, JP Morgan, Wells Fargo, go down the list, okay?
These banks on Wall Street, 24 of them, they have a special reserve account inside the Fed.
And here's how the Fed creates money.
The Fed literally has a trading desk in New York City, this floor of young traders that I toured back in early 2019.
A financial trader at the Federal Reserve will call up J.P.
Morgan and say, hey, I want to buy $8 billion of Treasury bonds from you.
And the J.P.
Morgan guy says, okay, here's $8 billion worth of Treasury bonds.
And then the Fed guy says, look inside your bank account.
Boom, $8 billion just appeared out of nowhere through some keystrokes at the Fed.
That's how the Fed creates new money.
And this is important to understand, to get back to our central point.
In 2010, the Federal Reserve Chairman Ben Bernanke said, we have got to boost economic growth.
We're going to do a jobs plan, and we're going to do it by printing hundreds of billions of dollars, which later became trillions of dollars on Wall Street.
This is a thing that the Fed likes to call quantitative easing.
This is how all that money got created.
So the Fed will just replicate this transaction again and again, buying these assets from Wall Street, making the money appear inside the Wall Street bank accounts until it's created Trillions of new dollars in the Wall Street banking system, all in the hopes that it'll drive up stock prices and encourage more lending to encourage economic growth.
Now, your question, who gave them the authority?
I mean, this is a question we could talk for five hours about.
In essence, the Fed was created with this very broad mandate to manage the security, and there's so much gray area.
around specifically how the Fed can do that. And what we've seen is the Fed every year pushing and pushing and pushing the boundaries further of what it can do. It's truly extraordinary. We can talk about it in detail, but the Fed's footprint has only grown larger.
steve bannon ▲ ● ▼
You know, if we had described that, people would say, oh no, that's a conspiracy theory.
It can't possibly work like that.
Walk back through the, the primary brokers, like you have the board of governors.
I want to give the structure of the fed briefly.
You have the board of governors, which I think have 14 year terms.
So they're kind of impervious to them.
They go past administrations.
And then those governors, I think elect, uh, selected to be the head of it, which is a governor, but he's going to be head of the federal reserve, but he essentially chairs the governors.
But talk about the banks who actually.
Owns the Federal Reserve.
Do the American people actually own the Federal Reserve, or do banks own the Federal Reserve?
christopher leonard ▲ ● ▼
Banks own the Federal Reserve, just by the structure.
And you know, the whole structure of the Fed is fascinating.
Again, it's this huge compromise.
America resisted having a central bank for at least decades, really over a century.
We charted a central bank, we revoked the charter, We created another one, we revoked it, because there's always been this real skepticism of having a government-run central bank because of the amount of power it can have.
So that's why Congress created this structure that breaks up power.
The Fed kind of looks like the United States of America in the sense that it's really not just one bank, it's a collection of 12 regional banks, okay?
And each bank has a president, and those presidents help run the system.
Okay, so you've got 12 central banks across the country, but then what you mentioned was the key governing body of the Fed, which is based in Washington, D.C., the so-called Fed Board of Governors.
And you're exactly right about the terms.
And these are 12 folks appointed by the President of the United States and approved by the Senate.
And these governors, they're just like a policy committee, a governing committee that runs the whole bank system.
And they meet every six weeks.
And I'm sorry to complicate it even more, but really, this committee that meets every six weeks to make these crucial decisions about raising or lowering interest rates or doing these other experiments, this committee is called the FOMC, or the Federal Open Market Committee, and it includes some governors, those folks who just live and work in Washington, and then it includes kind of a rotating cast of regional bank presidents.
These folks get together every six weeks and set policy for the Fed and decide what they do.
You're talking about the ownership structure.
It's just so convoluted.
These regional banks are owned by local banks in their region, but the local banks essentially cannot sell the stock that they own, but they help bank presidents I kind of describe the Fed as this sort of Frankenstein's monster, this genetically engineered creature that's a mix of a government agency and a private bank.
It's both at the same time.
Believe me, the governing structure can get pretty complicated, but really it's important to know that this committee, the FOMC, those 12 voting members that gather every six weeks, They're the most powerful economic committee in the United States.
These 12 people make decisions that truly affect everybody, that determine the level of money, the price of money, and the cost of a loan, and that could tip the economy into a recession, for example.
steve bannon ▲ ● ▼
When you talk about for everybody out there, this is your first time dealing with us in this topic.
It's one of the reasons we're trying to explain the nomenclature and the structure.
Here's how it impacts your life.
When that committee and the board of governors, and they decide this like they did today to raise 75 base point, that means your credit card immediately goes, you're paying for time.
Your credit card expenses go up.
Your mortgage goes up.
The cost of doing business to all the businesses go up and it flows through whether it's a gasoline price or fruit prices.
The cost of money and the availability of money is mother's milk for an economy.
And so every decision, the decisions they make are so much more powerful and the direct impact on your life than anything Congress can do.
In fact, if you look at the stimulus and all the deficits, we have $30 trillion of debt.
But that was as bad as that is. That all came through compromise and fight, and there's not enough fight, right? We talk about shutting down the government. There's a group that created $9.5 trillion just out of nowhere.
My point is they just literally create this out of nowhere.
And the system they do it to really give it to these prime brokers and then how it flows through the system is so Byzantine.
And what's obvious, Chris, and the reason the power of your book is they're not interested in people understanding this.
Even I went to Harvard Business School and I didn't at that time I'd been a naval officer.
I had worked as aid to the chief of naval operations.
I'd had experience in DC.
I'd come off the fleet.
I thought I was very well read.
I actually got a graduate degree at Georgetown and at Harvard, and even at Harvard, when they explained the political economy, the part in the Fed they didn't take that much time on.
And it was explained, but it was not explained into the detail of the power of this institution.
Why do you think people, they go out of their way, that people not understand this?
christopher leonard ▲ ● ▼
You know, it's fascinating.
As you kind of mentioned in the beginning, The politics of the money supply used to be a retail political issue debated in the public square.
When William Jennings Bryan ran for president, I think it was 1918 or around that, forgive me if I got the year wrong, but he made that famous speech where he talked about, you shall not crucify mankind upon a cross of gold.
That was a quote about monetary policy, okay?
About tightening the money supply.
But the Fed has very intentionally moved the politics of creating money into a private space, into a private sphere, and it's one of these things that's happened slowly over time, but the basic dynamic, you just nailed it.
They try to make this stuff sound as complicated as possible, and they try to make it seem like The American citizen needs to have a PhD in macroeconomics to even enter the room and talk about the politics of money.
And I feel like that is... That's why we're here.
steve bannon ▲ ● ▼
Let's take a short commercial break.
We're going to come back with Christopher Leonard, the blockbuster book, The Lords of Easy Money, How the Federal Reserve Broke the American Economy.
Christopher Lenders will join us after a short commercial break.
unidentified
We must find Philadelphia much change.
More changed than I could have imagined, Mr. Hamilton.
Not the city itself.
All cities swallow everything in their wake.
That's no surprise to me.
That's why I abhor them.
But I've been, as you know, in revolutionary France, where the streets are filled with the songs of liberty and brotherhood and the overthrow of ancient tyrannies of Europe, and to return from there to this Our cradle of revolution and find the dinner table chatter is all of money and banks and authority is an unwelcome surprise.
Unwelcome, perhaps, but necessary.
I must admit, Mr. Hamilton, I'm a little uncertain as to the purpose of the Treasury Department.
No doubt its function will reveal itself to me in good time.
The future prosperity of this nation rests chiefly in trade.
Trade depends, among other things, on the willingness of other nations to lend us money.
And how would you propose to establish international credit?
Our first step would be to incur a national debt.
The greater the debt, the greater the credit.
And to that end, I have recommended to the President that Congress adopt all the debts incurred by the individual states during the war through a national bank.
The idea being that if the states owe Congress money, then other nations will feel more inclined to lend it to us.
If the states are indebted to a central authority, it increases the power of the central government.
You have it exactly.
The greater the government's responsibility, the greater its authority.
The moneyed interest in this country is all in the north, so the wealth and power would inevitably be concentrated there in a federal government.
To the expense of the South.
If that is the case, it is unavoidable if the Union is to be preserved.
I fear a revolution will have been in vain if a Virginia farmer is to be held in hock to a New York stock jobber, who in turn is in hock to a London banker.
The opportunities for avarice and corruption would certainly prove irresistible.
Well, there you have it.
As I've heard said, if men were angels, then no government would be necessary.
Sadly, that is very well said.
But there can be no question, our nation cannot bind together without powerful central government.
But we must also accommodate the needs of our constituent states, both North and South.
The power of one must check and balance the other.
And to that end, we must dedicate all of our energies and our care.
I would like to welcome Mr. Jefferson home.
Thank you.
Mr. Secretary of State.
Yeah, yeah.
Mr. President, gentlemen.
There are cabinet matters that I would like to discuss.
Oh.
If you would excuse us, Mr. Adams.
Please convey my regards to your wife.
steve bannon ▲ ● ▼
That is from the brilliant HBO miniseries, John Adams, and you have Steve Delane, I think Rufus Sewell, Rufus Sewell playing Alexander Hamilton, Steve Delane, a magnificent actor, playing Thomas Jefferson.
Let me bring Christopher Leonard, the author of Lord's Easy Money, at the very founding, sir, of our republic.
The most intense debates inside were about this establishment of a central bank, the establishment of credit, the establishment of what they called authorities.
It has been the politics of money from the founding of the revolution, remember because that was all about taxes and how they were going to get paid, from the founding of our nation.
All the way up to 1913, the founding of the Federal Reserve.
And by the way, William James Byrnes, the late 19th century, was nominated, I think, by the Democratic Party three times as the presidential candidate.
And that speech, the Cross of Gold speech, was about the politics of money.
from Hamilton and Jefferson and the humongous fights they had about this, the founding of a national bank, to Andrew Jackson, who basically took the charter away from the first US National Bank, the first Federal Reserve, and they had the massive fights of Jackson's populist movement was predicated upon this, all the way to William Jennings Bryan in the late 19th century and all the booms and busts.
They always accused that you had too many currencies, nobody had control of the currency, We couldn't be a major nation until you got control of the currency.
And then in 1913, with the founding of the Fed, the politics of money totally went away.
And so here we are in the early 21st century, and we have this central authority, and as you said it so beautifully, It has these radical experiments.
And here's the thing, Chris, as you've studied this book and studied the history and interviewed everybody and went there, the thing that gets me as a populist is that these people hold themselves out as geniuses, that this is all highly mathematical and really to the fifth decimal place they've thought it through.
It's a crapshoot.
We've gone through booms and busts that are ten times bigger.
Than the problems we had in the 19th century, before you had a central bank.
And the reason is this stuff is so difficult.
Christopher Leonard, your thoughts, sir.
christopher leonard ▲ ● ▼
Well, amazing.
And you know, watching that clip and watching those debates, it really, it made me think about the committee that's having those debates today.
The committee that literally met today, the Federal Open Market Committee, those 12 people that run the Fed.
They actually transcribe their internal debates and then release the transcription five years after the fact.
So as a reporter, I kind of had this luxury to go back and read every page of these arguments that this committee had in 2010.
And it's absolutely fascinating.
You're right that they want to present themselves as these sort of Olympian, you know, PhD math geniuses.
But when you go back and look at what they were talking about, and even look at some of the internal studies and projections that they used to make these hugely consequential decisions that just turned out to be dead wrong, you realize this sobering fact, which is that these people are basically feeling their way through a dark room, and the rest of us are really on the hook for the consequences of that.
Let me please just talk about this debate inside the Fed that opens the book in 2010, because it's really important.
In 2010, we were on the other side of the crash of 2008.
The economy was weak, but we were starting to push out the other side, and the Fed chairman at the time, Ben Bernanke, wanted to push this program of accelerating job growth through money printing.
And Bernanke wanted to do two things.
He wanted to keep interest rates pegged at zero, as low as economists thought they could go.
That's an extraordinary thing.
You know, interest rates are typically around three to six percent.
They had brushed up against zero once or twice momentarily.
Ben Bernanke's Fed kept the interest rates at zero for roughly seven years during the 2010s.
Huge consequences for the financial system for doing that.
But at the same time, in 2010, Ben Bernanke was like, we want to do this experimental program called quantitative easing, which I described earlier, where you print all this money inside Wall Street.
And there was intense debate inside the committee of people saying, hey, if you do this, you're going to only really enrich the richest Americans who already own stocks and bonds, which are what's going to benefit primarily from creating all this money on Wall Street.
You're going to create another financial bubble that is going to be extremely difficult to negotiate and could create really high unemployment when it bursts.
And at the same time, once you start printing all this money, you're going to find it impossible to stop.
But these internal disputes were really shielded from public view.
And Ben Bernanke essentially kind of overcame the opposition inside the Fed and went ahead down this experimental road.
So one of the key things I really want to do is bring these debates alive for people so you can really read through and understand how we got to where we are.
And I just got to emphasize, they were not just solving math equations.
They were making policy decisions that were risky and that created winners and losers.
And we really need to understand that.
steve bannon ▲ ● ▼
I want to talk about two heroes in the book.
One is, I think, Honig, and the other is, I think, Richard Fisher, who is the governor of the Dallas Bank.
The audience should understand, it's not like people didn't argue the other side.
People argued and said, hey, look, the way I look at this, if you do this, you're going to concentrate wealth more than it's ever in the history of the country.
And the arguments on the counter are so shockingly precise and so shockingly prescient from what happened.
Talk to us about the two heroes, particularly Honig, who's a guy that nobody's ever heard of, even on Wall Street, that's really one of the heroes of your book.
christopher leonard ▲ ● ▼
Yeah, absolutely.
He really is a hero of the book.
And Thomas Honig was a guy who worked at the Federal Reserve for 32 years.
He was an absolute institutionalist who believes in the institution.
He was no bomb thrower.
But in 2010, Tom Honig was the one guy in that committee who really voted against these policies.
He said, it is going to be extraordinarily dangerous to keep interest rates at zero for all these years while pumping all this money into Wall Street.
You're going to enrich the rich and you're going to create huge asset bubbles.
And really, Honig was proven totally correct on those points.
Another guy you mentioned who I really want to talk about for a second is the president of the Dallas Fed named Richard Fisher.
And he said the most extraordinary thing inside this Fed committee.
This jumps forward to the year 2012.
Which was an extraordinary time.
This is when Ben Bernanke kept doubling down on this program of printing money to create new jobs, even though it was really not that effective.
They did a round of quantitative easing in 2012 that was $1.6 trillion.
Just extraordinary.
And during these internal debates, this guy Richard Fischer from Texas laid out very specifically He said, listen, if we do this, if we print all this money on Wall Street, we are going to create barely any jobs.
All we're going to be doing is supercharging the debt markets and the asset markets.
And Fisher literally quoted the chief financial officer of Texas Instruments, who said, hey, If you keep doing these easy money policies, we're not going to create a single job.
We're just going to borrow money and do stock buybacks and do these kind of financial transactions that are encouraged by easy money without creating a single job.
Fisher brought that up.
He quoted the chief financial officer of Texas Instruments, and Ben Bernanke's response to him was, if you could please not quote people who don't have a PhD in economics, I would appreciate it because, you know, it's not helping our discussion.
I really think that that reflects the attitude inside the Fed.
They were closing out these contrary points of view.
I will say, it is a cottage industry in the U.S.
to beat up on bankers, and that's fair enough.
But when you really talk to people on Wall Street, when you talk to folks out there in the market, in the hedge funds, in the private equity firms, they can explain These actions of the Fed, and they can explain in very close detail how the Fed is really just massively distorting our economy and benefiting the very rich and creating all this fragility.
And they explain it in ways that the Fed just won't acknowledge.
And you know, the Fed's discussion is very wrapped up in this sort of PhD economic theory that often doesn't really resemble what's happening on the ground.
steve bannon ▲ ● ▼
Chris, you're a business journalist and you run an institution, a not-for-profit, I think, that also focuses on fact-based journalism, not partisan journalism.
So when you came to this, the pre-researching book, Chris Leonard in The Post, did you ever think in a million years you studied the Fed or went to look at a central bank that in your journey you would actually end up being shocked about the system that we have, sir?
christopher leonard ▲ ● ▼
Absolutely not.
If you had told me a few years ago I was going to write anything about the Federal Reserve, I would have thought you were crazy.
You know, the great privilege of being a reporter is you get to talk to people just across the spectrum, across all different political views.
And, you know, I talk about this in Acknowledgements.
I interviewed this guy in 2016, very, very smart and very engaged in markets.
And he explained to me how the Fed was distorting markets.
And I thought, this is crazy.
I'd been a business reporter.
I'd heard about quantitative easing.
But the mechanics of it blew my mind.
And when this guy told me that the Federal Reserve had printed 300 years worth of money between 2008 and 2014, I thought he was crazy.
But he was dead right.
And that's what got me on this road.
Because I had this strong impression that People needed to understand this.
Even as a business reporter, I didn't understand it.
And I really wanted to explain it clearly and put it in a book that you could read easily.
It's a story that you could follow.
And I wanted people to get a better understanding of how the Fed works.
But I'll tell you, when I hit a turning point reporting this book, you know, originally I wanted this book to be like Michael Lewis's Moneyball, just kind of an explainer book of how quantitative easiness had changed the world.
But it was really when I was reporting on that enormous round of quantitative easing in 2012 when I realized the strategy that the Fed was using, I don't want to overplay this analogy, but it was a lot like the military in Afghanistan.
Knowing that the strategy was probably not going to pay off, but doubling down and doubling down, ignoring internal dissent, relying on internal forecasts that were faulty, that were erroneous.
I show in the book this internal study the Fed did about what would happen if it did quantitative easing that was just a hundred percent inaccurate.
And that's when I realized, you know, these are people making decisions That built up so much risk for the rest of us.
And it was at that point that you started to see, you know, for me, the reporting turned it to how the Fed broke the American economy.
steve bannon ▲ ● ▼
You saw today the Federal Reserve, the decisions.
What would you recommend to, look, our audience is the MAGA audience, but it's basically hardworking, working class Americans, middle class Americans.
What would be your recommendation of how do they keep up on top of this?
What should they read?
What should they be listening to?
Because this is a whole new world and we're going to get, we're going to start explaining the politics of money, of how this, not just how it happens, but what's going to happen going forward.
What would you recommend to people since you've spent I'm going to tank my career here, but number one, turn off CNBC.
Just never watch it again.
know anything about it, and now you've spent so many years researching, what would you tell the average American to do?
christopher leonard ▲ ● ▼
I'm going to tank my career here, but number one, turn off CNBC.
Just never watch it again.
And then secondly, and I don't mean to be glib about that, but it can be difficult to understand this, but if I could please, I just want to frame up where we are today, The Fed has gone down this extraordinary path.
As you pointed out, the Fed balance sheet was about $880 billion when the housing crisis really blew up in 2008.
It's 10 times that.
It's nine trillion today.
And in the book, I really try to walk through why that's such a big deal.
But just suffice it to say that we are sort of like Wile E. Coyote way out over thin air right now with our wheels spinning or our feet spinning.
And folks have to understand that unwinding that extraordinary money printing was going to be a very hard job no matter what.
Even if the Fed had five years or ten years to do it, it was going to be hard.
Inflation, the 9.1% price inflation we're seeing right now, is forcing the Fed to unwind it, to do what they call tightening, to hike interest rates, to suck some of that money out of Wall Street.
And it can create massive instability in the economic system.
So that's just one big thing I want to flag for folks, is Get ready to please pay attention to what the Fed is doing and realize it's going to create these second and third order effects in the home market, the mortgage market, in the stock market, in the bond market, which could ultimately lead to companies laying workers off and a recession.
So where to learn about it?
As you know, I'm just a newspaper guy.
I'm a big advocate in reading the newspaper.
You know, the Journal, The Times, The Post, Bloomberg, filter out the opinion or spin you don't agree with, but mine those organizations for good data and good information about where markets are headed.
It might be unsatisfying, but that's my advice.
steve bannon ▲ ● ▼
Real quickly, the book is Lords of Easy Money.
You can get it on Amazon.
It is the book of the year as we're on the 27th of July.
There may be a better one coming out, but I ain't seen it so far, and I read everything.
The Lords of Easy Money, Christopher Leonard.
Christopher, do you have a website or social media?
How do people keep up with you, sir?
christopher leonard ▲ ● ▼
Well, I'm ChristopherLeonard.com, and then my handle is from my Associated Press reporters today.
It's CLEONARDNEWS.
And I'm at SeaLeonardNews on Twitter.
I'm at SeaLeonardNews on Getter.
I'm on both platforms, and you can find me there.
steve bannon ▲ ● ▼
The book is a must-have.
We look forward to having you back.
Thank you for taking time.
This is extraordinary.
We haven't had a chance to spend an hour with an author all year, so really, really, this was so special.
Thank you so much.
I really appreciate it, Christopher Leonard.
christopher leonard ▲ ● ▼
Thanks for the time.
steve bannon ▲ ● ▼
The Lords of Easy Money.
Buy it.
christopher leonard ▲ ● ▼
Read it.
steve bannon ▲ ● ▼
We're going to be talking a lot about it every day from now until Election Day.
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