Podcast: Jim Bruce: The Siren Song of “Money for Nothing”…..Courtesy of PeakProsperity

By | February 10, 2014

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Jim Bruce: The Siren Song of ‘Money For Nothing’

Shining a bright light on the Fed’s culpability
by Adam Taggart
Saturday, February 1, 2014, 4:29 PM

 

Like many concerned about the growing credit bubble driving the housing boom, Jim Bruce did his best to warn family and friends about the looming risks leading up to the 2008 financial crisis. Not many heeded him.

Jim, though, had not only positioned his portfolio defensively for such an event, he also managed to make profits by betting against the stocks of overly leveraged financial institutions. But it’s what he did with the money he made that’s the interesting story here.

Jim’s worry about the unsustainability of our nation’s economic trajectory only increased once the Federal Reserve began undertaking its extreme measures to get liquidity flowing (QE I, II, III, etc). In his eyes, easy credit and misguided market intervention were huge causes of the crisis in the first place, and here we were, trying to solve the problem by simply doing a LOT more of what created it.

So Jim set out again to educate people about the dangers of continuing down the reckless path we’re currently on, and he chose to focus his beam on the Federal Reserve  arguably the most influential institution in the world right now, and at the center of the policies and programs that, in his estimation, are currently dooming our economic and monetary futures. So last year, he released the film documentary Money For Nothing: Inside the Federal Reserve, which he wrote, directed, and produced.

Since its release, Jim has been touring the country with the film, speaking to Main Street and college audiences about the Fed: the implications of its policies, its fallibility, and our responsibility as citizens to remain educated on and vigilant of this private institution that has been granted tremendous power over our lives. Jim’s goals are to build awareness that the money wizards are not all-knowing and to create a dialog to actively question policy decisions that he sees as detrimental to our nation’s interests in the long term:

The Fed’s role has just grown and grown over time. To me, it is symbolic of how we are not addressing the real issues that our country faces. One of the big crutches we are using is the Fed.

Globalization has made the world a more competitive place for the last 30 years, and the Fed’s response has been to lower interest rates and encourage consumption even as American households (many of them) are not making what they used to make. The idea is, Let’s use credit to keep buying the same amounts of things that we used to buy. The whole thing is unsustainable.

It is something that, step-by-step, as crises came up, we traced the 1987 crash, Long-Term Capital in 1998, the tech bubble collapse in 2000, and now this most recent collapse. With each crisis, the Fed has expanded its actions, you could argue, with diminishing returns. They really are playing a bigger and bigger role in all of our markets and in our economy. If you look at right now, you can say the Fed today is trying to be Atlas. The have the government bond market (the largest in the world) on their shoulders and they’re trying to fix prices there. They have the U.S. Stock Market  the Fed is the biggest player there; the biggest influence, at least. Then, if you look at the housing market, buying $400-500 million dollars of mortgages each year, they are by far and away the biggest influence there.

The Fed really is directly involved and explicitly involved now in all of our major markets. The goal of the film is to lay that out for people to look at that and say: Maybe this is not such a good idea.

The film includes interviews with a number of former (and some current) Fed officials, as well as economists, historians, and investors. It’s pretty remarkable to hear such a level of criticism about its current interventionism voiced by so many involved in that institution. None appears to have a clue how the Fed will get out of the box that its recent massive liquidity programs have put it in.

Given the number of insiders that appear in the movie, some readers here on PeakProsperity.com have questioned if this might be a publicity piece for the Fed, trying to soft-pedal its culpability in the recent state of the economy. We ask Jim that directly in the interview – listen to his full response and judge for yourself  but here’s some of what he had to say:

 

If you look at the film, it is so critical of the Fed, ultimately, that there is no way Ben Bernanke wants that message out. We say a lot of bad things about the Fed…ultimately we come down on the side of, The policies we are doing today are wrong…I just cannot see how you can watch the film and think it is really implying that the Fed is on top of things.

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