The Libertarian Case for RFK’s Attack on BlackRock, Part 2

Needless to say, the explosion of the Fed’s balance sheet by 45X (from $200 billion to $9 trillion) between 1987 and 2021 did not occur in a financial vacuum. Rather than the proverbial tree falling silently in an unattended forest, the Fed’s printing press explosion was more akin to a monetary “shock and awe” attack that repositioned the entire financial landscape.

In essence, there was no reason for the relationship between national income and financial asset values to change after 1987 because stock, bonds and other assets were more than fairly valued when Paul Volcker’s work was summarily cut short by the Texas easy money man, Treasury Secretary Jim Baker, and his White House henchman in August 1987.  In fact, the ratio of household assets to national income (GDP) at 2.7X on the eve of Greenspan’s arrival at the Fed was virtually identical to the 2.8X ratio that had been posted 40-years earlier in 1947.

And then, of course, the printing presses were put into overdrive and what amounts to the aggregate economy’s valuation multiple took flight.  There subsequently occurred the equivalent of a monetary Cambrian Explosion. New financial life broke out everywhere.

By the time of the dotcom crash in 2000, the financial asset ratio had risen to 3.5X national income and then climbed relentlessly under the uniparty governments of Bush the Younger and Obama to 4.0X by the end of 2016. That was just a warm-up, however, for the fill-the-Swamp regime of Donald Trump, who practically threatened the hapless Jay Powell with the cement shoes treatment unless he pumped-out the money even faster.

Accordingly, by 2021 the ratio was off the charts at 4.8X or two turns more than the steady-state 2.7X ratio that had prevailed for four decades prior to Greenspan. To be sure, two extra turns of household financial assets may sound antiseptic, but it’s more nearly the opposite. At the pre-Greenspan ratio of 2.7X, household assets at the end of 2021 would have totaled $69 trillion, not the actual level of $118 trillion.

Was that extra $49 trillion of financial assets an asset-gatherer’s dream? Did Larry Fink and BlackRock load up the wagons as the Fed-fostered financial bubble’s girth reached gargantuan size?

As Sarah Palin would have answered both questions: You Betcha!