Thank God that there’s a great deal of ruin in a nation

In a post I wrote right before the election, I made this prediction about what would happen if Biden won:

Are we facing a bad interregnum, as during 1932-33? Perhaps, especially if Trump becomes bitter and blames the American people, much as Hitler blamed the Germans for letting him down.

And now we see this:

Trump strips US Fed of emergency credit powers in latest scorched-earth move . . .

“The most obvious interpretation is that the Trump administration is seeking to debilitate the economic recovery as much as possible on the way out of the door,” said David Wilcox, the Fed’s former chief economist, now at the Peterson Institute.

Fortunately, the Fed has other tools, and thus it’s not at all clear that Trump will succeed in destroying the US economy out of spite. But you can’t accuse him of not trying!


Update: It just occurred to me that this is sort of good news, as it clearly indicates that Trump understands that he has lost.



30 Responses to “Thank God that there’s a great deal of ruin in a nation”

  1. Gravatar of Philo Philo
    20. November 2020 at 10:46

    So far as I can tell, these “emergency lending powers of the US Federal Reserve” are of little practical importance, and suspending them as of the end of the year means they will be in abeyance for just three weeks. What’s the big deal?

  2. Gravatar of Garrett Garrett
    20. November 2020 at 11:11

    “ The Fed retains its monetary policy powers and can purchase further US Treasury bonds but that is a blunt tool at this juncture unless it is married to aggressive fiscal expansion, which the Republican Senate has vowed to block. “QE is a very imperfect substitute for a credit market backstop,” said Mr Guha.

    The Fed is concerned that more QE will chiefly inflate asset prices without doing much to help the real economy, exacerbating social inequality. The central bank’s moral doctrine under Mr Powell – a ‘one-nation’ patrician conservative of the old school – is akin to a monetary Hippocratic Oath, that it should not undertake any measures that further damage the social fabric or that leave poor people behind.”

    Or maybe they could just keep inflation on track?

  3. Gravatar of Sean Sean
    20. November 2020 at 11:19

    Honestly, this seems like a solid move by Mnuchin. And a Pro-Democracy move. Biden should have to go to congress to fund his stimulus. If he can’t get their approval then no stimulus. That is Democracy. He shouldn’t have a slush fund he can claim later to bail-out states and other policies he would like to enact.

    This would be more significant if credit spreads were not at historical lows. But since they are at historic lows their is no reason to keep the program running and give Biden $450 billion slush fund to bypass congress.

  4. Gravatar of David R Henderson David R Henderson
    20. November 2020 at 11:40

    You seem to be saying implicitly that the Fed should have those powers. Are you? And if so, why?

  5. Gravatar of Steve J Steve J
    20. November 2020 at 12:04

    I like how all the responses claim it was a good thing to shut this down. So it was fine for it to exist when Trump was President but now that Biden is President it needs to be stopped immediately. I assume all these people will become very worried about the deficit as well. Trump was right there are bad people on both sides…

  6. Gravatar of msgkings msgkings
    20. November 2020 at 12:39

    @Steve J:

    Exactly. Expect a resurgence of the Tea Party worrying about deficits for the next 4 years.

  7. Gravatar of bill bill
    20. November 2020 at 13:06

    I like the Update! I think you are right.
    What’s up with the Fed letting the 5 year and 10 year inflation breakevens hover around 1.6% and 1.7%, respectively. Why don’t they continue to push until they get those up to the 2.3% range?

  8. Gravatar of ssumner ssumner
    20. November 2020 at 13:42

    Philo, The question is whether the funds will be returned to the Treasury.

    Garrett, Yes.

    Sean, This is not a slush fund for Biden; it’s funds available to the Federal Reserve. I don’t think you understand what you are commenting on.

    David, I certainly think they should have the power to buy a wide range of bonds. Other parts of the program are more questionable.

    I favor giving the Fed the ability to buy a wide range of assets in order to take away any doubt as to whether they can hit their inflation target. Many people doubt that claim, even with these extra powers. (I don’t.)

    I favored giving the Fed the power to buy corporate bonds even before Covid-19. There’s no point in having a 2% inflation target if you don’t hit the target. Even worse, that opens the door for fiscal stimulus.

    And of course the timing of this move is highly suspicious.

  9. Gravatar of Sean Sean
    20. November 2020 at 14:11

    I have no idea to be honest. Mnuchin commented they can spend it elsewhere. I’m pro-taking it back if Biden could use it for whatever he wants. Anti in a mild sense if he can’t, but mostly because I don’t think the program is needed now.

  10. Gravatar of Benjamin Cole Benjamin Cole
    20. November 2020 at 16:27


    Presently, the Federal Reserve’s major power to stimulate the domestic economy appears to happen through the fiscal lever.

    Essentially, the Fed can finance federal spending, that is, engage in money-financed fiscal programs.

    Although this may be the wrong description.

    Perhaps, by buying Treasuries, the Federal Reserve allows deficit spending, but without an real increase of the debt burden on taxpayers. Of course, indisputably, this is the practical result.

    We may need some new totems inside the Temple of Orthodox Macroeconomic Theology.

    Also, if you have a theory about macroeconomics, but it doesn’t gain traction across a few lifetimes, then the theory may be true but of little practical use.

  11. Gravatar of Christian List Christian List
    20. November 2020 at 18:02

    I have to admit that the prognosis of some media, pundits and commentators here has really come true: Trump does not admit defeat and clings to his presidency with all his power and all his dirty tricks, perhaps knowing that the Democrats will cover him with lawsuits and trials as soon as he has no more immunity.

    To be clear: this is not a right by Trump, it is undemocratic and wrong. He has lost, now get out of the way.

    The other prognosis of said media, that in case of Trump’s defeat there would be relevant outbreaks of violence, shootings, even some kind of civil war, did not come true at all. Only a few Trump supporters even demonstrate on the street – and these few are peaceful.

    All right, I don’t want to belittle this any further. 50% hit rate is almost legendary for some of these guys.

  12. Gravatar of xu xu
    20. November 2020 at 18:54

    Meanwhile the evidence proves mass corruption.
    Just more propaganda, by Scott “CCP” Sumner.

    People who accept bribes, and do what they are told, are beta boys. Sumner was a massive failure: University of Chicago graduate, yet landed a job at some watered down junk school in the northeast. He had to take bribes from the CCP to write junk articles, because otherwise he would have been a poor loser.

    Someone tells him to kneel, and he kneels. They tell him to go home at 10pm, and he says “yes master”. They say wear a mask, despite numerous studies showing zero efficacy and says yes my king.

    Beta boys don’t ask questions. They just do what they are told.

    On a more serious note: Trump will win.

    Sidney Powell and Lin Woods are both American patriots who love their country. They are legal legends, with a track record of WINNING WINNING WINNING. They wouldn’t risk their reputations without evidence.

    The Kraken will be released on the corrupt in the next few weeks.


  13. Gravatar of janice janice
    20. November 2020 at 19:47

    Trump is not Hitler, and you should be ashamed of yourself for even implying that. Hitler killed millions of people, including hundreds of thousands of American boys – nearly destroying an entire generation of young men.

    Trump is a billionaire playboy who wanted to run for office to save America from destroying itself. He didn’t need to take on that responsibility. He could have continued to be a playboy. But as a patriot, who cares deeply about his country, he sought to try and make a difference.

    If you want to make a comparison to Hitler, you can point in the direction of Xi. The guy who actually has concentration camps.

    Just a few of Trumps accomplishments.

    – Tariffs to protect American workers.
    – Reduced Illegal immigration and removed sanctuary cities. (No country in the world would permit one to stay there without a visa. You cannot just walk across the border into France and expect them to provide sanctuary status. In France, they will arrest you and deport you within a week. And in China they will put you in prison for years until you pay a bribe for the deportation order.)
    – Stopped Catch and Release.
    – Sanctioned CCP members over Uighur concentration camps
    – Implemented a new crime bill so that losers (mostly black) peddling 1 gram didn’t spend their lives in Jail. You can thank Sleepy Joe for the overcrowding (1994 crime bill).
    – Fought back against political correctness (AKA, silencing of our speech)
    – Removed Chinese spies connected with the PLA from our Universities (yes, many of them are).
    – Removed cumbersome regulations that destroyed industries
    – Funded companies to create a Vaccine in less than a year.

    All the pundits said these tariffs would DESTORY OUR ECONOMY. Including Sumner. Well, Sumner was wrong again (nobody should be surprised that he’s wrong). The result:

    Best Economy ever.
    Global elite had to accept lower profit margins.

    Now let’s look at Biden:

    1. lockdown until every company but tech companies go bankrupt.
    2. make backroom deals with CCP owned companies
    3. remove tariffs so corporations can increase profit margins, and Americans can lose more jobs.
    4. Join Paris accord destroying American Industry. (If you actually read the paris agreement, which of course Sumner didn’t do, you will see that only the United States has to curtail emissions immediately despite being one of the countries with the cleanest air. All of the other countries can continue to produce massive amounts of carbon until 2030. Does that make sense? Of course, not. )

    We live in uncommon times, and the global stakes are too high. The idiot TRYING to replace him is one of the most corrupt politicians in American History. For the sake of our country, and our children’s future, we cannot concede to the Communist Party.

    Trump must not concede. Civil war if necessary. But NEVER concede to the corrupt left.

  14. Gravatar of harry harry
    20. November 2020 at 19:53

    Trump is not going to concede.

    Lin Wood has lost only one legal case in 40 years.

    Sidney Powell has more appellate wins than any US attorney (over 600).

    You are clearly underestimating the legal battle about to take place.

    Highly unlikely Trump loses. Those attorney’s don’t cases they cannot win.

  15. Gravatar of Benjamin Cole Benjamin Cole
    20. November 2020 at 23:20

    I have no ability to judge Trump’s legal case, and, as usual, Trump is a terrible spokesman for his cause.

    I will say this: The whole “Russiagate” fandango turned into vapors, but not before resulting in the impeachment of the US president.

    In the end, people like Carter Page were never even charged with anything, while others, such as Paul Manafort, were put into prison on tax or other charges totally unrelated to “Russian collusion.”

    I remember “WMD in Iraq,” the Gulf of Tonkin, the Reagan Administration’s Iran-Contra dissembling. My Lai was denied for years. The government and media will lie, sometimes in coordination.

    It is odd that prominent commentators are saying the Trump lawyers have no evidence, when they have not even yet started discovery, or the auditing and recounting of votes.

    I sense that Trump’s lawyers will be unable to bring about the complete review of votes that they want, given the vagaries law, the court of public opinion, and the multiple jurisdictions in which they must operate, and the timeline.

    It may also be that Rudy Giuliani is past his prime.

    But do not swallow the party line.

  16. Gravatar of sty.silver sty.silver
    21. November 2020 at 01:53

    @xu, in the unlikely event that Trump loses, are you going to publicly acknowledge that you were wrong?

  17. Gravatar of Postkey Postkey
    21. November 2020 at 03:00

    Fiscal policy is ineffective unless it is ‘financed’ by an increase in credit creation?
    From my favourite ‘destroyer of the planet’.

    “ . . . whereby the coefficient for ∆g is expected to be close to –1. In other words, given the amount of credit creation produced by the banking system and the central bank, an autonomous increase in government expenditure g must result in an equal reduction in private demand. If the government issues bonds to fund fiscal expenditure, private sector investors (such as life insurance companies) that purchase the bonds must withdraw purchasing power elsewhere from the economy. The same applies (more visibly) to tax-financed government spending. With unchanged credit creation, every yen in additional government spending reduces private sector activity by one yen. . . . Equation (22) indicates that the change in government expenditure ∆g is countered by a change in private sector expenditure of equal size and opposite sign, as long as credit creation remains unaltered. In this framework, just as proposed in classical economics and by the early quantity theory literature, fiscal policy cannot affect nominal GDP growth, if it is not linked to the monetary side of the economy: an increase in credit creation is necessary (and sufficient) for nominal growth.
    Notice that this conclusion is not dependent on the classical assumption of full employment. Instead of the employment constraint that was deployed by classical or monetarist economists, we observe that the economy can be held back by a lack of credit creation (see above). Fiscal policy can crowd out private demand even when there is less than full employment. Furthermore, our finding is in line with Fisher’s and Friedman’s argument that such crowding out does not occur via higher interest rates (which do not appear in our model). It is quantity crowding out due to a lack of money used for transactions (credit creation). Thus record fiscal stimulation in the Japan of the 1990s failed to trigger a significant or lasting recovery, while interest rates continued to decline.”

  18. Gravatar of Thomas Hutcheson Thomas Hutcheson
    21. November 2020 at 04:35

    It seems to me that giving the Fed the “ability” to buy private debt sends exactly the wrong message, that the lack of this ability is what has prevented them from carrying out their mandate heretofore.

  19. Gravatar of Michael Sandifer Michael Sandifer
    21. November 2020 at 07:40

    Obviously, these pro-Trump people aren’t serious. Many of them do not use their real names, claim the election was stolen and that Trump will win, but will not place bets, etc. They’re obviously the betas, because they’re afraid to even reveal who they are.

  20. Gravatar of Michael Sandifer Michael Sandifer
    21. November 2020 at 07:43


    Since you’re so confident Trump will win a second term, how about placing a bet? I’ll bet you $100, $1000, or even more. I’ll bet that Biden takes office in January next year.

    Show us all you’re not a beta and lay your bet. Also, if you weren’t a beta, you’d be comfortable using your full name when you comment.

  21. Gravatar of ssumner ssumner
    21. November 2020 at 10:52

    I will enjoy teasing all the gullible Trumpistas once Biden takes office. It will be fun. Well, it would be fun if they were bright enough to realize how foolish they were. But I don’t think they are.

  22. Gravatar of sarah sarah
    21. November 2020 at 11:38

    Lot of people going to prison soon.

    Powell is a genius.

  23. Gravatar of Michael Sandifer Michael Sandifer
    21. November 2020 at 20:27


    Yes, your last sentence sums up the problem. That’s why I’m offering bets to all the Trump supporters I encounter, including in my family. Some of taken the bet on Trump staying in office.

    Losing money will at least shut them up, if it teaches them nothing else.

  24. Gravatar of ssumner ssumner
    21. November 2020 at 20:37

    Sarah, You don’t think Trump will be pardoned?

  25. Gravatar of Jack T L Jack T L
    22. November 2020 at 04:56

    for those with TDS, just wonder how do you explain that some county have more votes then vote being sent out plus an overall voting rate of close to 90%. GOP actually gained seat in house, why so many voted for biden but ‘forgot’ to vote for dem? the other hand, precidential, house and senate votes are regular aligned for GOP. How can Biden got 10m more votes than obama? No fraud?

  26. Gravatar of Michael Rulle Michael Rulle
    22. November 2020 at 05:53

    Well, I will join in on the nonsense—-as someone wrote just recently “we might as well face it we’re addicted to Trump”.

    For the 25,876th time—-any comparison of Trump to Hitler is a non-sequitur.

    Did Trump get defrauded from winning the election? I really do not know. I mean “not know” in the normal meaning of language, I.e., he may have been defrauded.

    The constant repeating by S.Powell’s of her talking points— without follow-up—-looks -psychotic.

    Rudy looks almost as demented as Biden

    My personal belief—-as in the common meaning of the term——is there was fraud on a massive scale——but “we can’t handle the truth”

    I do not believe the vote count totals——could be why they stopped counting in some states—-it will become too obvious how over stated they are. Trump broke Obama’s record! Biden has 80 million votes. 10 million more than Obama. All these votes were about Trump—for and against. Yes, it can be he was that important to everyone.

    If there was great fraud—-“it all over now baby blue”

    Scott already thinks it is all over anyway. His inability to truly demonstrate an emotional dislike of CCP despite his words to the contrary ——is Disturbing——has he ever called them a banana republic? No—because they are not.

    The land of Covid where the death rate is .35 per 100,000—because they know how to social distance.


  27. Gravatar of ssumner ssumner
    22. November 2020 at 09:07

    Jack, You said:

    “just wonder how do you explain”

    Every single similar claim that’s been presented in this blog has turned out to be wrong; Trumpistas simply don’t know how to handle data. For instance, one commenter said turnout in Wisconsin was 90%. I checked and it was a lie. Ditto for all the other statistical claims I’ve been given. They were either lies, or they misinterpreted what the data means.

    You don’t name the county, so I can’t comment.

    As for 10 million more than in the Obama’s election, the US population has grown by 28 million since 2008, AND this was a high turnout election for both parties, due to the ease of voting by mail.

    Michael, You said:

    “Did Trump get defrauded from winning the election? I really do not know.”

    I do.

    You said:

    “His inability to truly demonstrate an emotional dislike of CCP”

    Frequently calling them “despicable” is not enough? You want teardrop stains on the page?

  28. Gravatar of Christian List Christian List
    22. November 2020 at 17:27

    It seems that more and more GOP representatives are turning away from Trump. His orders are no longer being obeyed. He has lost, he is a lame duck, soon his power as POTUS will be completely gone, and then what? He then helds no more office and no more position in the party. The defeat has left clear traces, the shining armor is gone.

    He is set back to the year 2016. It still takes too long, but his power is crumbling. If we are lucky, the optimistic predictions will come true: The GOP was loyal to him as long as he had power. Now is the time to meet Caesar in the Senate. Where is Brutus when you need him?

  29. Gravatar of Jack T L Jack T L
    23. November 2020 at 01:47

    so easy to spot two mistakes in just one sentence.
    >As for 10 million more than in the Obama’s election, the US population has grown by 28 million since 2008,
    Population != eligible voter. how long does it take for New born and new immigrate or people on temperary visa to become eligible to vote? also you should compare 2012 not 2008.
    >this was a high turnout election for both parties, due to the ease of voting by mail.
    How about “high fraud rate due to the ease of voting by mail using fake or stolen identity”? One couple already sentenced to jailed for sending out 8000 vote in CA. Would this be the only case?
    I think you should withhold your judgement until the supreme court ruling.

  30. Gravatar of ssumner ssumner
    23. November 2020 at 10:27

    Jack, LOL, I said the population increased by 28 million, I assumed any reasonable person would understand that the voting age population increased by a bit less, say 20 to 25 million.

    I guess when responding to you in the future I won’t assume intelligence.

    And you should have said they were jailed for trying and failing to do vote fraud. The illegal ballots were never obtained. So the system works?

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