Lux Lucet

The New York Stock Exchange. Jeenah Moon for The New York Times

But when he had spent all, there arose a severe famine in that land, and he began to be in want.

Luke 15:14

“Coronavirus live updates:  Washington state weighs mandatory measures to contain outbreak” is the most recent headline on CNBC. As has been the case with countless other headlines over the past few weeks, it announces another possible government action, this time by the State of Washington, to combat the spread of coronavirus in the U.S.  My point in citing this headline is not to commend or to criticize Washington for its program, but merely to illustrate that coronavirus continues to be the lead story in the American press, a position that for the most part it’s held for at least a month.

Admittedly, the coronavirus story has proven difficult for this author to assess.  A big part of the problem is the lack of credible sources.  The Communist Chinese government is not necessarily the most reliable source of information concerning the state of affairs in the country.  Then again, the Western press, specifically the American mainstream media, is no better, at least in the opinion of this author. For example, two weeks ago the New York Times ran a “helpful” opinion piece titled “Let’s Call It Trumpvirus” which attempted to lay the blame for the current coronavirus crisis on the president.

After reading and reflecting on this story over the past few weeks, my opinion is this: Coronavirus is a real illness that has killed some people; though it can be deadly, coronavirus’ mortality rate worldwide is 3.4%, and many of those who have died seem to have been in a weakened physical condition already; the most severe threat from coronavirus is its potential economic impact.

But even the economic impact of coronavirus can be overstated.  Over the past month or so, there have been a large number of stories linking coronavirus to stock market declines to the point that one begins to wonder if governmental and central banking authorities aren’t using coronavirus as a way to shift blame for the ongoing stock market decline away from themselves and to an outside factor.  “Our policies would have worked if it weren’t for the unexpected outbreak of coronavirus!” seems to be their message.

This is just the latest variation on the old game of “Don’t blame the Fed,” which has been going on at least as long as I’ve been following politics and economics.  That is to say, several decades.

But the truth of the matter is this, the Fed, in cooperation with the U.S. federal government, has gone on a historic debt expansion binge since 2008.  Through various programs – some overt such as the Fed’s multiple QE programs, its current Repo market bailout and its “not QE” QE program, others covert such as the activities of the Plunge Protection Team – the Fed and the government have managed to pump up what some have termed the “everything bubble,” a triple bubble in stocks, bonds and housing.

So what does the term “bubble” mean when talking about financial assets?  It’s simply a way of saying that a particular asset has become overvalued.  Investopedia defines a bubble as “a surge in asset prices unwarranted by the fundamentals of the asset.”  If left alone, financial bubbles eventually deflate.  But what if government officials and central bankers don’t want that to happen.  What if, instead of allowing overprices assets to return to their true market value, they do everything in their power, not only to ensure that the bubble asset prices remain inflated, but work to push them even higher?  That’s a formula for financial disaster.  It’s also an accurate description of the activities of the federal government and the Federal Reserve over the past twelve years.

Want proof that the stock market’s in bubble territory.  Consider the case of Tesla.  Tesla has had only a handful of profitable quarters in its ten years as a public company, yet by market cap – market cap, or more formally market capitalization, is the total dollar value of all a company’s outstanding shares of stock – Tesla tops both Ford and GM and is now the world’s number 2 automaker behind Toyota.  One analyst argues that the degree to which Tesla is profitable at all rests on the fact that it sells Zero Emission/Greehouse Gas credits to other manufacturers, not from the its car sales. But Tesla’s ability to earn money this way is, apparently, going to be reduced as other manufacturers, instead of buying credits from Tesla, will begin selling them.  Some analysts have accused Tesla of accounting fraud.  But for all this, Tesla stock keeps marching higher and higher.

One could make the argument that Tesla is the poster child for our current financial bubble.

It could also be argued that this financial bubble, engineered as it has been by the Fed and the government, is in the process of popping.

An when the bubble pops, people are going to demand answers.  They are going to look for someone to blame.

But one constant over the years is that the Fed is never blamed for its destructive policies, even though it richly deserves it.

The Fed is like the arsonist who sets fire to a building, rides in on a fire truck to put it out, then accepts praise for being a hero. Or it’s like that German nurse last year who was convicted of killing 85 patients.  He would administer drug overdoses to people, “so he could try to revive patients heroically.”

The difference between the Fed and the German nurse is that the Fed has never yet been blamed for its destructive policies.

So what does all this have to do with coronavirus? It is this, it appears that the Fed and its enablers are using the economic shocks caused by coronavirus as a cover story to explain away the failing stock market.  “Our policies would have worked if it weren’t for a global pandemic” seems to be their argument.

But this is nonsense.

The parable of the Prodigal Son illustrates this well.  As Jesus related the parable, “A certain man had two sons.  And the younger of them said to his father, ‘Father, give me the portion of goods that fall to me.’ “ Now as we know, the son went away and wasted his money on “prodigal living,” which is a way of saying he partied, giving no thought to tomorrow.  But eventually, his money ran out, a famine hit, and he found himself in dire straits.

So let’s ask this question, was it the famine that caused the son’s troubles, or was it his sinful and wasteful lifestyle?  As the parable makes clear, it was the son’s sin that put him in difficulty.  The famine served merely to expose his prior foolish and sinful behavior.

And just as the prodigal son’s troubles came upon him, not principally due to the famine, but due to his own sin, so too are the problems plaguing our economy not caused principally by coronavirus, but by years, decades, even a century or more, of financial sin.  And the nexus of that financial sin is the Fed and its evil money printing schemes.

Some have likened coronavirus to the pin that pricks the bubble.  Perhaps this will turn out to be the case.  If so, don’t blame the pin, blame the people who are responsible for blowing the bubble in the first place.  This blame lies principally with the Fed.

But the mainstream media, whose job is not to inform, but to misinform the public gladly runs with the idea that it’s the coronavirus that lies at the root of all the stock market troubles in recent weeks and not the Fed’s monetary policies.

Whether the Fed can stop the stock market bleeding with further interest rate cuts and money printing remains to be seen.  This author is in a certain amount of awe at how long and how effectively the Fed has been able to keep the stock, bond and housing bubbles going.  The whole thing should have collapsed years ago, but the Fed, the Treasury Department and the big banks have kept the scam going for far longer than many observers, including this author, ever thought possible.

But whether the Fed and its enablers in the media use coronavirus as the cover story to justify more money printing, or to explain away an economic collapse, Christians absolutely must understand that this is a lie.  The current economic mess in which the U.S. and the West finds itself has nothing to do with coronavirus, and everything to do with prodigal living for over a century, which would not have been possible were it not for the evil of central banking.

America desperately needs to return to sound money, but vested financial and political interests work overtime to ensure that Americans never hear the truth of the evils of central banking.  The many financial disasters over the past 100 years, including the Great Depression of the 1930’s, were largely the result of Fed policy, yet it’s never the Fed that bears the blame.  Like a squid squirting a cloud of ink, the Fed and its enablers have successfully diverted attention away from the central role it has played in causing our extraordinary and historical national debt, our endless foreign wars, our declining standard of living and the erosion of our personal liberty.

It’s always a game of blame shifting with them.

The Fed induced stock market crash of 1929 was blamed on stock speculators and what followed was a rash of stifling government regulations.  Fed money printing and government overspending on the Vietnam war and President Lyndon Johnson’s Great Society welfare state brought about the terrible inflation of the 1970’s, which was blamed on Arab oil sheiks, frosts in the Florida orange groves and greedy businesses.  The result?  President Nixon’s wage and price controls.

Our current situation is far worse than what we faced in the 1930’s or 1970’s.  America has far more debt, personal, corporate and governmental than it did in either of those two decades.  It is also a far less Christian nation than in the past.  This does not bode well.

If not effectively countered by Christians who understand the Bible’s mandate for limited government and free market economics, an economic collapse today on the scale of the Great Depression likely will lead to calls for a  socialist government of the sort envisioned and called for by Bernie Sanders, Elizabeth Warren or Alexandria Ocasio Cortez.

It is imperative for Christians to understand that our current economic difficulties have nothing to do with a failure of capitalism or too much personal liberty.  Constitutional capitalism is the Bible’s systems of politics and economics.  Rather, it’s the lack of these things that has led to our current mess, and it’s the Fed and its century plus long money printing scheme that is principally responsible for brining us to this point.

Over the next few weeks, you likely will see calls – many of them coming from President Trump himself – for the Fed to intervene in the economy to keep the stock market propped up.  These interventions may or may not have the desired short-term effect of keeping the bubbles inflated.  But at some point, the bubbles are going to pop.  When that happens, things are going to get real for all of us.

Let us pray that God would grant men the necessary understanding from Scripture to refute the authoritarians who will surely clamor for more government control of the economy and less freedom.  Let us also take measures now, both to become educated on the Bible’s teachings on economics and politics and to prepare ourselves financially and physically for the tough times that are surely coming.

BREAKING ALERT:  I no more hit the “Publish” key on this post than I checked the futures markets and found that the Dow was off over 900 points, Oil was off 27% (that’s not a typo) and gold was up over $1,700 US.  My supposition is that the Plunge Protection Team will mitigate some of this by the time trading opens Monday morning.  But still, an opening of this sort, especially after several weeks of historic instability, underscores just how extraordinarily fragile our financial system is.  It may be a good idea to listen to David Stockman’s recent interview where he expresses his view that the unstable stock market is a warning sign that the current financial system is coming to an end.