Demise of the Dollar, 3rd Edition

CHAPTER 4HERE COMES THE BOOM

The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.

—Ben Bernanke

For the first two decades of the twenty‐first century, money had become “easy.” On November 21, 2002, the then‐Federal Reserve Governor Ben Bernanke gave an address before the National Economists Club in Washington, DC. The speech has come to be known as “The Helicopter Theory” speech—in which Bernanke outlined an economic recipe to avert Japan‐style deflation in the United States through a series of tax cuts and low interest rates that could effectively drop cash into the hands of consumers, as if from a helicopter. The result: inflation. Problem solved. Later he would win a Nobel Prize for his work.

If you listen to Bernanke and his successors today, they are still patting themselves on the back. In their view, when consumers refinance their homes and increase their mortgage debt, that frees up money. That money is used to spend and, according to the Fed chairman, that is a good thing—even though the US consumer savings rate had dropped to 2.4% in July of 2022,¹ significantly lower than the inflation rate that month of 8.5%.²

When we say things like “people are living paycheck to paycheck,” it's because our consumer culture accommodates spending over saving. The Fed, Treasury, and Congress do not encourage savings. Career politicians don't even think about things like the national savings ...