Lords of Easy Money — Book Review

The Lords of Easy Money by Christopher Leonard explores how the Federal Reserve's aggressive monetary policies, particularly quantitative easing, have reshaped the U.S. economy since the 2008 financial crisis. The book argues that these policies, driven by low interest rates and massive asset purchases, have fueled wealth inequality, corporate debt, and market distortions while failing to deliver promised economic stability. Leonard combines investigative journalism with economic analysis to reveal the consequences of the Fed's actions through the perspectives of policymakers, bankers, and everyday Americans while following the stories of a few significant players like Tom Hoenig and Jerome Powell.

Quote 1: “Economics seemed like the hidden key to explaining everything. It was presented to Hoenig as the scientific study of choices that people made to get by in their daily lives.”

I have discovered this as I have become more familiar with money. Money is a representation of human psychology, giving us a numerical understanding of our values, our desires, our fears. If you want to understand people, watch how they treat their money.

Idea: When you follow someone’s money, you begin to see who they really are.

Quote 2: “The Fed was not the independent agency it claimed to be. The members of the FOMC were not wise technocrats, making decisions about the money supply, guided by nothing more than high-minded economic theory. They were humans, driven at least in part by political pressures.”

The moment being described is the policy mistakes enacted by the Federal Reserve in the 1970s which led to runaway inflation. Inflation averaged nearly 7% for the entire decade, with inflation reaching 15% during certain periods. This forced the hand of Fed Chairman Paul Volcker who dramatically raised rates and temporarily crushed the economy in order to fix it.

How do you make such a blunder?

This group of people who were supposed to be independently minded felt the pressure from politicians and the broader public opinion. Instead of doing what was right, they did what they felt would bring them favor. But, in doing what the people wanted, it began a much longer process of tarnishing the reputation of the Federal reserve. Volcker did not do what was popular, but historians look back at what he did with great favor, recognizing that what he did was for the betterment of the future of the country.

Idea: Do what is right, even if it is unpopular. People may not like it in the moment, but they will trust you in the long run.

Quote 3: “Monetary policy needed to be made with restraint, and a long-term view.”

Tom Hoenig was in the minority for much of his career. While many of those making monetary policy desired to make conditions more loose and closer to a zero rate, Hoenig desired financial discipline. Though easing monetary policy may have felt good and pumped up things like the stock market, it hardly made a difference in the ordinary citizen’s life. The Fed hardly knew at the time what effect their easing would have on the future of the economy. What they have discovered is that, now that they have started easing, it is extremely hard to tighten without experiencing painful failures within the economy, leading to more easing.

I often think about this idea in making personal decisions. What if we made decisions slowly, with a focus on the long-term effects of a decision. Would we get that extra scoop of ice cream? Would we order another package from Amazon? How much time would we spend with our family? How would we view our job?

Idea: We need to balance being present with a long-term perspective, as each decision made today has consequences for tomorrow.

Quote 4: “When the financial system benefitted only a handful of people, average people started to lose faith in society as a whole.”

This is our current predicament. Since the Dot Com bubble at the turn of the century, the Federal Reserve has worked hard to stave off economic collapse. But for whom is the economy collapsing? Yes, when banks and businesses go under it hurts the everyday individual. But eventually out of wreckage new and better businesses and jobs arise, ones that learned from the destruction. But under the current Fed policy, no one is allowed to fail. The Fed steps in and bails out everyone. Businesses and banks that operate in shady and destructive ways are allowed to continue because the Fed deems that it is better to allow them to continue than for the economy to feel pain.

The problem is that in propping up the economy, it has allowed the rich asset owners to thrive while the everyday worker squanders.

Following the COVID bailout from the Fed, the top one percent tripled their net worth, while the bottom fifty percent stayed flat or got poorer.

This economy is only good for those who own assets. Everyone else has become a slave to bad monetary policy.

It is easy to understand why the everyday individual no longer trusts the Fed or the banks or large businesses. Why would they? It has become clear that when the Fed steps in, it is not for regular workers, but for the already rich asset holders and business owners.

If they wanted the average citizen to thrive, they would allow the bad actors to fail, relieving the corruption placed on the everyday person.

Andrew Mellon was head of the treasury during the 1929 stock market crash and he said the following: “Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate. It will purge the rottenness out of the system.” I do not want people to experience pain, but I do want a system that works for all people. The current monetary system has not allowed rottenness to be cleared, but has actually encouraged more corruption to happen in the system. Somehow and in some way, the current rottenness will be purged, whether we start to discipline ourselves or it comes about on its own.

Idea: Corruption and greed is allowed to go on for only so long.

Final thoughts

Currently, the only way to avoid being run over by monetary policy is to own assets. You have to own real estate, stocks, or a business. Current policy will continue to erode paychecks at slow and grinding pace, numbing the everyday worker so that they are hardly aware that they are losing their purchasing power. The current system only helps those who own assets.

Eventually the bill will come due. The Dot Com crash, the 2008 crash, and the COVID crash were all mitigated by the Fed so that the cancerous money schemes were not actually destroyed but multiplied. There will come a day when the Fed cannot save the current system from revaluation.

We need to form bonds and trust with institutions outside of government and policymakers. If things were to ever go south, government officials and big business types will not be there for you. Your local community will be, though. Build local businesses and support local businesses. Make friends with your neighbors. Go to church. These people who live around you and these institutions in close proximity will always be your largest support system and advocate.

It is your local community that you can have the biggest impact on, and will be there for you the most.

If you liked this post, or you feel like it would start a good conversation, please share this with your friends and ask them to subscribe.

It would help me a lot. Thanks for reading! 

More from the Spark Newsletter universe

New videos coming out weekly: https://youtube.com/@thejacobhayward?si=JHgwOjGP_-FwY3l0

Follow me on X for newest updates: https://x.com/thejacobhayward?s=21