Creative Capital

Fed Folly and its Practical Effects

“The… task of economics is to demonstrate to men how little they really know about what they imagine they can design.” –Friedrich von Hayek Adam Smith was the first to name the “the invisible hand” so felicitously, but he was hardly the first to notice the existence of such a phenomenon. The idea of an …

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The Red-Tape Fed

The long and deep recession of 1930–33 finally ended in March of 1933. Once it ended, the Fed, believing that the economy could now—and should now—fend for itself, backed off. The result was one of the most powerful economic expansions in U.S. history, an expansion that lasted three decades. The short and shallow recession of …

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The Fed’s Act of Cowardice

We are talking about America’s Monetary Keystone Kops, who have, since 1987 (when Greenspan became chair of the Federal Reserve), been masquerading as central bankers. (Or maybe it’s the other way ‘round, it’s hard to tell.) The Fed’s finest hour was saving Bear Stearns while wiping out its equity holders and senior management—that is, the …

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Bernanke’s Blunders

We’ve assessed the successes and failures of central bankers in the 1930s. Now let’s turn our attention to their modern counterparts. I will argue that, unlike the earlier central bankers, whose record was mixed but a net positive, our modern central bankers have done almost everything wrong—and for 30 years running. To wit: Like the …

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Why Gold Had to Go

The “gold standard,” which prevailed in the developed world for many decades, simply means that some fraction of a country’s paper currency has to be backed by—that is, convertible into—gold. In the U.S. that fraction was 40 percent. Since a government on the gold standard can’t print money without increasing its gold reserves, society-destroying events …

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Central Bankers Then and Now, Part III

Scholars of the Great Depression typically blame policymakers of the 1930s for failing to do four things: They failed to rein in the 1920s economic boom, allowing its collapse to lead to the worst depression in US history. Following the Crash of ’29, they failed to inject sufficient liquidity into the economy, causing it to …

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The Great Depression vs. the Great Recession

Subsequent to the Global Financial Crisis, U.S. GDP has grown, in the aggregate, 37%. During the period of the Great Depression, U.S. GDP grew, in the aggregate, 40%. In the 1930s, the U.S. economy declined 26% between 1930 and 1933 and unemployment rose to 25%. During the Great Recession the U.S. economy declined 3% and …

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Central Bankers Then and Now

Not that anyone cares, but in these pages I’ve been highly critical of the “unconventional” policies pursued by every central banker on the planet since the Financial Crisis. My arguments have been many and simple: The policies not only didn’t work, they actually stunted economic growth. The policies were “immoral” in the sense that they …

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Shined Shoes Can Save Your Life: The Conclusion

It was now late winter of 1971 and I was running the traffic division at the 226th MP Company at Fort Benjamin Harrison, outside Indianapolis. In those days Fort Ben was the headquarters of the Army Finance School and the location of the Army Finance Center. The building that housed the Center was the second largest …

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The Legend of Duke Hock

Sergeant Duke Hock was a legend in the Army while I was still in grade school. He was Jack Reacher before Lee Child was born. There are so many stories about Duke that, even though I’ve forgotten 90% of them, I can remember dozens. The two I’m about to relate happened to involve me. To …

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Shined Shoes Can Save Your Life, Part II

So there we were, in late 1970, having graduated from the U.S. Army Military Police Correctional Specialist Academy, the best-trained prison guards in the world. We had been assigned to one of the worst prisons in the world, the stockade at Long Bình, Vietnam, better known as the Long Bình Jail, or LBJ. Our job …

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Shined Shoes Can Save Your Life

A few weeks ago, in a post about J. D. Vance’s book, “Hillbilly Elegy,” I mentioned in passing that I was convinced that having spit-shined my Army combat boots may have saved my life. I didn’t elaborate, and since then several dozen people have inquired about that brief aside. So here’s the story. To understand what …

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Why Democracy Matters

Just to make it simple, let’s define Europe’s “illiberal democracies” as those countries where elected leaders profoundly disagree with the liberal, inclusive, affluent worldview of the EU’s political classes. The British disagreed with this worldview so violently that they left the Union altogether. Most of the other “illiberal” democracies aren’t in strong enough positions to …

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The Media Has It All Wrong

I mentioned last week that I recently visited Switzerland, Austria and Hungary, and that if we think things have gone nuts in the U.S., we have no idea. The gentle Swiss, as I pointed out last week, have become enamored of right-wing, populist parties and are about to vote on a flat-out silly leftwing ballot …

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Inside a Swiss Bank

I just returned from one of those whirlwind speaking tours in Europe – three speeches in four days in Zurich, Budapest and Vienna. It was an eye-opener. Back here in the U.S. we are so focused on the shenanigans going on in Washington, D.C. that we forget that very similar turmoil is convulsing the body …

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The Hillbilly Saga: Conclusion

The bottom line of J. D. Vance’s book, “Hillbilly Elegy,” is that far too many people from southeastern Kentucky are trapped in a hillbilly culture that stands in the way of their own success. As if that weren’t bad enough, hillbillies are discriminated against because people aren’t willing to distinguish between good hillbillies and bad …

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How to React to a Hillbilly

Last week we tried to imagine how Professor Daniel Kahneman, Nobel Prize-winning author of “Thinking, Fast and Slow,” would react if he saw a couple of hillbillies coming into his store. This week we’ll re-look at that situation, pretending that Kahneman isn’t a Nobel Prize winning professor at all, but a lowly department store clerk. …

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The Stubbornness of Culture

In 2013 J. D. Vance graduated from Yale Law School, an accomplishment he shared that year with the following fraction of his fellow Americans: 0.00000063. I deduced this remarkable statistic very simply, by dividing the number of students in the Yale Law School class (208) by the population of the United States, which, at this …

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Don’t Even Think About Crossing a Hillbilly

We’ve talked about several obstacles to success in middle class Ohio for migrants from southeastern Kentucky: they had horrible accents and they tended to dress funny. But the biggest obstacle was the most difficult to overcome: their behavior. As I’ve noted, Scots-Irish immigrants to America brought with them a constellation of characteristics. These included an …

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Don’t Dress Like a Hillbilly

Last week we discussed one of the major hurdles recent immigrants from southeastern Kentucky faced when they tried to assimilate into middle class society in Ohio: they talked like hillbillies. This week we’ll look at a second hurdle: the matter of dress. In “Hillbilly Elegy,” J. D. Vance notes that his Papaw wore the same outfit every …

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The Inscrutable Foibles of Hillbilly Talk

Although the parallels between my life and that of J.D. Vance, author of “Hillbilly Elegy,” seem flat-out astonishing, it’s actually the differences that are more interesting. Vance and I both started out with grandparents who migrated from southeastern Kentucky to the Dayton, Ohio area, and we ultimately ended up in pretty much the same place: Yale …

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Why Were Pittsburgh’s Scots-Irish So Successful?

If Malcolm Gladwell is right that the cultural legacy of the Scots-Irish explains the poor outcomes experienced by people in southeastern Kentucky, how do we explain the exceptional success of these same people in Pittsburgh? One answer to this conundrum is this one: “Cultural legacy explanations are garbage.” That’s the Politically Correct answer, but it’s …

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