Bannon's War Room - WarRoom Battleground EP 103： The Lords Of Easy Money

00:00:00.000 this is what you're fighting for i mean every day you're out there what they're doing is blowing

00:00:19.860 people off if you continue to look the other way and shut up then the oppressors the

00:00:26.860 authoritarians get total control and total power because this is just like in arizona this is just

00:00:32.760 like in georgia it's another element that backs them into a quarter and shows their lies and

00:00:37.500 misrepresentations is why this audience is going to have to get engaged as we've told you this is

00:00:41.780 the fight all this nonsense all this spin they can't handle the truth war room battleground

00:00:48.080 here's your host stephen k bannon welcome to the battleground it's wednesday 27 july the year of

00:00:55.620 our lord 2022 as we went through an extraordinary depth in the last hour was the federal reserve

00:01:03.060 chairman's uh jay powell's announced today i think 75 basis points uh he also made a startling statement

00:01:09.800 did not think that country was in a recession and more importantly he says i don't put a lot of stock

00:01:14.980 in initial gdp reports coming out of the fed okay i i guess the first time i've heard a fed chairman say

00:01:21.800 that but we're on uh we're in uh unique and extraordinary times and uh you know there's been

00:01:28.380 a lot of spinning a lot of spinning and changing a nomenclature and definitions and up is down and

00:01:34.220 down is up all that so what i wanted to do in the for an entire hour and i haven't had the opportunity

00:01:39.340 in this entire year to do this particularly with a book uh and i happen i've had this gentleman on a

00:01:45.920 couple times before it's christopher leonard the book is the lords of easy money and and people know

00:01:51.700 and booksellers publishers come to me look at this we got my notes all over the place uh because we

00:01:57.320 saw a lot of books here in the war room you know we have an audience that's not just engaged but are

00:02:01.360 real readers this book lords of easy money is at least up to the 27th of july the year of our lord

00:02:09.620 2022 on the show that's the biggest bookseller by far and i'll take on all comers in that we'll

00:02:16.280 talk to all publishers this is the book of the year and why is it the book of the year because it

00:02:21.500 has taken an institution that's absolutely not just central i would say dominant more dominant

00:02:28.340 institutionally in american life than the supreme court and i don't say that lightly and what shocks me

00:02:36.920 and stuns me is that its dominance and its importance is very rarely talked about but

00:02:44.340 particularly not explained and i believe that when we talk about democracy and anti-democratic

00:02:51.340 institutions and and you talk about deep state and all this kind of nomenclature the swamp i say put

00:02:56.500 all that stuff aside that's that's like saint paul's when i thought like a child i reasoned like a child

00:03:02.020 and i acted like a child we now need to start talking like adults we have an institution that

00:03:08.820 has a essentially a dominance not just on our financial system but has a dominance in each and

00:03:15.640 every one of yours not just the country's economic lice but your life your life you can think of any

00:03:22.100 institution in the world from the church to the courts to across the board the single most dominant

00:03:28.380 institution in your life is the institution that controls the money of this country now who knew

00:03:36.300 this i tell you who knew it it's the founders of our nation all the way up if you go back and that's

00:03:42.540 why i had birch gold if you go to birchgold.com slash bannon i've got the first part of this i think

00:03:47.580 seven or eight part series it's been the biggest uh uh you know a paper that birch has ever put

00:03:54.240 that's totally free and i said the end of the dollar empire and i started and i started the

00:03:59.960 first the first part was just to look at the from the founding of the country all the way up to the

00:04:05.020 founding of the federal reserve in what 1913 i think it was the entire country's politics to a large

00:04:11.820 extent was debates on the concentration of finance the concentration of uh wealth and who controlled

00:04:19.980 currency and what was currency and we're going to have central banks that all went away from the

00:04:25.200 federal reserve since then it has it's been taken out of the politics of the nation the politics of

00:04:31.000 andrew jackson the politics of william jennings bryant the politics of quite frankly abraham lincoln

00:04:37.060 so it's been it's been extraordinary and uh that's why this book is so powerful this book not only

00:04:42.840 is a great primer to understand money and to understand the flow of capital and how it affects

00:04:49.160 your life it also talks about the history and most important talks about the modern history when i say

00:04:54.100 the modern history for me it's really from the financial crash of 2008 going forward because that

00:04:59.140 crisis is unresolved today one of the reasons that i say that right now the world is on an abyss of a

00:05:06.400 financial catastrophe is that we have not we have not gotten to the heart of what the problem was

00:05:12.420 for the financial crash of 2008 and in fact we exacerbated i believe that problem with results of

00:05:18.340 what is the federal reserve let me bring in christopher leonard the um the author of the lords of easy money

00:05:24.480 how the federal reserve broke the american economy walk me through that subtitle in your thesis what's your

00:05:31.440 theory the case because you're uh chris as i've got to know you you're the farthest thing from a

00:05:38.020 bomb thrower you're the the anti steve bannon you're steady eddie you're a journalist you go where the

00:05:43.960 facts are you're not going to get your hair is never on fire but you wrote a book as i say that if enough

00:05:50.000 people read this book and embrace this book and understand this book this is the kind of document you

00:05:55.020 base a revolution on the lords of easy money how the federal reserve broke the american

00:06:01.180 economy christopher leonard the author explain to our audience what that means yeah thank you for

00:06:07.820 that i really appreciate it and that was a great background a kind of history to get us up to this

00:06:12.900 point as you know you know this this book it walks through the history of the fed but it really looks

00:06:18.940 at what the federal reserve has done over the last 10 years which is unprecedented in the history of

00:06:25.360 the fed the fed has really broken the graph of history it has engaged in a series of

00:06:30.860 unprecedented and and really truly radical experiments in printing money and we can walk

00:06:36.780 through all of this uh but you know you're asking me about that subtitle how the fed broke the american

00:06:42.160 economy that's a very confrontational subtitle and i really stand behind it more and more every day

00:06:48.740 the fed broke the economy in a few key ways first of all the fed's actions helped widen wealth

00:06:57.360 inequality probably more than any single institution in the united states the fed drove the gap between

00:07:03.260 the very very richest and everybody else to its widest point in history through its money printing and

00:07:09.360 we'll talk about how that works but then secondly by by doing this over a decade by pumping money into

00:07:17.060 wall street by boosting stock market prices corporate debt markets and all the rest of it the fed has

00:07:23.740 has put us in a terribly fragile position they have created enormous asset bubbles on wall street it's

00:07:30.660 what the hedge fund types call the so-called everything bubble and that's what's left us in such a

00:07:36.400 precarious state today where where the fed is being forced to try to fight inflation by tightening the

00:07:42.680 money supply but in doing so it's really risking a massive financial crisis so that's how the fed has broken

00:07:49.200 the economy it's enriched the rich and it's made our financial system so fragile today

00:07:54.440 chris one question before we go back into the history of it how does any institution have this

00:08:02.820 power when you say they went on these radical experiments they they for the for the for the

00:08:07.720 average viewer and our viewer is at a level of sophistication more than just regular cable tv

00:08:13.440 or or or certain of these shows and i think much more sophisticated than what's watching business

00:08:18.900 tv when you say radical experiments and they've done more radical experience bringing money

00:08:23.340 how does any is how does this institution have the power to do radical experiments that they don't have

00:08:30.860 accountability or at least have to get permission to do that sir that that is such a that is literally

00:08:37.260 the eight trillion dollar question and and i'll explain that and what you're talking about here is the

00:08:41.960 very structure in the power of the fed so let's go back to the very beginning congress created the fed in

00:08:48.160 1913 in a way that insulated the fed from voters okay congress intentionally gave the fed tremendous power

00:08:57.260 and and tremendous insulation from democratic pressures and there's a reason for that okay they formed the

00:09:05.180 fed to do something truly extraordinary which is to create the national currency of the united

00:09:11.620 united states uh before the fed there were literally thousands of currencies in the u.s it sounds kind

00:09:17.060 of crazy now but each bank would essentially issue its own currency and we had a a ton of financial

00:09:24.560 volatility so eventually congress created this institution that would create a unified and single

00:09:32.120 currency that thing we call a dollar is actually a u.s federal reserve note and to manage a currency

00:09:39.760 sometimes you have to do hard things okay sometimes you have to tighten the money supply for example to

00:09:45.640 fight inflation but that can create a recession so that's why congress said okay we're not going to

00:09:50.980 have these folks who run the fed be elected officials they're going to be appointed by the president

00:09:55.520 they're going to be approved by the senate but they're going to operate without democratic

00:09:59.280 influence or voter influence okay of course the wall between voters in the fed is is never impermeable

00:10:05.980 or perfect but that's how they set it up and you know for for decades the fed used its power i i'd call

00:10:14.640 it within kind of a narrow lane if you will you know the fed tried to manage the currency it bailed out banks

00:10:21.280 when there was a banking panic but what we've seen particularly since the 1990s is that the footprint of

00:10:28.200 the fed has just grown ever and ever larger and and and congress has essentially given more and more power

00:10:35.580 to the fed more and more of our economic policy is sort of handed over to the central bank and so what

00:10:41.640 you have by 2010 is this institution with just tremendous latitude to act okay and and a governing board that

00:10:50.700 never faces voters and you've got a congress who's sort of sitting on the sidelines saying okay fed

00:10:55.540 we're going to leave the jobs programs to you we're going to leave the job of economic development

00:11:00.700 to you and so the fed has really taken this power and run with it and as i've said just an unprecedented

00:11:07.980 way when you talk about jobs when they first start up they were they were focused on the currency

00:11:15.340 and also inflation but they got added a second mandate uh with jobs uh and then recently with i think it

00:11:23.660 was jamie raskin's wife one of the reasons she was turned down at the fed they wanted to actually

00:11:28.840 add another esg they wanted to actually bring in another whole aspect that the fed would do when did

00:11:35.740 they get added this issue about in full employment and and uh and and jobs and do you think that that's

00:11:42.660 too can you really do both can you really manage the currency and worry about inflation and trying to

00:11:48.560 keep inflation low and worry about the business cycle at the same time you're trying to worry about

00:11:52.960 unemployment uh you can't and and it's been proven right from the outset so this is this is a great

00:11:59.400 question let's back up to 1978 that's when the fed was given this thing that they call the so-called

00:12:06.820 dual mandate which means the fed is mandated to fight inflation and keep the currency stable

00:12:12.980 but on the other hand it's mandated to make sure the unemployment rate is low to create as many jobs as

00:12:18.780 possible now this was passed in 1978 and then the chairman of the fed in 1980 was this guy named

00:12:27.100 paul volcker who we'll talk about he was the guy who literally doubled interest rates to stop the great

00:12:34.360 inflation of the 1970s and in doing so he threw the dual mandate out the window he he raised interest

00:12:40.800 rates to stabilize the the currency but he plunged the nation into a recession with a 10 unemployment rate

00:12:48.100 absolute brutal recession and you know congress called him in front of a committee and said hey how can you

00:12:53.500 be doing this and he said well you know the dual mandate it really all depends on the scale of time at

00:13:00.140 which you consider it like we're gonna create a recession but it's for the long-term stability and

00:13:05.880 eventually the jobs will come back so the so-called dual mandate is really in the eye of the beholder

00:13:10.720 in essence to manage the currency you got to create unemployment and to create unemployment sometimes you got a little

00:13:16.680 little bit of inflation happen but if we could really quickly i i just want to emphasize how

00:13:23.700 how different the last decade has been okay uh the fed can boost jobs essentially or boost economic growth

00:13:33.580 by cutting interest rates at least typically that's what it did okay it it makes it easier and cheaper to

00:13:40.220 borrow money which is supposed to fuel economic growth you know you can measure the amount of

00:13:47.760 money the fed is printing by looking at the size of the so-called fed's balance sheet i know that sounds

00:13:52.700 like a technical term but basically when the fed creates money its balance sheet increases and we can

00:13:58.320 talk about the mechanics of that but the fed's balance sheet increased really slowly and incrementally

00:14:04.600 for about a century okay it it the fed created a little bit more money and a little bit more

00:14:09.180 money each year until the the total pool of money was about 900 billion dollars in the u.s now we're

00:14:15.280 talking here about the original pool of dollars created by the fed they can call it the monetary base

00:14:21.720 so 900 billion dollars in about a century and then between 2008 and 2014 the fed creates 3.5 trillion

00:14:31.960 dollars so that's three and a half centuries worth of money printing in a few short years and that was

00:14:37.560 really just the beginning when covet hit the fed printed another north of 3 trillion dollars so

00:14:43.220 you know over the last 10 years the fed has created 8 trillion more dollars and so when you look at

00:14:48.980 the size of the balance sheet it creeps up slowly and then over the last decade it just explodes

00:14:54.040 upward so this is just one of the indications we're talking about yeah i i i i i hold a hold a hold

00:14:58.600 i i want to slow down for a second because this is very important and i want the audience to understand

00:15:02.220 for the for the first century we have a monetary base of 900 billion dollars that's the money in

00:15:07.260 circulation they had these crisis in 2008 they immediately start creating money and we'll walk

00:15:13.440 through the mechanism how they do that of three and a half trillion the pandemic the ccp virus and

00:15:18.020 other three the balance sheet of the federal reserve and just put it in perspective when um the

00:15:23.340 financial crisis happened in 2008 when they guys went to the when the head of the federal reserve

00:15:28.680 and the secretary of treasury it was uh it was a bernanke was the fed chair and hank paulson was the

00:15:34.900 treasury they went to see bush because they had this immediate problem uh the balance sheet of the fed was

00:15:40.400 880 billion dollars 880 billion dollars today as we sit here it's north of nine trillion dollars

00:15:48.380 who gives them authorization to create that money and how they actually create i think what's so scary

00:15:55.840 about your book is that particularly jay powell and these guys during the during the during the uh

00:16:01.840 the covid crisis if they want to create a trillion dollars they just create a trillion dollars what is

00:16:07.760 absolutely stunning is who authorized and who's responsible because this is what's causing a lot of

00:16:15.100 inflation today going from really 880 billion dollars in the september of 2006 2008 to the nine trillion

00:16:26.340 dollars you have on the balance sheet today who authorized it how do they create it and who's

00:16:32.740 accountable responsible for that sir let me start please with how they create it because to me this

00:16:40.240 is just so key one of the things i really love to do is to understand the the plumbing of the american

00:16:46.960 political economy you know the mechanics of how things work because when you study that you can

00:16:51.340 really see who wins and who loses and and and it's very helpful to understand how it works for our

00:16:56.640 discussion so we talk about the fed printing money it's it's amazing how it does it the fed doesn't

00:17:03.320 print money by making dollars just appear inside the checking account of steve bannon or chris leonard

00:17:10.240 when the fed was created the the framers basically made the fed uh subservient or or behind wall

00:17:19.660 street if you will you know you've probably heard of the famous uh meeting of these bankers on jekyll

00:17:25.060 island off the coast of georgia when they got together and kind of created the architecture of

00:17:28.860 the fed they did not want the fed as a government-run central bank to displace wall street so here was

00:17:35.460 the compromise they come up with to create money the federal reserve essentially buys things from

00:17:42.880 a group of 24 selected banks these banks are called primary dealers and they're the usual suspects

00:17:50.160 goldman sachs jp morgan wells fargo go down the list okay these banks on wall street 24 of them

00:17:58.520 they have a special reserve account inside the fed and here's how the fed creates money the fed literally

00:18:05.620 has a trading desk in new york city this floor of young traders that i toured back in 20 early 2020

00:18:13.000 or 2019 and a trader a financial trader at the federal reserve will call up jp morgan and say hey

00:18:20.360 i want to buy eight billion dollars of treasury bonds from you and the jp morgan guy says okay here's

00:18:25.940 eight billion dollars worth of treasury bonds and then the fed guy says look inside your bank account

00:18:31.040 boom eight billion dollars just appeared out of nowhere through some keystrokes at the fed that's

00:18:37.340 how the fed creates new money and this is important to understand to get back to our central point

00:18:42.780 in in 2010 the federal reserve chairman ben bernanke said we have got to boost economic growth we're going

00:18:50.760 to do a jobs plan and we're going to do it by printing hundreds of billions of dollars which

00:18:56.100 later became trillions of dollars on wall street this is a thing that the fed likes to call

00:19:00.120 quantitative easing this is how all that money got created so the fed will just replicate this

00:19:05.520 transaction again and again buying these assets from wall street making the money appear inside the

00:19:09.980 wall street bank accounts until it's created trillions of new dollars in the wall street banking system

00:19:15.400 all in the hopes that it'll drive up stock prices and encourage more lending to to encourage economic

00:19:22.320 growth now your question who gave them the authority i mean this is a question we could talk for five

00:19:30.120 hours about in in essence the fed was created with this very broad mandate to manage the security and

00:19:36.700 there's so much gray area around specifically how the fed can do that and what we've seen is the fed

00:19:43.960 every year pushing and pushing and pushing the boundaries further of what it can do it's truly

00:19:51.540 extraordinary and we can talk about it in detail but but the fed's footprint has only grown larger

00:19:56.460 you know if we had described that people would say oh no that's a conspiracy theory it can't possibly

00:20:05.840 work like that walk back through the the primary brokers like you have the board of governors i want

00:20:11.140 to give the structure of the fed briefly you have the board of governors which i think have 14 year

00:20:15.480 terms so they're kind of impervious to them they go past administrations and then those governors i

00:20:20.700 think elect uh selected to be the head of it which is a governor but he's gonna be head of the federal

00:20:26.880 reserve but he essentially chairs the governors but talk about the banks who actually owns the

00:20:33.240 federal reserve do the american people actually own the federal reserve or do banks own the federal

00:20:38.040 uh banks own the federal reserve just by by the structure and you know the the whole structure

00:20:44.800 of the fed is fascinating again it's this huge compromise america resisted having a central bank

00:20:53.340 for um at least decades really over a century we charted a central bank we revoked the charter

00:20:59.420 we created another one we revoked it because there's always been this real skepticism of having a

00:21:05.260 government-run central bank because of the amount of power it can have so that's why congress created

00:21:11.080 this this structure that breaks up power um the fed kind of looks like the united states of america in

00:21:17.440 the sense that it's really not just one bank it's a collection of 12 regional banks okay and each bank has

00:21:24.840 a president and those presidents help run the system okay so you've got 12 central banks across the

00:21:31.460 country but then what you mentioned was the key governor in the governing body of the fed which

00:21:36.760 is based in washington dc the the so-called fed board of governors and and you're exactly right

00:21:42.860 about the terms and these are 12 folks appointed by the president of the united states and approved by

00:21:49.060 the senate and these governors they're they're just like a policy committee a governing committee that

00:21:54.060 runs the whole bank system and they meet every six weeks and and i'm sorry to complicate it even more

00:22:01.300 but really this committee that meets every six weeks to make these crucial decisions about raising or

00:22:07.840 lowering interest rates or doing these other experiments this committee is called the fomc or

00:22:13.780 the federal open market committee and it includes some governors those folks who just live and work in

00:22:18.820 washington and then it includes kind of a rotating cast of regional bank presidents so these folks get

00:22:25.320 together every six weeks and and set policy for the fed and and decide what they do and you know you're

00:22:31.980 talking about the ownership structure it's it's just so convoluted like these regional banks are owned by

00:22:39.940 local banks in their region but the local banks essentially cannot sell the stock that they own but they help a

00:22:48.820 bank presidents and i kind of describe the fed as this sort of frankenstein's monster or this

00:22:54.660 genetically engineered creature that's a mix of a government agency and a private bank it's both at

00:23:00.920 the same time and believe me the governing structure can get pretty complicated but really it's important

00:23:07.360 to know that this committee the fomc those 12 voting members that gather every six weeks they're the most

00:23:14.480 powerful economic committee in the united states these 12 people make decisions that truly affect

00:23:20.040 everybody that determine the the the the level of money the price of money and the cost of a loan

00:23:25.440 and that could you know tip the economy into a recession for example

00:23:29.180 when you talk about for everybody out there this is your first time dealing with us in this topic

00:23:36.520 it's one of the reasons we're trying to explain the nomenclature and the structure here's how it impacts

00:23:40.540 your life when when that committee and and and and the the board of governors and they decide this

00:23:45.580 like they did today to raise 75 base point that means your credit card immediately go the money the

00:23:51.960 the you're paying for time your credit card expenses go up your mortgage goes up the cost of doing

00:23:58.740 business to all the businesses go up and gets flow and it flows through whether it's a gasoline price

00:24:03.640 of fruit prices the cost of money and the availability of money is mother's milk for an economy and so

00:24:12.100 every decision the decisions they make are so much more powerful and the direct impact on your life

00:24:18.920 than anything congress can do in fact if you look at the stimulus and all the deficits we have 30 trillion

00:24:23.840 dollars of debt but that was as bad as that is that all came through compromise and fight and there's

00:24:30.520 not enough fight right we and we talk about shutting down the government there's a group that created

00:24:37.100 nine and a half trillion dollars just out of nowhere my point is they just literally create this out of

00:24:42.820 nowhere and the system they do it to really give it to these prime brokers and then how it flows through

00:24:47.680 the system is so byzantine and what's obvious chris and the reason the power of your book is they're not

00:24:58.120 interested in people understanding this even i went to harvard business school and i didn't at that time

00:25:03.260 i'd been a naval officer i had worked as aid to the chief of naval operations i'd had experience in dc i'd

00:25:09.340 come off the fleet i thought i was very well read i actually got a graduate degree at georgetown

00:25:15.560 and at harvard and even at harvard when they explained the political economy the part in the fed

00:25:21.300 they didn't take that much time on and it was explained but it was not explained into the detail

00:25:26.580 of the power of this institution why do you think people they go out of their way the people

00:25:31.540 not understand this

00:25:33.520 you know it's it's fascinating as you kind of mentioned in the beginning the politics of the

00:25:42.520 money supply used to be a retail political issue debated in the public square when william jennings

00:25:49.120 brian ran for president i think it was 1918 or uh around that forgive me if i got the year wrong

00:25:54.960 but he made that famous speech where he talked about you shall not crucify mankind upon a cross of gold

00:26:00.600 that was a quote about monetary policy okay about tightening the money supply but the fed has very

00:26:08.400 intentionally moved the politics of creating money into a private space into a private sphere and

00:26:18.040 it's it's it's one of these things that's happened slowly over time but the the basic dynamic you just

00:26:23.920 nailed it they try to make this stuff sound as complicated as possible and they try to make it seem like

00:26:31.680 the american citizen needs to have a phd in macroeconomics to even enter the room and talk about the politics

00:26:38.820 of money and i feel like that is um that's we're here to hang on let's take a short commercial break

00:26:46.660 we're gonna come back with christopher leonard the blockbuster book the lords of easy money

00:26:52.160 how the federal reserve broke the american economy christopher leonard is joining us after a short commercial break

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00:29:52.540 you must find philadelphia much change there was more change than i could have imagined mr hamilton

00:30:10.440 not the city itself all cities swallow every brain their weight that's no surprise to me that's why

00:30:16.240 i abhor them but i've been as you know in revolutionary france where the streets are filled with the songs

00:30:23.400 of liberty and brotherhood and the overthrow of ancient tyrannies of europe and to return

00:30:29.640 from there to this our cradle of revolution and find the dinner table chatter is all of money and banks and

00:30:37.040 authority is an unwelcome surprise unwelcome perhaps but necessary

00:30:44.360 i must admit mr hamilton a little uncertain as to the purpose of the treasury department

00:30:54.480 no doubt its function will reveal itself to me in good time

00:30:59.160 the future prosperity of this nation rests chiefly in trade trade depends among other things on the

00:31:08.060 willingness of other nations to lend us money and how would you propose to establish international

00:31:13.680 credit our first step would be to incur a national debt the greater the debt the greater the credit

00:31:20.280 and to that end i have recommended to the president that congress

00:31:24.660 adopt all the debts incurred by the individual states during the war through a national bank the idea

00:31:32.720 being that if the states owe congress money then other nations will feel more inclined to lend it to us

00:31:40.220 if the states are indebted to a central authority it increases the power of the central government

00:31:47.800 you have it exactly the greater the government's responsibility the greater its authority

00:31:52.360 the moneyed interest in this country is all in the north so the wealth and power would inevitably

00:32:02.720 be concentrated there in the federal government to the expense of the south

00:32:09.320 if that is the case it is unavoidable if the union is to be preserved

00:32:15.700 i fear a revolution will have been in vain if a virginia farmer is to be held in hock to a new york stock jobber

00:32:22.800 who in turn is in hock to a london banker

00:32:25.100 the opportunities for avarice and corruption would certainly prove irresistible

00:32:34.840 well there you have it as i have heard said men were angels and no government would be necessary

00:32:42.260 well sadly that is very well said uh but there can be no question our nation cannot

00:32:50.300 bind together without powerful central government but we must also accommodate the needs of our

00:32:59.080 constituent states both north and south now the power of one must check and balance the other

00:33:07.960 and to that end we must dedicate all of our energies and our care

00:33:13.160 i would like to welcome mr jefferson home

00:33:24.520 mr secretary of state yeah yeah mr president gentlemen

00:33:36.040 there are cabinet matters that i would like to discuss if you would excuse us mr adams

00:33:47.560 please convey my regards to your wife

00:33:54.280 it's the uh that is from the brilliant hbo miniseries uh john adams and you have steve delane

00:34:07.700 i think rufus soul rufus soul playing alexander hamilton steve delane a magnificent actor playing

00:34:14.340 thomas jefferson let me bring christopher leonard the uh author lord's easy money

00:34:18.740 at the very founding sir of our republic the most intense debates in inside were about this

00:34:28.020 establishment of a central bank the establishment of credit the establishment what they called

00:34:33.320 authorities it has been the politics of money from the founding of the revolution remember because

00:34:38.960 that was all about taxes and how they were going to get paid from the founding of our nation

00:34:43.000 all the way up to 1913 the founding of the federal reserve and by the way william james bryer was the

00:34:49.220 late 19th century he was nominated i think by the democratic party three times as the presidential

00:34:53.260 candidate in that speech the cross of gold speech was about the politics of money from hamilton and

00:35:00.000 jefferson in the in the humongous fight they had about this the founding of a national bank to to

00:35:06.300 to andrew jackson who basically took the charter away from the first u.s national bank the first

00:35:11.760 federal reserve and they had the massive fights of jackson's populist movement was predicated upon this

00:35:18.360 all the way to william jennings bryan in the late 19th century and all the booms and busts they

00:35:23.980 always accused that you had too many currencies nobody had control of the currency we couldn't be a

00:35:28.460 major nation until you got control of the currency and then in 1913 with the founding of the fed

00:35:34.600 the politics of money totally went away and so here we are in the early 21st century and we have

00:35:41.220 this central authority and as you said it so beautifully has these radical experiments and

00:35:48.860 here's the thing chris as you studied this book and studied the history and interviewed everybody

00:35:52.740 went there the thing that gets me as a populist is that these people hold themselves out of this

00:35:58.220 geniuses that this is all highly mathematical and and really to the fifth decimal place they've thought

00:36:03.460 it through it's a crap shoot we've gone through booms and busts that are 10 times bigger than the

00:36:09.900 problems we had in the 19th century before you had a central bank and the reason is this stuff is so

00:36:15.160 difficult christopher leonard your thoughts sir well uh amazing and you know watching that clip and

00:36:23.020 watching those debates it really it it made me think about the committee that's having those debates

00:36:28.680 today the committee that literally met today the federal open market committee those 12 people that

00:36:33.020 run the fed and they actually transcribe their internal debates and then release the transcription

00:36:39.760 five years after the fact so as a reporter i kind of had this luxury to go back and read every page of

00:36:47.060 these arguments that that this committee had in in 2010 and it's it's absolutely fascinating you're right

00:36:56.860 that they want to present themselves as these sort of olympian you know phd math geniuses but when you

00:37:03.300 go back and and look at what they were talking about uh and even look at some of the internal studies and

00:37:10.220 projections that they used to make these hugely consequential decisions that just turned out to be dead

00:37:16.260 wrong you know you realize this this sobering fact which is that these people are basically feeling

00:37:22.280 their way through a dark room and and the rest of us are really on the hook for the consequences of

00:37:27.540 that and if i could let me please just talk about this debate inside the fed that opens the book and

00:37:33.820 in 2010 because it's really important in 2010 we were on the other side the crash of 08 okay we you know

00:37:43.220 the economy was weak but we were starting to push out the other side and and the fed chairman at the time

00:37:49.020 ben bernanke wanted to push this program of accelerating job growth through money printing

00:37:55.980 and and bernanke wanted to do two things he wanted to keep interest rates pegged at zero as low as

00:38:03.740 economists thought they could go that's an extraordinary thing you know interest rates

00:38:07.660 are typically around three to six percent they had brushed up against zero once or twice momentarily

00:38:13.260 ben bernanke's fed kept the interest rates at zero for roughly seven years during the 2010s huge

00:38:21.460 consequences for the financial system for doing that but at the same time in 2010 ben bernanke was

00:38:27.680 like we wanted we want to do this experimental program called quantitative easing which i described

00:38:33.880 earlier where you print all this money inside wall street and and there was intense debate inside the

00:38:39.640 committee of people saying hey if you do this you're gonna only really enrich the richest americans

00:38:46.820 who already own stocks and bonds which are what's going to benefit primarily from creating all this

00:38:51.320 money on wall street you're going to create another financial bubble that is going to be extremely

00:38:56.520 difficult to negotiate uh and could create really high unemployment when at first and at the same time

00:39:02.300 once you start printing all this money you're going to find it impossible to stop

00:39:06.540 but these internal disputes were really shielded from public view and and ben bernanke essentially

00:39:14.680 kind of overcame the opposition inside the fed and went ahead down this experimental road

00:39:19.020 so one of the key things i really want to do is bring these debates alive for people so you can really

00:39:25.520 read through and understand how we got to where we are and and i just got to emphasize

00:39:30.080 they were not just solving math equations they were making policy decisions that were risky

00:39:37.900 and that created winners and losers and we really need to understand that

00:39:42.320 i i want to talk about two i can't the heroes in the book one is i think honig and the others i think

00:39:49.220 richard fisher who is the governor of the of the dallas bank it's not the audience should understand

00:39:54.700 it's not like people didn't argue the other side people argued and said hey look the way i look at

00:40:00.380 this if you do this you're going to concentrate wealth more than it's ever in the history of the

00:40:05.040 country and and the arguments on the counter are so shockingly precise and so shockingly uh prescient

00:40:14.400 from what happened talk to us about the two heroes particularly honig who who's a guy that nobody's

00:40:20.100 ever heard of even on wall street that's really one of the heroes of your book

00:40:24.700 yeah absolutely he he really is a hero of the book and thomas honig was a guy who worked at the

00:40:30.660 federal reserve for 32 years he was an absolute institutionalist who who believes in the institution

00:40:37.940 he was no bomb thrower but in 2010 tom honig was the one guy in that committee who really voted against

00:40:45.800 these policies he said it is going to be extraordinarily dangerous to keep interest rates at zero for all these

00:40:52.660 years while pumping all this money into wall street you're going to enrich the rich and you're going

00:40:57.540 to create huge asset bubbles and and really honig was proven totally correct on those points

00:41:04.320 another guy you mentioned who i really want to talk about for a second is the president of the dallas fed

00:41:11.860 named richard fisher and he he he said the most extraordinary thing inside this fed committee

00:41:18.360 this is the this jumps forward to the year 2012 which was an extraordinary time this is when ben

00:41:25.860 bernanke kept doubling down on this program of printing money to to create new jobs even though it was

00:41:33.080 really not that effective they did a round of quantitative easing in 2012 that was 1.6 trillion

00:41:40.160 dollars uh just extraordinary and and during these internal debates this guy richard fisher from texas

00:41:48.200 laid out very specifically he said listen if if we do this if we print all this money on wall street

00:41:56.040 we are going to create barely any jobs all we're going to be doing is supercharging the debt markets

00:42:04.000 and the asset markets and fisher literally quoted the chief financial officer of texas instruments who

00:42:11.100 said hey if you keep doing these easy money policies we're not going to create a single job we're just

00:42:16.800 going to borrow money and do stock buybacks and do these kind of financial transactions that are encouraged

00:42:22.340 by easy money without creating a single job fisher brought that up he quoted the chief financial

00:42:27.840 officer of texas instruments and ben bernanke's response to him was if you could please not quote

00:42:34.820 people who don't have a phd in economics i would appreciate it because you know it's not helping our

00:42:40.760 discussion i i really think that that reflects the attitude inside the fed they were closing out

00:42:46.880 these contrary points of view and you know i i will say you know it is a cottage cottage industry

00:42:55.600 in the u.s to beat up on bankers okay and that's fair enough but when you really talk to people on

00:43:01.360 wall street when you talk to folks out there in the market in the hedge funds in the private equity

00:43:06.500 firms they can explain these actions of the fed and they can explain in very close detail how the fed is

00:43:13.180 really just massively distorting our economy and benefiting the very rich and creating all this

00:43:18.580 fragility and they explain it in ways that the fed just won't acknowledge and and you know the fed's

00:43:25.160 discussion is very wrapped up in this sort of phd uh economic uh theory that that often doesn't really

00:43:34.060 resemble what's happening on the ground

00:43:36.140 chris you're you're a business journalist and you run an institution uh not for profit i think that

00:43:43.340 also focuses on fact-based journalism not partisan journalism so when you came to this

00:43:50.060 the pre-researching book chris leonard in the post um did you ever think in a million years you studied

00:43:58.420 the fed or went to look at a central bank that in your journey you would actually end up being

00:44:05.520 shocked about the system that we have sir absolutely not if you had told me a few years ago i was going

00:44:13.800 to write anything about the federal reserve i would have thought you were crazy you know the great

00:44:19.200 privilege of being a reporter is you get to talk to people just across the spectrum um across all

00:44:24.640 different political views and you know i talk about this in the acknowledgements i interviewed this guy

00:44:29.360 in in uh 2016 very very smart and very engaged in markets and he explained to me how the fed was

00:44:39.580 distorting markets and i thought this is crazy i've never heard any i mean you know i'd been a business

00:44:45.160 reporter i'd heard about quantitative easing but the mechanics of it blew my mind and when this guy told me

00:44:51.220 that the federal reserve had printed 300 years worth of money between 2008 and 2014 i thought he was crazy

00:45:00.260 but he was dead right and and that's what got me on this road because i i had this strong impression

00:45:07.480 that people needed to understand this even as a business reporter i didn't understand it and i really

00:45:13.460 wanted to explain it clearly and and and put it in a book that you could read easily it's a story you

00:45:19.740 could follow and i wanted people to get a better understanding of how the fed works but i'll tell

00:45:25.040 you when i hit a turning point reporting this book you know originally i wanted this book to be like

00:45:31.620 michael lewis's money ball just kind of an explainer book of how quantitative easing has had changed the

00:45:37.480 world but it was really when i was reporting on that enormous round of quantitative easing in 2012

00:45:43.840 um when i i realized the the strategy that the fed was using i don't want to overplay this analogy but

00:45:53.440 it was a lot like the military in afghanistan just knowing that the strategy was probably not going

00:46:00.300 to pay off but doubling down and doubling down ignoring internal dissent relying on internal forecasts

00:46:07.300 that were faulty that were erroneous erroneous i i i show in the book this internal study the fed did

00:46:14.060 about what would happen if it did quantitative easing that was just a hundred percent inaccurate

00:46:18.340 and that's when i realized you know these were people making decisions that that built up so much

00:46:25.400 risk for the for the rest of us and it was at that point that you started to see you know for me

00:46:31.760 the reporting turned it to how the fed broke the american economy uh you saw today the the federal

00:46:41.320 reserve the decisions what would you recommend to look our audience is the mega audience but it's

00:46:47.440 basically hard-working working-class americans middle-class americans what would be your

00:46:51.900 recommendation of how do they keep up on top of this what should they read what should they be

00:46:56.980 listening to because this is a whole new world and we're going to get we're going to start

00:47:00.640 explaining the politics of money of how this not just how it happens but what's going to happen

00:47:04.880 going forward what would you recommend to people since you've spent a couple years your life coming

00:47:10.040 at this as a business reporter but not really know anything about it and now you've spent so many

00:47:13.960 years researching what would you tell the average american to do i'm gonna tank my career here but

00:47:20.960 number one turn off cnbc just never watch it again and then secondly and i don't mean to be glib about

00:47:30.260 that but um it it it can be difficult to understand this but if i could please i just want to frame up

00:47:37.140 where we are today which is at the fed has gone down this extraordinary path as you pointed out

00:47:43.960 the fed balance sheet was about 880 billion when the housing crisis really blew up in 08 it's 10 times

00:47:52.860 that it's it's it's nine trillion today and in the book i i really try to walk through why that's such

00:47:59.480 a big deal but just suffice it to say that we are sort of like wily coyote way out over thin air right

00:48:07.000 now with our wheels uh spinning or feet spinning and and and folks have to understand that unwinding

00:48:15.300 that extraordinary money printing was going to be a very hard job no matter what even if the fed had

00:48:23.060 five years or ten years to do it it was going to be hard inflation the 9.1 price inflation we're

00:48:30.740 seeing right now is forcing the fed to unwind it to do what they call tightening to hike interest rates

00:48:37.660 to suck some of that money out of wall street and it can create massive instability in the economic

00:48:44.160 system so that's just one big thing i want to flag for folks is get ready to please pay attention to

00:48:51.420 what the fed is doing you know and and and realize it's going to create these second and third order

00:48:57.620 effects in the home market the mortgage market uh in the stock market in the bond market which could

00:49:03.580 ultimately lead you know to companies laying workers off and a recession so where to learn about it you

00:49:11.300 know um as you know i'm a i'm just a newspaper guy i'm a big advocate in reading the newspaper

00:49:18.640 you know the journal the times uh the post bloomberg uh filter out the the opinion or spin you don't agree

00:49:29.840 with but mine those organizations for good data uh and and and good information about where where

00:49:38.260 markets are headed i that's my it might be unsatisfying but that's my advice yeah real quickly

00:49:44.440 the book is lords of easy money you can get it on amazon it is the book of the year as we're on the

00:49:49.280 27th of july there may be a better one coming out but i ain't seen it so far and i read everything

00:49:53.920 the lords of easy money christopher leonard christopher uh do you have a website or social media how do

00:49:59.860 people keep up with you sir well i'm uh christopher leonard.com and then my handle is from my associated

00:50:08.180 press reporters today it's c leonard news c-l-e-o-n-a-r-d news uh and i'm at c leonard news on twitter

00:50:16.140 i'm at c leonard news on getter i'm on both platforms and uh you can find me there

00:50:21.560 the book is a must-have we look forward to having you back thank you for taking time this is extraordinary

00:50:27.500 we haven't had a chance to spend an hour with an author all year so really really this was so special

00:50:32.700 thank you so much i really appreciate christopher leonard thanks for the time the lord the lords

00:50:39.340 of easy money buy it read it we're going to be talking about a lot about it every day from now

00:50:46.060 until election day see you tomorrow morning 10 o'clock in the war room

Bannon's War Room - July 27, 2022

WarRoom Battleground EP 103： The Lords Of Easy Money

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