Ron Paul's Foray Into Monetary Education
Readers may recall that Ron Paul once surprised everyone with a seemingly very elegant proposal to bring the debt ceiling wrangle to a close. If you're all so worried about the federal deficit and the debt ceiling, so Paul asked, then why doesn't the treasury simply cancel the treasury bonds held by the Fed? After all, the Fed is a government organization as well, so it could well be argued that the government literally owes the money to itself. He even introduced a bill which if adopted, would have led to the cancellation of $1.6 trillion in federal debt held by the Fed.
Paul argued that given the fact that the Fed had simply created the money to buy the bonds from thin air, no-one would be hurt by this selective default. Moreover, he reckoned that this would likely neuter the Fed and make it less likely to manipulate the money supply in the future -- if it could no longer rely on the treasury honoring its debt, there would be no point in buying more of it. He also considered the Fed's 'exit' talk to be spurious: the inflation of the money supply its bond buying had inaugurated would likely never be reversed anyway (we agree on this point).
Of course the proposal was not really meant to be taken serious: rather, it was meant to highlight the absurdities of the modern-day monetary system. Paul himself pointed out in subsequent interviews that the proposal would naturally never be adopted. In short, it was essentially an educational foray on his part -- he wanted to encourage people to think. Ron Paul has always been an exception among politicians -- he regarded educating people about monetary policy matters as part of his remit.
We live in an age where a pure credit money is used -- a fiat money, that has been created by stripping money substitutes of their backing by money proper and imposing "legal tender" laws. This means that certain conventions have to be followed by the official engines of inflation, the central banks, if they want to be successful in their vain (and dangerous) endeavor to create what they term a "stable money" (in reality, "stability" is held to be an arbitrarily chosen decline in money's purchasing power of 2% per year. This neither represents "stability," nor is it even possible to realize such a plan. The purchasing power of money certainly exists, but it cannot be measured).
These conventions need to be adhered to in order to hold "inflation expectations" in check. As long as a critical mass of individual actors in the economy remains convinced that the central bank is indeed capable of guaranteeing a fairly "'stable value of money," it is unlikely that they will react to inflationary policy by trying to quickly get rid of their cash balances in the expectation that its purchasing power will rapidly decline. As a rule, it takes a long time for people to abandon this misguided faith, but when they finally do, we often get to observe a discontinuous, sudden change in the money relation.
Anyway, it is one thing for Ron Paul to employ the idea of canceling the Fed's bond holdings as a means of educating people, it is quite another when modern day mainstream economic observers and even policymakers begin to discuss the possibility in earnest.
The Financial Times Latches on to the Topic
Sometimes the bien-pensants that regularly supply us with their plans to rescue the economy come up with strikingly bizarre ideas. The Financial Times is a well-known staging area for armchair monetary quackery, led by its chief economics commentator Martin Wolf, whose in our opinion absurd notions we have occasionally addressed in the past. At least Mr. Wolf is fairly straightforward -- instead of hiding behind technocratic babble and euphemisms, he gives his articles titles that tell one right away where he is coming from (consider for example: "Why it is right for central banks to keep printing"). What might be considered the piece de resistance in this context has recently been covered in the pages of the FT in an article by Gavyn Davies entitled: "Will central banks cancel government debt?"
The article discusses the very proposal Ron Paul has more or less made in jest (and as a means to educate people) as a policy step that is receiving serious consideration. To his credit, Mr. Davies informs us that he is actually not supportive of the idea. He merely reports that it is an option that a number of people have begun to earnestly debate and lays out the effects as he sees them (we differ with him on a number of points regarding "QE as it is currently practiced," see below).
In a way, we would actually not necessarily be entirely inimical to the idea, for similar reasons Ron Paul had in mind: it would no doubt speed up the inevitable demise of the fiat money system. Although we fear that the current fiat money system would then simply be replaced by another one, this is still the only reasonable chance we see for the conditions that could enable a return to a sound market-based monetary system to come about. It should be clear that today's political class and the banking cartels led by the central banks would never consider the adoption of a sound market-based money voluntarily. Too many "free lunches" would be at stake for those profiting from the system. An enormous shift in economic and political power would result. Governments would have to shrink dramatically and central economic planners and their myriad advisers and intellectual handmaidens would all be out of a job. Banks would find credit expansion more risky and difficult. In short, from the point of view of today's bureaucratic and intellectual elites, the idea of voluntarily adopting a sound market-based money is ruled out completely. To them it is undoubtedly the most toxic subject imaginable.
This is also why the system as such is very rarely questioned in the mainstream press or by mainstream economists. It is a topic that is not even up for debate -- everybody proceeds as though it were perfectly normal that money and interest rates are subject to central planning. The only debates revolve around how to "improve on the plan," not on whether it might actually be better to abandon the plan altogether. If a mainstream economist were to suggest that central banks and fiat money should be abolished, it would be akin to farting in church.
So in this sense, Davies' article may be regarded as one of those "how the inflationary policy might be improved" missives (even though he is personally not in favor of the proposal). It calmly discusses the possibility that central banks might indeed agree to cancel the government debt they hold in order to "ease fiscal pressures" and "boost the economy." We will look at a few excerpts from the article in below and add our comments.
Should Central Banks Cancel Government Debt?
The article begins as follows:
As the IMF meetings close in Tokyo this weekend, it is obvious that governments are struggling to find the correct balance between controlling public debt, which now exceeds 110 per cent of GDP for the advanced economies, and boosting the rate of economic growth. The former objective requires more budgetary tightening, while the latter requires the opposite. Is there any way around this?
We already have a problem with the very first paragraph. Davies asserts what we regard as a misguided premise: namely that "loose fiscal policy" (read: deficit spending) is required to create economic growth.
The government does not possess resources of its own -- every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy -- it can only dispose of already existing wealth by taking it from the private sector. It matters not if this is done by means of taxation or borrowing -- the latter method is merely a means of deferring the former (we will discuss inflation further below).
In order to believe that this will create "economic growth," one has to believe that government bureaucrats are better at allocating scarce resources than the private sector. This seems an absurd proposition to us. Since government bureaucrats are not driven by the profit motive in their allocation decisions, they have no means of ascertaining the opportunity costs of their actions. They are faced with a somewhat milder form of the socialist calculation problem -- "milder" only because they can observe prices in the market economy and are thus not entirely groping in the dark. The only sense in which government spending can be said to add to "growth" is the fact that it is treated as a positive contributor to GDP. However, this merely reveals that GDP is a very flawed measure of wealth creation.
One radical option which is now being discussed is to cancel (or, in polite language, 'restructure') part of the government debt that has been acquired by the central banks as a consequence of quantitative easing (QE). After all, the government and the central bank are both firmly within the public sector, so a consolidated public sector balance sheet would net this debt out entirely.
This option has always been viewed as extremely dangerous on inflationary grounds, and has never been publicly discussed by senior central bankers, as far as I am aware.
There is a good reason why no central banker has entertained the idea yet, at least not publicly. The manner in which the banking system is organized today is inter alia designed to obfuscate the realities of the monetary system. It is important to realize that fiat money is indeed "backed" by absolutely nothing. In a fiat money system, the bank notes issued by the central bank literally are standard money. Banknotes once were money substitutes, this is to say they represented a claim to gold held in reserve by the issuing bank. Their use as money was merely a matter of convenience -- but it was clear that the bearers of such notes could actually redeem them at any time for what was then considered money proper, i.e., gold or silver. In essence, such banknotes were simply warehouse claims on deposited money. Fiat money by contrast consists of bank notes that have been stripped of this feature: they are irredeemable. Their "moneyness" has been established by fiat, this is to say, what renders them the sole legal means of final payment for goods on the market and the "discharge of debt, both public and private" are legal tender laws.
The backing in the form of assets held by the central bank is in this sense a fiction: no-one can go to the central bank and demand that it redeem its banknotes for a portion of the assets it holds. However, from the central bank's point of view, it is important to uphold the vague idea that something stands behind the money it issues. Moreover, it uses the assets it holds as the main tools to conduct monetary policy, i.e., to manipulate interest rates and the size of the money stock. The much-touted "credibility" of central banks today rests crucially on the idea that they can and will take back the money supply inflation engendered by quantitative easing at any time, if necessary -- i.e., if the purchasing power of money begins to decline at an accelerated rate that violates the tenets of the stability policy. The danger that this could happen is very real, considering the expansion in central bank credit in recent years and the vast monetary inflation that has taken place since the end of the great asset mania of the 1990s (to be sure, a lot of money supply inflation has occurred earlier as well -- but it has accelerated enormously since the year 2000). As an example, consider U.S. money supply data:
The broad U.S. money supply measure TMS-2 since the year 2000. (Chart via Michael Pollaro; for an in-depth explanation of the money supply measure TMS-2, visit his definitions and references page, where all the required information can be conveniently found in one place).
It is worth noting that the broad U.S. money supply TMS-2 has increased by more than 200% since January of 2000 (from approximately $2.9 trillion to $8.8 trillion today). Prior to the crisis of 2008, the main driver of the money supply expansion was the commercial banking system, which in the course of expanding credit to the private sector created a lot of deposit money from thin air via the fractional reserve banking multiplier. The Fed was only passively aiding and abetting the process, supplying new bank reserves as needed and keeping the federal funds rate artificially low by means of open market operations.
Since 2008 the role of the Fed has become more active: the policy of quantitative easing has created a lot of new deposit money directly through the acquisition of assets from non-banks, while vastly increasing the excess reserves of banks (for details on this process, readers may want to take a look at two previous articles: "Quantitative Easing Explained" and "The Difference Between Money and Credit"). The latter are not considered part of the money supply as long as they remain deposited with the Fed -- but they can of course be used as the basis to create more credit and with it, additional fiduciary media in the form of new deposit money. The extent to which banks may want to use their excess reserves for this purpose will largely depend on their assessment of future economic conditions and their own financial health, as well as credit demand. The interest rate paid by the Fed on excess reserves is also an important determining factor.
A chart of Federal Reserve credit outstanding: Since 2008, the central bank has become the active driving force behind money supply inflation.
Obviously, from the central bank's point of view there is a not inconsiderable risk that the extremely large money supply expansion over the past 13 years could lead to a sudden loss of faith in the future purchasing power of money (it is no coincidence that Ben Bernanke repeatedly dwells on the subject of "inflation expectations"). Presumably there is a threshold at which the ongoing increase in the money supply will no longer be sufficiently counterbalanced by the increase in the demand for money that has undoubtedly taken place in recent years. To be sure, there is no way for us to measure the demand for money. We can only infer that it must have increased from the fact that economic uncertainty has been uncommonly high since the 2008 crisis and from the fact that the the monetary inflation has not yet resulted in a large increase in consumer goods prices. However, keep in mind that we can also not ascertain how much lower consumer goods prices would have been absent the inflationary policy; and it is clear that many prices in the economy have indeed risen sharply, chiefly stocks, bonds and commodities. In other words, the absence of large consumer goods price increases is not evidence of the absence of inflationary effects.
If central banks were indeed to simply cancel the government debt they hold, economic actors would likely rapidly lose their faith that central banks have inflation under control. Here is Davies explaining why:
Why is this such a radical idea? No one in the private sector would lose out from the cancellation of these bonds, which have already been purchased at market prices by the central bank in exchange for cash. The loser, however, would be the central bank itself, which would instantly wipe out its capital base if such a course were followed. The crucial question is whether this matters and, if so, how.
In order to understand this, we need to ask ourselves why governments finance their deficits through the issuance of bonds in the first place, rather than just asking the central bank to print money, which would not add to public debt. Ultimately, the answer is the fear of inflation. When it runs a budget deficit, the government injects demand into the economy. By selling bonds to cover the deficit, it absorbs private savings, leaving less to be used to finance private investment. Another way of looking at this is that it raises interest rates by selling the bonds. Furthermore the private sector recognizes that the bonds will one day need to be redeemed, so the expected burden of taxation in the future rises. This reduces private expenditure today. Let us call this combination of factors the 'restraining effect' of bond sales.
All of this is changed if the government does not sell bonds to finance the budget deficit, but asks the central bank to print money instead. In that case, there is no absorption of private savings, no tendency for interest rates to rise, and no expected burden of future taxation. The restraining effect does not apply. Obviously, for any given budget deficit, this is likely to be much more expansionary (and potentially inflationary) than bond finance.
However, the central banks have indeed printed the money to buy government bonds and other assets in their QE operations. Obviously this does not involve the restraining factor of government bond sales to the public as discussed by Davies above. The question is really whether the so far hypothetical exit from these operations will ever take place.
It should be noted here that by buying bonds in the secondary market rather than directly from the government, the inflationary potential of these central bank purchases is mitigated somewhat (for an explanation of this point see the above mentioned article on the mechanics of QE).
Here is what Davies has to say to the exit question and why he thinks the restraining effect of conventional deficit financing still applies:
This is not, however, what has happened so far under QE. Fiscal policy, in theory at least, is set separately by the government, and the budget deficit is covered by selling bonds. The central bank then comes along and buys some of these bonds, in order to reduce long-term interest rates. It views this, purely and simply, as an unconventional arm of monetary policy. The bonds are explicitly intended to be parked only temporarily at the central bank, and they will be sold back into the private sector when monetary policy needs to be tightened. Therefore, in the long term, the amount of government debt held by the public is not reduced by QE, and all of the restraining effects of the bond sales in the long run will still occur. The government’s long-run fiscal arithmetic is not impacted. (emphasis added)
However, as we have already mentioned above: What makes everyone so sure that these bonds are only temporarily parked at the central bank? Both the ECB and the Fed have frequently talked about how easy it will be for them to exit the vast positions they have amassed under their unconventional policies (the ECB's policies have thus far been technically slightly different from the Fed's, but have involved just as big an increase in central bank credit). In practice, they have not only not "exited" thus far, they have massively expanded their balance sheets further and have promised to engage in even further rounds of monetary pumping going forward. The exit talk is just that: talk.
The vast increase in ECB credit (chart via Michael Pollaro).
Moreover, the money supply expansion -- e.g., the Fed has engendered is very real. It would certainly not make any sense to assert that it has had no economic effects, regardless of Davies' hopeful and probably erroneous expectation that "in the long run the amount of government debt held by the public is not reduced by QE."
Does anyone seriously expect the Fed to actively deflate the money supply at some point in the future? Conceivably the Fed may attempt to reduce excess bank reserves, if the commercial banks started extending inflationary credit again at a sufficient pace to keep the money supply expansion going.
However, we know from the Bank of Japan's attempt to do just that in 2006 that such balance sheet contractions enacted by the central bank don't tend to last very long these days. When the BoJ reduced Japan's monetary base by 25% almost overnight in 2006, it inadvertently issued a death sentence for numerous bubbles abroad, as the yen was used as a major funding currency for "carry trades." One of the bubbles it probably helped to deflate was the U.S. housing bubble (to be sure, U.S. and euro area money supply growth had also decelerated into the low double digits by 2006, so there was a marked reduction in the pace of monetary pumping everywhere). Almost needless to say, the BoJ has pumped its balance sheet back up again following the 2008 crisis.
In addition to denying that there are any significant economic effects stemming from QE type debt monetization (why should there be no economic effects? If that were true, why would central banks engage in QE at all?), Davies falls prey to another error. This is actually an argument frequently forwarded by the chartalists as well (or proponents of MMT, as it is called today) -- he denies that there is a fundamental difference between money and credit instruments:
Note that QE under these conditions does not directly affect the wealth or expected income of the private sector. From the private sector’s viewpoint, all that happens is they hold more liquid assets (especially commercial bank deposits at the central bank), and fewer illiquid assets (i.e., government bonds). Because this is just an temporary asset swap, it may impact the level of bond yields, but otherwise its economic effects may be rather limited. (emphasis added)
Money is not merely a somewhat more liquid asset than a bond. Money is the medium of exchange, the means of final payment for all goods and services on the market. It makes a big difference if the public suddenly holds more money instead of holding the bonds the central bank has acquired. A bondholder must first sell his bonds to someone else in the private sector before he can spend the money invested in them. This means though that the buyer now holds a credit instrument instead of money that he can spend (respectively allocate to other investments or his cash balance). There are in fact a great many economic effects -- it seems to us that they are not exactly limited in scope at all. We already mentioned the distortion in relative prices that is the inevitable result of the inflationary policy. In fact, it is impossible for the price system as a whole not to be entirely revolutionized by an expansion in the money supply. It is a good bet that nearly every price in the economy is different from what it would have been in the absence of the money supply increase.
Below is a chart that we have already shown on previous occasions that documents one of the major economic effects that this price distortion furthers (admittedly it affords us only a very rough glimpse of what is a very complex process):
The ratio of spending on business equipment vs. non-durable consumer goods production. The most recent vast increase in this ratio since 2009 denotes that factors of production have been increasingly drawn toward the higher order stages of the production structure to the detriment of the lower order stages -- a typical phenomenon of an inflationary boom. It is also unsustainable: Many of the business activities and investments that have been inaugurated due to the monetary expansion will turn out to be unprofitable or will lack the resources to be finished. The ratio will eventually turn down again when these errors are revealed and the next bust ensues -- click chart for better resolution.
Davies appears to assume that because the public is supposedly expecting QE to be reversed at some indefinite point in the future, the additional money the central banks have created from thin air will simply be hoarded and thus remain idle and fail to affect prices and the economy. This may be true to some extent for commercial banks that are depositing their excess reserves with the Fed and have been very careful (but not as careful as one might think) about increasing their inflationary lending since the crisis (even so, the amount of uncovered money substitutes created by private banks in the US has increased by 14.9% over the past year, which indicates that the banks are no longer shy about once again expanding credit). Obviously though, everyone will allocate additional money income according to their subjective preferences, and it would be quite strange if all those on the receiving end of the Fed's largesse simply decided to hold on to their larger cash balances and not allocate some of the money to consumption and investment (of course this does not alter the truism that all money in the economy is always held by someone. The question that is relevant to our deliberations is whether the demand for money has increased to the same extent as its supply). In fact, there are numerous indications (inter alia the developments depicted in the chart above) that show that this has not been the case.
Now consider what would happen if the bonds held by the central bank were canceled, instead of being one day sold back into the private sector. Under this approach, the long-run restraining effect of bond sales would also be canceled, so there should be an immediate stimulatory effect on nominal demand in the economy. If done without amending the path for the budget deficit itself, this would increase the expansionary effects of past deficits on nominal demand, and would also reduce the outstanding burden of public debt associated with such deficits.
It would be better to say that there would be an immediate additional "stimulative effect," as money would likely become a hot potato under these circumstances. A crack-up boom would become a near certainty. Furthermore, governments would definitely use this opportunity to increase their spending (we don't think an alternative path is worth considering; their deficit spending record to date speaks for itself).
Davies then leaves us with an ominous sounding warning:
Furthermore, the effects would be increased even more if, instead of just canceling past debt, the central bank were to co-operate with the government, agreeing to directly finance an increase in the budget deficit by printing money. We would then be genuinely in the world of 'helicopter money,' with no pretense of separation between fiscal and monetary policy.
Outside of wartime, developed economies have not been normally been willing to contemplate any such actions. The potential inflationary consequences, which are in fact signaled by the elimination of central bank capital which this strategy involves, have always been considered too dangerous to unleash.
For me, that remains the case. But others are more worried about deflation than inflation. This genie might soon be leaving the bottle.
A few more comments are in order here. First of all, neither the Fed nor the ECB or the BoJ can simply "agree to directly finance an increase in the budget deficit by printing money" (it might be different in the U.K., we are not certain on this point). This would actually require a change in the law. However, there is nothing that keeps these central banks from expanding their purchases of existing government debt in the secondary markets (except for the BoJ, which is required by law not to hold JGB's in an amount exceeding currency in circulation; however, the BoJ these days buys all sorts of assets, not only JGB's). As to the inflationary consequences, we reiterate that it is erroneous to assume that no inflationary consequences have already been set into motion. They clearly have and we have grave doubts that the planners will ever find it opportune to reverse them -- as that would involve the kind of economic pain their policies are seeking to forestall (actually, they seem to think that it can be averted forever, which is erroneous as well).
Rather, in the event that the proposed course is followed -- a cancellation of the bonds currently held by central banks that would clearly cement the money supply increase to date and a pledge to monetize future government deficits as well -- we should not merely begin to worry about inflation in the sense of a somewhat more vigorous decline in money's purchasing power than has been observed hitherto. Rather we should then worry about hyperinflation -- the complete breakdown of the monetary system (for readers interested in our thoughts on hyperinflation, here is a past article on the topic).
We are not sure whether Davies' assessment that the "genie might soon leave the bottle" is correct -- but it is not totally inconceivable. Imagine for instance that CLSA's well-known bearish analyst Russell Napier turns out to be correct and a major deflation scare develops in the near future (according to this interview, Napier still expects the S&P 500 index to eventually fall to a mere 400 points). How would governments and central banks react to such a development? It is certainly true that, e.g., Ben Bernanke's biggest worry is deflation, not inflation. According to his own words he is firmly convinced that the Fed will always be in a position to get an unduly fast increase in prices under control with ease. He is far more concerned that "deflation might become entrenched: (see his 2002 speech) unless it is countered in a timely and forceful fashion (never mind that there hasn't been any noteworthy monetary deflation since 1932).
How would the Fed top what it is already doing, namely QE without a time limit? Surely a decline in asset prices on the order envisaged by Napier (even a smaller one as it were) would give the authorities plenty of reason to panic. The hue and cry for even more extraordinary measures than have been implemented to date would become deafening. The Fed would certainly not be averse to priming the pump even more (unless the markets balk and send interest rates much higher -- that would make the decision a great deal more problematic) -- after all, we already know that it does not believe that its own actions have actually contributed to the economy's weakness.
However, this is precisely what has happened. This can not only be shown by means of correct economic theorizing. The empirical evidence to date appears to confirm what theory tells us to expect: The Fed's incessant monetary pumping has weakened the economy structurally, by inducing massive capital malinvestment, capital consumption and a weakening of the pool of real funding. Perhaps someone should ask Ben Bernanke at his next press conference why a more than 200% expansion of the money supply since the year 2000 has yet to produce a sustainable economic recovery (we obviously do not regard the phantom prosperity of the housing bubble era as having represented a sustainable recovery). Could it not be that the policy is simply totally misguided? This is what would occur to us, but it has yet to occur to the Fed chairman and most of his colleagues, not to mention a great many leading lights in the economics profession.
As an aside, Davies' benign assessment of QE may be based on the experience in the U.K., where the BoE's asset purchases have failed to ignite further money supply growth, in spite of a vast increase in its balance sheet (the BoE now holds 25% of all outstanding gilts). Apparently private sector deleveraging has trumped the attempt to create inflation in the UK, with banks unwilling to lend and putative borrowers unwilling to borrow. The BoE may therefore also be more easily persuaded to step up its interventions.
U.K. money supply aggregates, stagnating since 2009 in spite of the BoE having bought 25% of all gilts outstanding.
Lastly, we leave you with a pertinent quote by Ludwig von Mises as to what to expect when the "genie is leaving the bottle" as Davies has put it (the quote is from Human Action, ch. XVII):
The course of a progressing inflation is this: At the beginning the inflow of additional money makes the prices of some commodities and services rise; other prices rise later. The price rise affects the various commodities and services, as has been shown, at different dates and to a different extent. This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.
But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them. It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796 and with the German Mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last forever. (emphasis added)
And this dear readers is why all the smug assertions by our modern-day central planners that they "have things under control" and the debate over whether they should be engaging in even more extreme inflationary monetary experimentation are so dangerous. Control can be lost, and it usually happens only after a considerable period of time during which their interventions appear to have no ill effects if looked at only superficially. It is however not enough to consider only the superficial picture in economics. As Bastiat said (in "That Which is Seen and That Which is not Seen"): "Thus we learn ... to be ignorant of political economy is to allow ourselves to be dazzled by the immediate effect of a phenomenon; to be acquainted with it is to embrace in thought and in forethought the whole compass of effects."
Charts by: Michael Pollaro, St. Louis Fed.