How The Fed Is Knocking The World Off Balance

John Overstreet profile picture
John Overstreet


  • The relentless rise of the service sector and the growing need for the government to assume the burden of rising social costs imply further deindustrialization and nationalization of the economy.
  • The rise of the service sector both through high services inflation and deindustrialization of mature industries has been caused, perversely, by Fed-induced hyperindustrialization since its inception.
  • Through the creation of the service economy, consumer culture, and cheap durable goods, the Fed has transformed not only American but global demographics, culture, markets, and politics.
  • There are economic and social limits to the Fed's ability to continue this process, and we may be facing them now in the form of populism and a coming depression.
  • The Fed will eventually be unable to generate growth and inflation, or it will generate economic and political chaos until social order breaks down, or we must nationalize the economy.

The world has changed since the Federal Reserve was established in 1914. Most Americans lacked the basic accoutrement of consumer life: movies, mobile media devices (well, radios), cars, washing machines, refrigerators, vacuums, pop music, and fashion (hair styling and fitted clothing). At that time, art and music had not been taken over by the cabal of avant garde and consumerism. In public life, there was no income tax, and senators were still selected by their state legislatures. Women could not vote; racial divisions were engraved in the laws. Abroad, Germany had an emperor; the Japanese one was still divine. Britain's emperor ruled over India, among other places. China had just deposed hers in a desperate struggle to modernize; Russia had yet to do so. There was an Austro-Hungarian Empire.

Of course, one can pick any arbitrary date in even the not-so-distant past, say "the world has changed a lot since then," and come up with countless examples to prove it. It goes without saying, needless to say. The reason I feel that those years in the 1910s mark a watershed is that I cannot remember what came before them. Since I was not to be born until many decades later, that is probably not especially surprising, but what I mean is that I believe I share in a collective memory of the decades that followed those years, while the decades that precede them are at best indistinct to me.

Each decade since the 1910s evokes a definite image. If I say "the 1920s" or "1960s" or "1980s," each evokes a unique set of impressions, good, bad, or ugly. We have, or think we have, a pretty good idea of the difference between the 1950s and the 1960s, the 1920s and the 1930s, or the 1980s and 1990s. But, if I say "1890s," I cannot say my image of that decade varies much from that of the 1880s or 1870s

This article was written by

John Overstreet profile picture
I study markets from a long-term historical view, especially the interaction between yields and inflation across all major asset classes. I have a bachelor's degree in political science, history, and intelligence analysis, and a master's in political theory. My Seeking Alpha articles have been mentioned in Marketwatch and Real Clear Markets. I have lived in Asia for twenty years.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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