by Robert Gore, Straight Line Logic:
Aim your rocks at glass houses.
The Overton window is the range of policies politically acceptable to the mainstream population at a given time. It is also known as the window of discourse. The term is named after Joseph P. Overton, who stated that an idea’s political viability depends mainly on whether it falls within this range, rather than on politicians’ individual preferences. According to Overton, the window frames the range of policies that a politician can recommend without appearing too extreme to gain or keep public office given the climate of public opinion at that time.
Heaven forbid anyone appear too extreme. Our rulers keep discourse safely within the Overton window by allowing debate about the details of what the government does or doesn’t do. However, those who question the necessity of particular government agencies or programs, or government in general, are beyond-the-pale extremists and cast into the Abyss of the Unacceptable, one zip code over from the Abyss of the Deplorable.
The Federal Reserve has been much in the news lately, The term “repo” is shorthand for a repurchase agreement. The repo market allows those who own securities to sell them to lenders and repurchase them on a set day at a higher price. The difference between the sale and the repurchase price is interest to the lender. The repo market is huge, providing short-term financing for hundreds of billions of dollars worth of transactions daily, primarily in government and agency debt.
On September 16 the repo market blew up. Short term repos usually carrying interest rates of 1 or 2 percent required rates approaching 10 percent for the market to clear. The Fed stepped in, offering massive fiat credit to push rates back down. It wasn’t just a one-time glitch. Since then, the repo market has required substantial and repeated injections of Fed fiat credit. The Fed has announced injections totaling close to half-a-trillion dollars, or $500 billion, over the next few weeks to prevent the market from seizing up over year-end, when demand for repo financing is traditionally brisk. That will take the Fed’s balance sheet to around $4.5 trillion, the high reached after the last financial crisis.
There are plenty of articles about the causes of the blowup and its implications and SLL has reposted some of them. Not alone among commentators, SLL’s best guess is that markets are seizing up under massive and ever-expanding US government debt. Unless the Fed buys what nobody else wants, the market will crash and rates will skyrocket. Time will tell. Without getting further into those weeds, the incident follows a pattern inherent in any government-central bank sponsored system of fiat credit creation.
Credit expands faster than underlying economic production until interest and principal can no longer be paid and credit begins to contract. Governments and central banks meet that inevitable consequence with a still greater expansion of fiat credit, setting the stage for the next contraction and expansion. How successful governments and central banks are in forestalling economic and financial catastrophe is merely a detail. The important point is that the cycle, each successive crisis larger than the previous one, is a feature, not a bug, of fiat credit systems. Eventually they all crash.
Will the repo market be the tipping point for the next credit contraction? Apparently it already is, judging by the Fed’s frantic response. However, focusing on the details keeps the debate within the Overton window. Instead, ignore the details and look at the destruction wrought by the fiat credit system since inception. The dollar is worth about 2 percent of what it was in 1913 when the Fed was created. The Fed has amplified rather than damped economic fluctuations (for a masterful exposition of the destructiveness of US, European, and Japanese central banks the last several decades, see “The Japanization of the European Union,” Jesús Huerta de Soto, SLL, 12/13/19). Which prompts the Overton window-shattering question: why do we need central banks in the first place? The Overton window-shattering answer: we don’t.
We’re not yet to the point where shattering questions are asked about central banks or other government or government-aligned institution, but we’re well into stage one: the realization that the status quo is not working for anyone but a small sliver of the population. Stage two has also launched: recognition that promoters of the status quo lie incessantly. So too has stage three: things keep getting worse.
The lying is incessant. The Organization for the Prohibition of Chemical Weapons’ (OPCW) official conclusions about an alleged chlorine attack in Douma, Syria were unsupported by the evidence and several OPCW investigators raised unaddressed objections at the time. The findings were skewed to support propaganda justifying retaliatory airstrikes by the US, UK, and France. Justice Department Inspector General Michael Horowitz’s report detailed the FBI’s lies and deliberate omissions of exculpatory material to the FISA court. The Washington Post recently published what are being called the Afghanistan Papers, culled from a trove of Freedom of Information Act releases. Numerous military and civilian officials lied about America’s eighteen-year and counting war in Afghanistan from its inception.
This is a couple of weeks’ disclosures concerning official prevarication. The OPCW story hasn’t received much coverage in the mainstream media, while the IG report and the Afghanistan Papers have. They’re the tip of the iceberg. While more people are seeing the iceberg that’s above the water line, the Overton window and pervasive official secrecy still obscures the much larger part floating below the surface.
It probably doesn’t matter. There is one bedrock truth about governments: they are based on coercion, violence, and fraud. It’s easy to mistake lack of public reaction to stories like the above for insouciance or mental sloth, but many people have internalized that governments repeatedly lie, they don’t need the details. They don’t have time to follow all the stories or to speak out and protest the undeniable lies and injustices—they have lives to lead. There are often nasty reprisals for those who speak out or protest, and they know that, too. But an ever-increasing percentage of the populace know in their bones that contemporary governance is rotten to its evil core. Whatever trust that once existed between government and the governed is long gone and it’s not coming back.