Belmont Club

Why Bernie Madoff should have run the Fed

Peter Schiff makes the case before the Austrian Scholars Conference, Ludwig von Mises Institute, 13 March 2009. It’s an hour and sixteen minute YouTube video about the compulsion to chase fantasy. And while the Madoff suggestion is tongue in cheek, his discussion is entertaining in a serious sort of way. The indictment is that the system unwinds bubbles with yet more bubbles. One question I mentally had was whether this was true of politics also.

The alacrity with which cultural and political institutions have submitted themselves to the wrecking ball will fascinate historians for generations to come.  A recent article in the Weekly Standard has attempted to answer the question of how American capitalism died without putting up a fight. The answer, according to Andrew Stuttaford, was from within. He describes how one group of rich people decided to bring down another group of rich people with the aid of the merely prosperous.

it was somewhat less predictable that a large slice of the upper crust would succumb to Obama’s deftly articulated pitch. Yes, it’s true that there had been signs that some richer, more upscale voters were being driven into the Democratic camp by the culture wars (and the fact that prosperity had left them free to put a priority on such issues). Nevertheless, even after taking account of the impact of an unusually unpopular incumbent, it’s striking how much this process intensified in 2008–a year in which the Democrats were not only running their most leftwing candidate since George McGovern, but also running a leftwing candidate with every chance of winning. …

certain aspects of the 2008 campaign came to resemble a millionaires’ brawl–one that was, of course, decorous, sotto voce, and rarely mentioned. … Traces of this can be detected in parts of Robert Frank’s Richistan: A Journey through the American Wealth Boom and the Lives of the New Rich (2007), a clever, classically top-of-the-bull-market account of what was then–ah, 2007!–America’s new Gilded Age. To read this invaluable travelogue of the territories of the rich (the “virtual nation,” complete with possessions, that Frank dubs “Richistan”) is to see how the emergence of a mass class of super-rich could fuel growing resentment both within its ranks and, by extension, without. By “without,” I refer not to the genuinely poor, who have, sadly, had time to become accustomed to almost immeasurably worse levels of deprivation, but to the not-quite-so-rich eyeing their neighbors’ new Lexus and simmering, snarling, and borrowing to keep up.

It is almost as if the graduates from the schools of government and arts and science faculties decided that Obama gave them a chance of revenge at the business school graduates. Now who wouldn’t jump at a chance of that? But they were the cannon fodder, according to Stuttaford. The real moneybags behind Obama were the “Croesuses” who saw the chance to use the great overly-washed to lead a revolt against their rivals. And wanted their rivals down, not so that they could offer people “hope and change”. They just wanted it all. According to this narrative, American capitalism ended not in revolution, but in a bank-robbery abetted by multitudes of PhDs. The end result won’t be socialism, according to the Weekly Standard article: it will be aristocracy.

These Croesuses are rich enough scarcely to notice the worst (fingers-crossed) that an Obama IRS can do. They were thus free to vote for Obama, a candidate whose broader policy agenda clearly resonated with many in this nation’s elite and who seemed at the time both plausible and unthreatening. The shrewdest or most cynical amongst them will have realized something else, something that an old Bolshevik might call a class interest. The onslaughts on Lower Richistan and on Wall Street will make it more difficult for others to join them at mammon’s pinnacle and thus to compete with them economically, politically (particularly in an era when McCain-Feingold has greatly increased the importance of being able to self-finance a campaign), and socially.

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