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Inflated: How Money and Debt Built the American Dream

ISBN: 978-0-470-87514-8
393 pages
December 2010
Inflated: How Money and Debt Built the American Dream (0470875143) cover image
Americans as a whole view themselves as reasonably prudent and sober people when it comes to matters of money, reflecting the puritan roots of the earliest European settlers. Yet as a community, we also seem to believe that we are entitled to a lifestyle that is well-beyond our current income, a tendency that goes back to the earliest days of the United States and particularly to get rich quick experiences ranging from the Gold Rush of the 1840s to the real estate bubble of the early 21st Century.

Inflated examines this apparent conflict and makes the argument that such a world view is so ingrained in us that to expect the United States to live in a "deflated" world is simply unrealistic. It skillfully seeks to tell the story of, money inflation and public debt as enduring (and perhaps endearing) features of American life, rather than something we can one day overcome as our policy makers constantly promise.

  • Features interviews with today's top financial industry leaders and insiders.
  • Offer a glimpse into the future of the Federal Reserve and the role it will play in the coming years
  • Examines what the future may hold for the value of the U.S. dollar and the real incomes of future generations of Americans

The gradual result of the situation we find ourselves in will inevitably lead to inflation, loss of economic opportunity, and a decline in the value of the dollar. This book will show you why, and reveal how we might be able to deal with it.

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Preface.

Acknowledgments.

Introduction.

Chapter 1 Free Banking and Private Money.

The Bank of the United States.

State Debt Defaults.

The Age of Andrew Jackson.

The Panic of 1837.

The Gold Rush.

The Rise of Bank Clearinghouses.

Chapter 2 Lincoln Saves a Nation by Printing Money.

The Lincoln Legacy.

Financing the War.

Salmon Chase and Jay Cooke.

Fisk and Gould Profi t by Infl ation.

The Panic of 1873.

Gold Convertibility Restored.

The Battle Over Silver Money.

A Changing American Dream.

The Silver Compromise.

Chapter 3 Robber Barons and the Gilded Age.

The Age of Speculation.

Republicans Embrace Inflation.

The Panic of 1893.

The Cross of Silver.

The Evangelical Silverites.

The Turning Point: 1896.

Chapter 4 The Rise of the Central Bank.

The Progressive: Theodore Roosevelt.

A Flexible Currency.

The Crisis of 1907.

The National Monetary Commission.

The Passage of the Federal Reserve Act.

Roosevelt, Wilson, and the Politics of Reform.

Chapter 5 War, Boom, and Bust.

The Fed During WWI.

A Return to Republican Normalcy.

The Roaring Twenties.

A New Era of Debt and Investing.

The Rise of Consumer Finance.

America Transformed.

Prelude to the Depression.

Bust: Stocks Fall and Tariffs Rise.

Inflation versus Defl ation.

Ford, Couzens, and the Detroit Banks.

Chapter 6 New Deal to Cold War.

FDR and the Era of Broken Precedent.

The Seizure of Gold and Dollar Devaluation.

Dollar Devaluation Hurt World Trade.

The Rise of the Corporate State.

The Reconstruction Finance Corporation.

Central Planning Arrives in Washington.

FDR Embraces Federal Deposit Insurance.

The Legacy of FDR.

The Fed and the RFC.

Corporativist Reform at the Fed.

America Goes to War.

Wartime Inflation and Debt Finance.

Bretton Woods and Global Infl ation.

Chapter 7 Debt and Infl ation: A Rising Tide Lifts All Boats.

Federal Revenues Grow.

The Fed Regains Independence.

The Post-War Economy Soars.

The Legacy of War.

Cold War, Free Trade.

The Dollar's Golden Age.

Global Imbalances Return.

Richard Nixon's Betrayal.

The End of the Dollar Peg.

The Return of Sovereign Borrowing.

Chapter 8 Leveraging the American Dream.

The New Uncertainty.

Humphrey-Hawkins and Full Employment.

Balanced Budgets and Inflation.

Volcker's Shock Treatment.

The Crisis Managers.

The Latin Debt Crisis.

Reagan Reappoints Volcker.

The Neverending Crisis.

Volcker Exits, Volatility Returns.

From Excess to Delusion.

The Greenspan Legacy.

Chapter 9 A New Monetary Order.

The Growth Challenge.

Jobs versus Infl ation.

Changing Places.

Triffin's Dilemma and the Dollar.

Notes.

Selected References.

About the Author.

Index.

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R. CHRISTOPHER WHALEN is cofounder and Managing Director of Institutional Risk Analytics, a Torrance, California, bank rating agency and consulting firm. He is editor of IRA's popular newsletter, the Institutional Risk Analyst, and heads IRA's advisory practice. Whalen is among one of the most frequently quoted financial analysts in the United States and appears regularly on Bloomberg, CNBC, and National Public Radio. He worked for the U.S. House of Representatives, the Federal Reserve Bank of New York, as a Mexico analyst during the 1990s, and as an investment banker for firms such as Bear Stearns & Co., and Prudential Securities. During his three decades as an investment banker and writer, Whalen contributed to publications such as Barron's, American Banker, the New York Times, Financial Times, and many others. He has testified before both the U.S. Congress and the Securities and Exchange Commission on issues ranging from financial regulation to OTC derivatives to XBRL to the federal rescue of GMAC. For more information, visit www.rcwhalen.com.
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December 01, 2010
Inflated: How Money and Debt Built the American Dream

Whether taming the frontier in the 1800s, fighting poverty in the 1970s or saving the American banking empire just this last year, successive American government have turned to debt and inflation to make ends meet. The rejection of any practical limits on expenditure by Americans is a view particularly encouraged by the generations that have come since WW II and the subsequent half century of the cold war.  The result has been consistent inflation rates and the devaluing of the US dollar.

In his new book, Inflated: How Money and Debt Built the American Dream (Wiley, December 2010, 978-0-470-87514-8, $34.95), Christopher Whalen tells the story of inflation and public debt as enduring (and perhaps endearing) and describes the habits that are so instilled in us, as our history repeatedly shows, that to suggest alternatives, like returning to the gold standard, as many movements are suggesting, is an exercise in futility!  He discusses when it comes to matters of money, most Americans tend to view themselves as reasonably prudent people, reflecting the puritan roots of their European ancestors. Yet, at the same time, Americans also seem to feel entitled to a lifestyle, individually and nationally, that is well above the rest of the world's, and well beyond our current means. Inflated explores more than two hundred years of American politics and monetary policy to examine this conflict. In doing so, it asks whether the current understanding of the American Dream, one of entitlement, is so ingrained that to expect Americans willingly to live in a "deflated" world is unrealistic. 

The book discusses:

  • The Gold Rush and how dreams of instant wealth replaced the notions of hard work and saving as the national ideal
  • How Congress's deficit spending is a direct legacy of Abraham Lincoln's presiding over the first legal tender laws, which gave the federal government control over the issuance of "money"
  • How the financial crisis of 1893 led to the creation of the Federal Reserve System, ultimately confirming the cautionary views of Thomas Jefferson and Andrew Jackson that a central bank would prove antithetical to democracy and individual rights
  • The rise of investment trusts during the 1890s, and how those trusts were the precursors of hedge funds and complex financial derivatives
  • How the dollar's role as the world's currency after WWII encouraged America's tendency to demand immediate gratification of national wants and needs -- and paid for it with inflation and debt
  • And much more!

Inflated explores the rich history of living beyond one's means, and whether Americans—an instinctively self-reliant, isolationist people—are more likely either to embrace fiscal stringency if other nations demand it or turn their backs on the rest of the world.

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