#monetary policy

Peter St. Onge 6/26/26

Alan Greenspan has died at the ripe age of a hundred.

Greenspan’s passing set off a tsunami of tongue-bath OpEds how the “Maestro” centrally planned the American economy for close to 20 years.

In reality, Greenspan turned the Fed into a permanent bailout machine that gets worse with each passing decade.

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The “Maestro” at the Helm

Just 69 days after taking office in 1987, Greenspan was blindsided by a market crash that he used to turn the Fed from alleged economic referee into a bailout machine where the bankers keep the wins and taxpayers -- and dollar holders -- eat the losses.

This became known as the “Greenspan Put” — put means insurance in finance. And it’s the reason Boomers — and bankers — own everything while 40-something Millennials live in Mom’s basement.

Greenspan ran that machine for 20 years, all the way through 2006 when Greenspan lit his last boom-bust bomb, ending in the 2008 Financial Crisis that nearly set off a Second Great Depression.

Unfortunately, the bailout machine Greenspan built is now a permanent feature, with every subsequent Fed chair forced to pump til it breaks then bail out what’s left at your expense.

From Counterfeiter to Bailouts

So the Fed was created by bankers — the infamous Jekyll Island putsch — as a counterfeiting cartel that prints money, but not so fast the inflation puts voters on pitchforks.

Like a gasoline thief who siphons the neighbor a quarter-gallon at a time instead of draining tanks, which would get him caught.

The way central banks do this is guaranteeing bailouts for commercial banks — so-called “lender of last resort.” Which lets those banks lend money they don’t have -- they literally create type the loans from thin air. Which is why you need to open an account to get a mortgage — the bank created the money.

Then central bankers limit the printing to tidy quarter-gallon siphons using interest rates, which determine how much loans cost.

Lower rates mean cheaper loans — and more of them. Which artificially boosts growth, generates fees for wall street, and makes it cheap for the federal government to spend more than it has.

Everybody wins. Except pleb taxpayers and dollar-holders.

The problem is having a giant counterfeit machine is Frodo’s ring: It attracts pressure to cut rates too far -- which causes boom-bust inflation and recession.

And the even more insidious pressure from Wall Street to use that lender of last resort function to bail out not just boom-bust but speculation.

Because an iron law of finance is more risk is more return. If you tell gamblers they keep the wins but you’ll cover the losses they’ll go all in all the time.

And that’s where Greenspan comes in. Starting with that 1987 stock crash -- Black Monday -- Greenspan flooded the banking system with money, promising to keep flooding til every banker was solvent.

The Greenspan Put was born.

The Wall Street Greenspan Built

Bankers went from conservative portly men in glasses to the 1980s sharks fueled by hookers and blow.

Sharks who went on to fuel near-annual financial crises under Greenspan, from the S&L crisis and Tequila crises to the dot-com bubble. The 1994 bond market massacre. The 1997 Asian financial crisis. The 1998 hedge-fund bailouts.

The mother of housing bubbles in the early 2000’s.

In every case, the sharks made billions. And in every case taxpayers and dollar holders got shafted.

When the smoke cleared finance quadrupled to become the third largest industry in America.

Worse, it put Wall Street on a risk house of cards that every Fed chair now must feed.

Our new Fed Chair Kevin Warsh has already bumped up against that, apparently ditching promises to reduce inflation by pawning Fed assets since Wall Street is now orchids in a greenhouse cannot survive in the wild.

What’s Next

Greenspan may be gone, but the bailout machine he built keeps growing. Fixing it is easy: Just announce the Fed won’t bail anybody out, if a bank fails it’s sold for scrap to more prudent banks.

Of course that would set off an instant 2008 crisis. Meaning it won’t happen.

The best Warsh can do is try and limit bailouts. But he’s locked in a straitjacket Alan Greenspan wove.

Pix has spiced up Brazil’s fusty banking sector, but it gives the central bank a worrying amount of power

In november 2020 the Central Bank of Brazil (BCB) launched Pix, a digital payment system, into the teeth of the covid-19 pandemic. Avoiding physical contact at a time when that was much desired, instantaneous, free and easy-to-use, Pix took off. Users need the recipient’s national ID number, phone number or a QR code to move money. By 2024 (see chart) it had become Brazil’s most popular payment technology, displacing both cash and cards. The number of transactions increased from 9bn in 2021 to 63bn in 2024, moving 26trn reais ($4.5trn). No country has adopted such a system faster.

The widespread use of a frictionless, cheap payment platform has spurred competition in Brazil’s stale banking sector. It is also fostering further innovation. Pix provides the bedrock on which the BCB is building Drex, a digital version of the real, which it plans to launch after tests, due to finish this year. It would then be one of just a handful of central banks to have issued a digital currency.

Renato Gomes, one of the eight directors of the BCB, says Pix is fast supplanting cash payments. Cash withdrawals in Brazil are down by nearly 40% from their peak. Pix is expected to overtake credit cards to become the primary method of making online purchases this year. The central bank is constantly adding features to facilitate payments in an ever wider array of scenarios. In February Pix began rolling out contactless payments using smartphones. From June users will be able to use Pix to make recurring payments, such as those for utility bills. All this means more and more money flowing through the banks and retailers’ accounts. Mr Gomes says Pix’s mass adoption may well have boosted productivity. Perhaps coincidentally, Brazil’s GDP growth has beaten expectations for the past three years in a row.

Yes. You can't really do MMT, or indeed a lot of modern economic policymaking, with a gold standard. (That's one of the major purposes of having a metallic standard.)

As to your second question, the U.S would have been in a much better place in the 19th century (especially for workers and farmers, i.e the vast majority of the American people) had it stayed on the fiat currency model after the Civil War and never looked back, rather than returning to the gold standard.

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Apple Podcasts: https://podcasts.apple.com/us/podcast/guest-tony-arterburn-mastering-money-how-to-outsmart/id1439014279?i=1000677319630

Spotify: https://open.spotify.com/episode/29TlOQrbxJuuHtt08yAzHj

*closes my eyes and taps my shoes together*

The US Dollar is still the dominant reserve currency

The US Dollar is still the dominant reserve currency

The US Dollar is still the dominant reserve currency