John McCain's Political Suicide--First Step to a New Jacksonian Revolution?

By identifying with the Bush/Paulson bailout John McCain has effectively handed the election to Barack Obama. McCain's task in this election was to distance himself from the Bush administration, but instead he has chosen to embrace it.

The Constitution established the House as the more responsive of the two legislative bodies, and the two-year cycle was important for Monday's vote on the bailout. Congressmen feared public retribution. However, that does not mean that the public's will will be done.

In the past week, the Federal Reserve Bank increased the number of treasury bonds it is holding by 18%. That is a supernatural jump, and it means that it has injected a tremendous quantity of money into the banking system. Monetary reserves have increased by 6%, which is also huge. There is no reason for a Congressional bailout if the Fed increases the money supply dramatically. Moreover, there is still a good chance of the bail out bill's passage in the Senate and then in the House, with the House using the Senate as cover.

In the nineteenth century the public understood that its interests DID NOT COINCIDE with those of commercial and investment banking. As a result, the central bank, the Bank of the United States, was abolished in the 1830s. Today, the public is unwilling to learn a few simple facts about the relationships among money supply, inflation, real wages and real economic growth. Real economic growth is impeded by monetary inflation because, in a form of reverse rationing, less optimal projects receive funding because those with political connections (e.g., Wall Street) get the first dibs on capital instead of those who can produce the highest returns, for instance, creative but risky inventors.

I have seen quite a few blogs and spoken to several Ivy-League-trained Ph.D. economists in the past few weeks, and I can say with assurance that the widespread support for the bailout among academics, the media and the establishment is based on junk ideas, quack theory and opportunism. The public is smarter than the "experts", and if problems with the economy continue to escalate, and the bailout will perpetuate and enhance them, then perhaps we will see the beginnings of a new Jacksonian revolution.