We write today in non-partisan alarm.
For the first time in US history, the nation’s highest law enforcement agency — the FBI — has pulled out its automatic weapons and raided the house of an ex-president as if he were a drug dealer.
Why not just ask for the files, politely?
Did they think Donald Trump would skip town?
Were they afraid he would put up a fight? Were FBI agents’ lives in danger? Justified or not? We don’t know. But the raid on Mar-al-Lago was certainly a step towards bananafication.
The conservative press took the bait…calling out the G-Men for ‘crossing the Rubicon’. Newt Gingrich in Newsweek: ‘Crossing the Rubicon at Mar-a-Lago | Opinion’:
‘On Monday, Buck Sexton told Jesse Waters:
‘It almost feels like a preemptive coup…This is meant to prevent Donald Trump from being able to run again…This is the Rubicon being crossed. This is something we’ve never seen before. This is something that is outrageous. And the usage of the FBI in this way is really the nail in the coffin for so many Americans as to whether you can trust the FBI or trust the DOJ. Clearly not on political matters.
‘On CNN on Tuesday, George Conway repeated that “they’ve crossed the Rubicon here.”
‘Crossing the Rubicon references a historic event with a specific meaning. To truly “cross the Rubicon” is to take a step which changes decisively the circumstance in which politics and government occur.’
‘Alea iacta est’, said Caesar as he crossed the Rubicon. (The die is cast.) But Caesar was an able, energetic commander at the head of a victorious army. The FBI is very different; it hasn’t exactly covered itself in glory over the last few years.
And it was not the Rubicon that the FBI crossed…it was another, muddier river.
Money is our beat, not politics. But money is just a piece — an important one — in the web of civilisation. Money keeps score, telling us who has and who has not. And when the tally is falsified, everything goes bad.
On Monday it was Assumption Day…the day celebrated by Catholics for the Virgin Mary’s rise to Heaven. It is also the day when the US’s money went to Hell. It was on this day, in 1971, when the US substituted a ‘paper’ dollar for the old, gold-backed greenback. This new money had an advantage; it could be diddled, counterfeited, and tricked-up. The Fed could ‘print’ as much as it wanted…and fiddle interest rates down to absurd levels (zero!).
After a stumbling start, the Fed figured out how to exploit the new money system in the ‘80s. Thereafter, it was off to the races…with huge increases in debt…and a steady decline in the value of the dollar. Since the switcheroo in 1971, a person who had put his money in his mattress has lost 86% of it.
The slippage sped up dramatically after 2020. The Chinese could no longer be counted on to reduce consumer prices…and the lockdowns from the COVID panic had caused severe supply chain disruptions. Once people got used to not working, for example…it became a hard habit to break.
‘According to Labor Department data, the number of workers in the U.S. has fallen 400,000 since March, a troubling sign after the number of workers approached prepandemic levels earlier this year. The total labor force is now about 600,000 smaller than it was in early 2020, right before widespread COVID-19 restrictions plunged the economy into a recession.’
In 2020, the Fed added four trillion new dollars — and the federal government spread the new money around in stimmy cheques, unemployment boosters, and PPP loans. By the summer of 2022, the CPI (consumer price index) rose more than 9%, the worst inflation since 1980.
Suddenly, the whole scam became clear. The feds could ‘print’ money. Or they could control the value of their money. They couldn’t do both. In the event, they chose to expand the supply of dollars; the value of each one fell.
Along with the money, faith in ‘the system’ fell too. Civil society became less civil. Politics became more vicious. The press became more partisan and less reliable. The universities stifled debate, rather than encouraging it. The rich got richer. The poor got poorer.
Last week saw a major step down for the US’s justice system. The FBI crossed an important river. But it was not the Rubicon…it was the Rio de la Plata. And it leads not to the imperial magnificence of Augustus…but to the slouchy flimflam of Juan Peron’s Argentina, where chaos, cynicism, and corruption still dominate political life.
But wait. All is not lost. The Fed is trying to reverse the damage. After three decades of inflating, it is now deflating — desperately trying to restore its credibility, gain the upper hand against inflation, and save the value of the dollar.
How long will it be able to stay the course? Or will it be tempted to ease up…now that inflation has peaked? Like the FBI, will it take a little raft across the Rio de la Plata itself?
That is the story we are watching. It’s also the drama that will determine the direction of the US economy for decades into the future.
For The Daily Reckoning Australia