Interview: Christopher Leonard, Author of ‘The Lords of Easy Money’

Check the site momentarily for the accompanying review of “The Lords of Easy Money.”

There’s an illuminating scene in Christopher Leonard’s The Lords of Easy Money that talks about the difficulty of trying to communicate the intricacies of Fed policy to mass audiences. Fox News host Glenn Beck, a trusted voice of the Tea Party movement and therefore someone who would have been expected to take an interest in the Fed’s plans for a massive intervention in the economy via the quantitative easing program, took on the subject in a free-flowing broadcast. Leonard describes what ensued:

Beck scrawled a long numeral on a chalkboard: 600,000,000,000. This represented the value of bonds the Fed just announced it would buy. “This is what they call quantitative easing,” Beck said. Then he walked to a new chalkboard with a confusing flowchart written across it that included a series of large, cartoonish arrows that seemed to signify the flow of money, or influence, or something like that, behind the Fed’s new program. Confusingly, the whole thing began with organized labor, depicted by a union boss wearing a bowler’s cap and with a cigar dangling from his mouth. It got weirder and increasingly inaccurate from there. The final cartoon on the flowchart showed a group of top-hat-wearing bankers…

Leonard described Beck’s understanding of the Fed as “like that of a very high drug user who had sat in a motel room, trying to eavesdrop through the wall while people talked about central banking.” I remember the broadcast – though I wasn’t a fan of Beck’s and occasionally wondered if his chalkboard theories about Obama as both Hitler and Stalin were really a brilliant parody I was too thick to grasp, I thought he was at least trying to say something critical about a truly dangerous Fed policy.

As Leonard notes, Beck got one important thing right, that the flood of cheap money punished ordinary savers, but the rest his presentation was so far-out, and over-focused on the idea that QE risked Weimar-style hyperinflation, that his audience probably ended up with a net minus from a knowledge perspective.

This was too bad, because the media treatments on the other, more “respectable” side, at 60 MinutesCNBCCNN, and the like, were either completely credulous in repeating the assertions of Fed officials that its policies were needed to “jumpstart the sluggish economy” or, if they were critical at all, focused only on the narrow question of price inflation. The much more serious question of the impact of Fed policies on asset prices simply didn’t fit well in our increasingly bifurcated media landscape, which didn’t know whether to identify the concerns of a figure like Leonard’s main character Thomas Hoenig as conservative or liberal complaints. In fact, Hoenig’s worries were about inherent institutional weaknesses that concerned both left and right demographics, making his story a tough sell to either media “side.” In this sense, a book like The Lords of Easy Money is a gift to media audiences that rarely get a clear look at a confounding topic.

I asked Leonard about the history of the project, the response to it, whether his thesis is more or less relevant today, and other questions. Edited for length, his thoughtful responses:

Matt Taibbi: How did you come on to this subject?

Chris Leonard: I was reporting my previous book about Koch Industries, Kochland, and I met some really bright financial trader type people in the reporting of that. One of these guys in 2016 just started going off on what the Federal Reserve was doing to asset prices through quantitative easing.

I hate to use the cliché term red pill or whatever, but I did not understand how the Fed affected monetary policy. I did not understand what quantitative easing was, I did not understand how it affected markets. I’d heard about this stuff in the background, but when he described it to me in a mechanical way, I became totally obsessed with quantitative easing and came home and started reading about it. And there wasn’t much really deep throat journalism, in my opinion, about QE back at that time. One of the first things I read was that the vote to do QE2 in 2010 was the vote of 11 against one, and the one was Tom Hoenig. I had heard the name and obviously, I had the Kansas City connection. It turns out he lives three blocks from where my mother lived.

But I had never met the guy. I didn’t know a thing about him. And I just thought, “Oh, that’s interesting.” And it was one of those things where the more I pulled the thread, really, the more interesting it became in terms of Tom. He wasn’t that central of a figure at the beginning, but then when I actually started going through and reading his internal arguments, and reading what he was warning about, that’s when I started to become fascinated with him.

Matt Taibbi: How did you connect with him? He obviously gave you incredible access, not just to the history of what he had done, but to his private thoughts. There are not many Fed officials who’ve been so open.

Chris Leonard: It was pretty interesting to me. Again, in 2016 I started to become urgently fascinated with this stuff and I was still doing the Koch book, but I started reporting on this alongside it. And I emailed Tom Hoenig, who at that time was vice chairman of the FDIC.

I went through the public relations team at FDIC and said, “Look, I want to interview this guy about quantitative easing and his vote against it. I know that he’s not involved with the Fed anymore, but I’d love to get his perspective on it.” And he agreed to do the interview and I went and interviewed him at the FDIC headquarters that summer with the PR team sitting there.

I’ve really come to respect this guy and I just can’t hide that. I sincerely feel that he has this old school sense of things, this old school probity. And I really do think he felt like it was his obligation to handle questions from reporters on this, and they had an obligation to talk about his votes at the FOMC and to talk about these issues. And so, that’s why he did that first interview, and it was pretty fascinating.

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