Foundation and Empire
Every vice of the Empire has been repeated in the Foundation. Inertia! Our ruling class knows one law; no change. Despotism! They know one rule; force. Maldistribution! They know one desire; to hold what is theirs.
That quote is the narrative crux of Isaac Asimov’s second book of the Foundation trilogy, Foundation and Empire (1952). It’s the fatal flaw of the Foundation, formed originally as a noble form of galactic government, but now no better than (and easy pickings for) the Empire.
Hold that thought.
The narrative crux of the second note of the Things Fall Apart trilogy, Things Fall Apart (Part 2), can be found in the following chart. It’s the relationship between U.S. household net worth (how rich we are) versus U.S. GDP (how much our economy has grown) from 1951 through today.
Both data sets are in nominal dollars (meaning neither is adjusted for inflation), both are compiled by the same people (the Fed) using the same methodology, and both are normalized at 100 to show growth rates. It’s an apples-to-apples comparison, so don’t @ me about semi-log charting – it adds nothing here.
For 46 years, from 1951 to 1997, we were no more and no less rich than our economy grew. Which makes sense. That’s the neutral vision of monetary policy, where you’re not trying to pull forward future growth through leverage and easy money in order to create more wealth today.
For the past 20 years, however, we have had a series of wealth bubbles – first the Dot-Com bubble, then the Housing Bubble, and today the Financial Asset Bubble – that have made us richer than our economy grows. Each of these bubbles was intentionally “blown” by the Fed through monetary policy.
