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The McAlvany Weekly Commentary

with David McAlvany and Kevin Orrick

FED Power: “One Ring To Rule Them All”

July 20, 2021

“Market participants today are running up against the best offers of peace and tranquility. You get central bankers who’ve offered to smooth the historical timeline, provide a world of reduced volatility where everyone wins. No one loses. They’ve offered to get rid of the chaos, but control must be maintained. Who wants mischief when you can have order? Who wants war when you can have peace? You only need to relinquish freedom and a better world can be crafted for you.” — David McAlvany

Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.

I’m reading an interesting book, Dave, on the history of the ring myths, the Ring of Power myths. We see Tolkien with the Lord of the Rings, and he talks about the One Ring and Sauron and the misuse of having unlimited power. But actually, if you go back, you can look in the Norse mythology. You’ve got ring myths in the Carolingian, which was the Charlemagne throne. Those myths, even though it was based on a real person, there were myths around it, and it had to do with the Ring of Power or the serpent’s ring. We were talking, when a central bank has the ability to print unlimited amounts of money. In a way, isn’t it wielding a ring of power?

David: Power and what people will do with it. These are themes that go way back. I mean, not just to the Carolingian period, but even back to ancient Greece and Rome, where you can see the same kinds of conflicts, the same kinds of ideas wrestled with. And so, when you have a group of people who are given a tremendous amount of influence and a mandate, which, unfortunately, has gone from fairly narrow to quite broad—you have the ability to save the world, they are told, and that’s what they’re attempting to do is, in a grand fashion, in a top down manner, save the world.

Kevin: Do you think maybe that’s why this whole transitory inflation thing has been, in a way— the markets have been seeming like they’ve been believing that inflation is transitory until now?

David: They believe it’s transitory because those with authority and those with the prestige of a PhD following their names have told them that it is transitory. And here we have Biden, President of the United States, leader of the free world, who says this week, no serious economist is worried about inflation. And I thought it was pretty interesting because he actually called Larry Summers into the White House a couple of times in the last week, I think to remind him that he’s currently singing out of tune. There is a way that he should be singing this particular chorus—not to worry, no inflation, simply transitory.

Kevin: I wonder if Monday of this week they started wondering if they were believing the wrong people.

David: I would also note that it’s Otmar Issing’s turn, who spent eight years at the European Central Bank as the chief economist—probably not a serious economist in Biden’s view either—but his whole message in a recent Project Syndicate article had everything to do with inflation being a real concern.

Kevin: Well, talk to us about Monday because Monday scared a lot of people, and of course, somebody came in and maybe it was just normal buyers came in and kept the market from being a full-on collapse. But it got scary there for a while. It was almost a thousand-point drop for a bit.

David: It started in overnight trading on Sunday, and actually markets noticed even before the weekend that for weeks something was shifting. So if you’re looking at the equity markets, they’re usually the last to wake up to anything.