STAFF NEWS & ANALYSIS
Comparing Essays: Simon Black vs. Dennis Lockhart
By Daily Bell Staff - December 02, 2015

Federal Reserve official: Economy on track for 'normalization' phase … "I believe the national economy is on a reasonably solid trajectory," said Dennis Lockhart, president and chief executive officer of the Federal Reserve Bank of Atlanta. Speaking Nov. 19 at a DeKalb Chamber of Commerce general business meeting at the Georgia Aquarium, Lockhart added. – The Champion

Dominant Social Theme: Listen to oracles such as Dennis Lockhart so you may understand, too.

Free-Market Analysis: Once we were even more callow than we are now. Listening to a speech by Dennis Lockhart 15 or 20 years ago (see above excerpt), we probably would have been enormously impressed, thinking he sounded judicious, modest and yet at the same time almost infinitely wise.

Why "infinitely"? Because the speech deals with the US economy and its growth or lack thereof. This is at least a US$16 trillion economy and Lockhart is comfortable evaluating it, and with the help of government numbers, he is apparently comfortable with making determinations about what to do next.

More:

… "I won't predict the outcome [of the upcoming, December FOMC meeting]," Lockhart said. "There are more data points to evaluate over the next four weeks. I will be processing that information to see whether the incoming data change my sense of the health and momentum of the economy.

"On balance, the data have been encouraging and affirm that the economy is growing at a moderate pace. Real final domestic demand data have been quite solid, driven in large part by robust consumer spending," he continued.

Fortunately, we are not living in the past and our understanding of the world has improved a bit; at least we do a better job identifying "poseurs." From our current perch, Lockhart doesn't sound wise at all. In fact, he sounds, well … fatuous and full of himself.

He's going to evaluate "data points" and then like a computer he will "process the information" in order to see whether the vast but delicate mechanism of his mind will "sense" a change.

Gawd. Later in his speech, he does have the modesty to admit that the "inflation picture is not clear." Of course, he does not clarify what kind of inflation he is talking about – monetary or price. But these are details to such a grand intellect. "Survey measures of inflation expectations are not signaling imminent broad disinflation," he announces. Oh, good.

Lockhart supported leaving rates unchanged in October but believes the situation has "settled down now." Thus, he is comfortable "moving off zero soon, conditioned on no marked deterioration in economic conditions."

After this statement the gobbledygook gets thicker, if you can believe. He begins to babble about "phases" of the economy as if it is some sort of lab experiment. The economy's next phase is "normalization," followed by "lift-off."

Lockhart's finely tuned brain is capable not only of discerning economic segmentation; he is actually able to predict variations in the upcoming phases. He sounds like Obi-Wan Kenobi evaluating the Force.

"I think the normalization phase might look somewhat different than one's sense of normal based on historic episodes of rising rates," Lockhart is quoted as saying.

He then goes on a long peroration about "three factors that are key in determining the timing of the start of normalization." One is the level of employment, the second is an appropriate amount of (price) inflation and a third is "global risk."

Impressively, he informs us that the second factor (rising price inflation) is also known as the "whites of their eyes perspective." Lockhart has thus managed in one speech to compare the US economy to an aircraft and the Revolutionary War.

But he is not through yet. Almost in the next breath, he refers to the current zero bound as the "bedrock policy rate." By this, he is implying that the current rate comprises a kind of monetary foundation. Thus, we should give him credit for using three disparate metaphors in one speech – all referring to various elements of the economy.

These are evidences of a mind so mired in memes of "common wisdom" that there is no room for any kind of enlightenment to penetrate. This is a man entirely at ease with deciding on the value and price of currency for a US$16 trillion economy. He acts as if it is his birthright. Or at least as if his intellect justifies the privileges of the price-fixing that he is regularly called upon to perform.

Contrast Lockhart's fatuous, self-importance with a missive we received in our in-box by libertarian entrepreneur Simon Black. Black writes from Santiago, Chile to inform us that the IMF's decision to add the yuan to the SDR basket (we wrote about this yesterday) was not so much a "historic moment" as an irrelevancy.

We don't quite agree with this because there are advantages, given the current fiat system, to being associated with the SDR basket. We pointed them out yesterday and Chinese officials obviously believe they are valuable because China has been seeking to participate for years.

But later in the article, Simon Black makes some historical points that are worth the proverbial price of admission. In fact, he provides us with a frame of reference that Lockhart seems to lack entirely. The "big-picture issue" is that the entire fiat mechanism is gradually toppling. While China's financial system may be marginally better-positioned than that of the US's, both systems are racked by debt, unemployment and dangerous asset bubbles.

What will be the result? Here:

The dollar may be in its twilight, the real change we'll see is the financial system itself. Today, unelected bureaucrats and central bankers conjure money out of thin air and manipulate asset prices in their sole discretion.

OK, maybe three centuries ago when most of the world was illiterate and few people traveled more than ten miles from their homes, this might have been an understandable way to set up a financial system. But today? Give me a break.

This system is so outdated that the head of the IMF might as well have gone to her press conference by horse and buggy. All the technology already exists to make the overlords of our financial system totally irrelevant.

This system is changing. Whether you like it or not, whether you realize it or not, and whether you're prepared or not – it's happening.

This conforms almost exactly to what we wrote yesterday in analyzing the addition of the yuan to the SDR basket. We indicated that the BRICs, and especially China, had seemingly done well over the past decade but this would not last.

A cataclysm is headed our way, we wrote, and Simon Black believes it, too. It is, unfortunately, sure to be a great economic upheaval that will catapult the world into a ruinous Great Depression out of which a truly global economic system is planned to emerge. This is surely the fate in store for us, at least in aggregate. We'll let Black provide our …

After Thoughts

He writes, "You can either have a front-row seat to enjoy the show and benefit from these developments, or you can choose to do nothing and become another victim of history. But make no mistake, it's happening. And looking back, it's going to seem obvious."

Posted in STAFF NEWS & ANALYSIS
  • On the basis that it appears the world money power bankers have long planned for their state sanctioned international fiat money system to be spread globally and to consolidate, (and that the evident ‘teetering on the brink of ruin’ is only of the central banker’s own manufacture), I will wager they have a plan and it is all going swimmingly well toward the next chapter – maybe the final chapter and must be one hewed from their, little doubt, considerable stock of gold.

    • natural human

      Excellent article. Lockhart’s demeanor is representative of so many our modern technocratic experts – the most brilliant of which is Mr. Larry Summers. I just have this question, and it’s not meant to be confrontational: how are we supposed to reform our global monetary system so long as all money, currency really, exists only as a result of credit issued and outstanding by and to the banking system? We wale and gnash at the unsupportable debt hanging over the global economy, yet most of this debt is merely the corollary of what we now call money. If we do not alter our monetary system to include debt free money of one stripe or another, how can we possibly reduce aggregate debt?

      • Dimitri Ledkovsky

        Debt forgiveness and mandatory jail time for banksters. Sort of like in Iceland.

        (My spellcheck refuses to acknowledge “bankster” as a legitimate word, though it’s been around too long to be a neologism. Funny how they seem to control everything.)

      • The issue is not to do with banks, banker’s fiat currencies/debt money, central banks, the IMF, the BIS, the global money power international bankers. The problem is the relationship between the state and the banks. Cut the banks off from the tax-payer backed indemnity guarantee, remove their limited liabilities, remove all restrictions on who can become a bank, remove all restrictions on who can publish a currency, allow the free market into banking, let the customer take care of themselves, remove all vestiges of a relationship between ‘the state’ and any bankers central bank of banks if they want one. And allow the public to challenge in court the validity of their having to pay taxes to repay any debt they did not personally agree to.

  • 45clive

    Most people are happy to be oblivious and will exercise many contortions and denials to remain so. Like the sea butterfly, a kind of snail like plankton, they see safety in numbers, not realizing it is their numbers that make them the basis of the entire food chain. They believe that if they keep their head down and keep swimming with the current their jobs, bank accounts and home equity will save them.

  • robertsgt40

    The Fed is looking more like my cat trying to bury her turd on a frozen pond.

  • Don Duncan

    The international banking cartel (IBC) will not suffer a cataclysm. And Simon Black will not. But he will be adversely effected. Imagine a world where Simon did not have to deal with statism. He could focus on free market economics exclusively, safe from govt. predation, e.g., world war. Come to think of it, no one is safe if the nukes get out of hand. That is the direction we are headed. The only way out is freedom for everyone. We all agree (at D.B.) that the present world culture is unsustainable. But how unsustainable? We can’t know for sure. If we just focus on personal salvation, that is hoping we die before “unsustainable” becomes species suicide. Sooner or later technology will kill us if we don’t evolve philosophically. Humanity is still debating the same metaphysical, epistemological, ethical, and political points as it did 3,000 years ago. We had time to make progress, but that time is running out, thanks to the two-edged sword of tech. Even if some escape earth to colonize the moon, mars, and space, that buys more time, but it does not address the fundamental problem: How do we keep from killing each other, before it results in species end?

    • Best comment I have read on DB. And the answer to the conundrum is for humanity is to end the cult religious belief in the false legitimacy and false utility of ‘the state’ – all the ‘killing’ is not man-on-man.

      • natural human

        Yes, an excellent comment…except for the mention of escaping earth in favor of the moon, mars, space. That kind of thinking not only deflects attention from our solvable problems, it is insane.

        • I think it is just a bit of fun illustration, prefaced with ‘even if’, to be fair. Agreed though that ‘the wacky’ can deflect from the message but who is to say it is an imposable, ‘insane’, proposition. On the balance of probabilities, in the fullness of time, it is not.

        • joeyman9

          No, that type of thinking is THE way out of this. As Erie Hancock says, We’re going to space and government isn’t invited.
          Space is to our civilization what the Americas were to Europe in the 1500s…a way out. Best of all we can do away with all that limited resources garbage.

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