For the past 20 years, my assignment at The Washington Post has been to explain and interpret arcane and complicated economic developments to general readers in ways that are interesting, relevant and credible. It’s left me with deep admiration for those who do it well — a list that now includes two young documentarians, Jim Bruce and Jacob Kornbluth.
Neither Bruce (“
Money for Nothing
”) nor Kornbluth (“Inequality for All”) has much of an economics background. Bruce worked on films such as the horror flick “Freddy vs. Jason,” although he did start a financial newsletter in 2006 that warned of the coming crash. Kornbluth wrote and directed several indie dramas and stage productions in Los Angeles.
You get the sense that both originally came to their projects with an ideological agenda: Bruce, from the right, to expose the dangers of the Federal Reserve’s easy-money policies; Kornbluth, from the left, to show how the hollowing out of the middle class is undermining our economy and our democracy. As with today’s markets for best-selling books and cable television news, the market for documentaries is showing signs of political polarization. Yet despite their ideological motives, both have produced subtle, sophisticated and compelling economic arguments that are well grounded in fact and solid analysis.
The theme of “Money for Nothing” is that it’s not free markets that are to blame for the recent economic crisis but instead the well-meaning but excessive manipulation of those markets by a Federal Reserve that clings arrogantly to the conceit that it can successfully micromanage the ups and downs of the economic cycle.
In Bruce’s telling, it was the Fed’s easy-money policies that created the stock market bubble of the 1990s and the real estate bubble of the past decade. And when those bubbles burst and the economy teetered, it was the Fed that compounded its mistakes by riding to the rescue with yet more easy money to bail out the banks, the financial markets and an ailing economy.
This dangerous addiction to easy money was confirmed several weeks ago when the Fed announced that it would continue to pump an additional $85 billion into the financial system each month rather than proceed with plans to finally begin reducing the extraordinary monetary stimulus begun five years before. On cue, the stock market rallied to new highs. As narrator Liev Schreiber said of earlier bouts of “quantitative easing,” it’s the economic equivalent of “giving the drunk another drink.”
But wait! What about those sleazy mortgage brokers and greedy bankers and compromised rating agencies? Weren’t they also to blame for the financial crisis? To answer that objection, Bruce turns to Peter Fisher, a former Fed and Treasury official, who explains that blaming the money men is like blaming faulty rivets when an overheated boiler explodes. According to Fisher, the Wall Street crowd was merely responding to the distorted incentives, false signals and illusion of prosperity created by the Fed’s easy-money policies.