The Scottish writer Thomas Carlyle called economics “the dismal science.” He was only half right.
Dismal, yes, but a science, no. Economics is more like a religion, in which reality is shaped by belief or blind faith.
And, in the case of free-market zealots, it can turn into a cult. Thus, we see them pointing these days to the dazzling light of the soaring stock market, proclaiming fervently that Wall Street’s spectacular rise from the ashes of the Great Recession is proof from the God of Mammon that these are boom times.
Lo, is the magic of the marketplace upon us?
No, it’s just the wizardry of the Fed.
For five years, America’s central bank has funneled two massive subsidies into Wall Street banks and giant corporations in an ungodly effort to keep them flush, while praying that they might use these government windfalls to create a job or two.
The first subsidy essentially amounts to giving $85 billion every month to big banks. Yes, 85 billion! The idea behind the government’s so-called “asset-purchase program” is that this capital will be channeled into investments that nourish the roots of our economy.
In practice, however, bankers are funneling this cash into gimmicky high-risk investment schemes that create nothing and buyouts to expand their already too-big-to-fail empires — plus ever-heftier paychecks for themselves.
The second subsidy is the Fed’s relentless policy of artificially holding interest rates close to zero. This has severely punished middle-class retirees who counted on getting interest income from their savings, but it’s been a blessing from on high for huge corporations wanting to buy out their competitors or — in a totally unproductive bit of marketplace voodoo — to buy out themselves.
Meanwhile, the Fed’s trickle-down monetary policy has produced a truly dismal level of job creation while widening our hellish chasm of inequality.