An “easy money” plan lingers, then crumbles

It began as a stop-gap plan. Banks were failing, economies were fading; quick steps were needed.
And then the approach lingered. “It became a semi-permanent part of the past decade,” James Jacoby said. “Then, during the pandemic, this went into overdrive.”
Now his “Easy Money” documentary, from 9-11 p.m. Tuesday (March 14) on PBS’ “Frontline,” views short-term steps that somehow stayed, leading to crypto-currency commercials (shown here) and corporatge spending sprees.
No, we don’t expect a broadcast network to set aside two hours for a probe of fiscal policy. But Jacoby and others argue that the easy money approach (low interest loans, readily available) transforms life.
“It rewards borrowing,” Sheila Bair said. “It penalizes savings …. So you borrow money; you speculate.”
That led to what Ben Mackenzie calls “cryptocurrency, casino capitalism and the golden age of fraud.”
These people are experts: Bair is the former chairman of the Federal Deposit Insurance Corporation; McKenzie is … well, the guy who starred in “The O.C.” (as an angry teen) and co-starred in “Gotham” (as a cop who supported Batman).
McKenzie also has an economics degree from the University of Virginia, the alma mater of his father (a lawyer) and grandfather (a prominent professor). He set that aside for a couple decades, then jumped back in, co-writing an upcoming book.
That was spurred, he said, partly by extra time during the pandemic and partly by concerns over the rise and fall of crypto-currency schemes. “Hollywood played a major role in marketing these.”
Speaking to the Television Critics Association, those three agreed that the original easy-money fix was needed. “The financial system really had come to a halt and needed to be saved,” Jacoby said.
Loosening of regulations had led to a surge in risky mortgages and a leap in housing prices. When the prices cooled, lenders and homeowners found themselves owing more than the value of their property.
The Lehman Brothers firm went bankrupt on Sept. 15, 2008. By the next February, the global economy was heading toward a $2 trillion loss. In the U.S., unemployment doubled to 11 percent.
Previous “Frontline” documentaries have said the financial system was teetering toward a complete collapse. Congress approved a massive bail-out; the Federal Reserve, Jacoby said, “injected a huge amount of money into the banking system and kind of pulled ever lever …. It was meant to be a temporary measure, where the Fed was basically bringing interest rates down to zero.”
Then the “temporary” went on for more than a decade, spurred by extra measures needed to revive the post-pandemic economy.
The result? When interest rates plunge, Bair said, “you speculate in risk assets, because treasuries and bank deposits that are safe don’t give you any kind of yield.”
With “all this money sloshing around,” she said, people took chances “Crypto is a prime example.”
That peaked last year, McKenzie said. “The crescendo was the Super Bowl. The crescendo was Matt Damon (shown here) and Larry David and LeBron James and (more), hawking these products.”
Then some of those ideas crashed. After more than a dozen years, the easy-money era had ended.