THE PRESENT has the unique quality of being so imposing–so suddenly familiar–that despite more surreal or otherworldly events that history will deem “tumultuous” or “cataclysmic,” people never quite view themselves as living in a time of great change.

Of all the happenings in the US that have broken the rules of logic, sanity,  or even common sense in recent years–and they are legion–one stands out to me. But first, I am going to list things that, twenty years ago, I would have sworn could never happen in the US during my lifetime:

• The US electoral system elected a “reality” TV show star who had filed for bankruptcy a number of times, had no political experience, and claimed to never read books. He also had support from Russia if you believe our best intelligence gathering agencies.
• The ongoing condition of dueling narratives; that for any politicized issue there are two opposing versions of the truth: one of which–as far as I am concerned–bears no resemblance to reality. In other words, the transition from the Information Age to the Disinformation Age.
• The steady erosion of the Rule of Law, the  attempts to dismantle our democratic system, the usurpation of the Justice Department by the Executive Branch, and the retro action where by right-wing appointments, Federal Courts and the Supreme Court operate as if we have traveled back in time to the 1950s. I am waiting for hats and Sock Hops to come back (Happy Note: at least the Beat Culture might be revived).
• The complete corruption of public funding. The White House became ground zero for drug deals where no legislation–as a profit-making enterprise–went to waste. The office of the presidency of the United States was completely “monetized,” to use a term that should be changed to “Mammonized” since everything that is happening today seems biblical and apocalyptic.

As a list, that will suffice, though it feels a little like coitus interruptus to stop there.

What is really amazing is that we achieved the thing we were told as five year-olds we could never do:  create something from nothing.

Since we abandoned the gold standard (where we had to supply gold each time we created new money) in the 1970s, our central bank–The Federal Reserve Bank–and other central banks around the world, have tasted of a banker’s forbidden fruit and not yet been kicked out of Eden: they have created trillions in money from air, from “thin air.” It’s called Quantitative Easing or “QE.” They create money digitally then use it to buy up bonds in the open market. The sellers of the bonds get a corresponding reserve credit at the Fed. It is complicated, but has the effect of providing new liquidity for banks.

Today, Fed Governor Bullard today said he thought that the 120 billion monthly QE program should be reduced this fall and end altogether in spring.  Does that mean something will go back to being nothing? Sort of. As the bonds mature, the Fed gets billions in real money from either investors or the Treasury itself and sends the proceeds to the US Treasury (the Fed doesn’t get to keep the printed money). The Treasury does have to issue new debt though because they just paid billions to pay off older bonds. If none of that made sense, just think pea-and-shell game.

The stimulus seems free: we simply see stock prices go up and loans are available with low interest rates But there are side effects:

• With the cheap loans and low returns in bonds or CDs, investors look to real estate–which is highly leveraged. This leads to a surge in housing costs without a corresponding increase in wages.  It benefits property holders at the expense of lower-income or less wealthy citizens who rent.
• The effects on the stock market are profound: again the low rates on fixed income investments (they are usually below the inflation rate itself) “force” investors to find a higher return and stocks are a very convenient vehicle. Here again, most stock-market wealth is owned by the wealthiest citizens. This “Fed Put” as it is called (it only suggests that by providing massive stimulus at the first threat of recession, the Fed provides an insurance policy for stock investors), creates a dangerous complacency and false sense of safety in investments that are inherently risky.
• While the investments of Corporate America contribute only roughly 15% to GDP, US citizens put a substantial portion of their retirement savings into the stocks and bonds of the largest public companies. This creates another incentive for stock prices to be “propped up”: fear of massive wealth destruction from a crash. It gives public corporations another bit of leverage whenever regulations (e.g. anti-trust, taxes, or fines) threaten to reduce corporate profits–which have soared in recent years from surges in buybacks and monopolistic advantage (“rents” is the technical term).
• The Fed has enabled deficit spending, but if interest rates rise and stay up, the interest alone on the national debt will be a trillion before long.

Bitcoins, Virtual Banking, Virtual Medicine, Virtual Work, Robo-Advisors–the list is long and growing. . .

If there were ever a time to consider the New Digital Reality–our impassioned ” tango with the abstract”–as having reached a dizzying apogee, now is the time.

Now is the time to think “tango with the tangible” or “cheek to cheek with the real world.”

Now is the time to remember “you can’t get something for nothing.”

WRH