In a polarized America, trust in the dollar is the only thing that still unites people. As legal tender for all debts, public and private, everyone must accept this means of exchange regardless of ideology. Ironically, the dollar’s common use facilitates the frenetic culture that fragments the country.
The meltdown of Silicon Valley Bank (SVB) and other banks shows the fragility of the banking system that undergirds the culture it generates. The reign of the dollar could be in question.
A Crisis of Trust
The American fiat money regime depends upon a vital commodity more precious than gold: trust. The money’s complex system of checks, balances and backstops has to convince people that dollars are trustworthy and, therefore, stable and valuable. However, this system can unravel when trust erodes. At SVD and Signature Bank, spooked depositors, sensing insecurity, ran to retrieve their money.
The run on trust now threatens the banking establishment as the crisis spreads. Indeed, no one knows just how deep the problems are. If trouble at SVD, the nation’s sixteenth largest bank with over $200 billion in assets, slipped under the regulatory radar, then it is anyone’s guess what other ailing financial giants also evade detection. If Barney Frank, co-author of the infamous Dodd-Frank Act that was supposed to reform Wall Street after the 2008 sub-prime mortgage crisis, was sitting on the board of New York’s failed Signature Bank, who can confide in the expertise of any financial institution’s board?
A Spirit of Frenetic Intemperance
Indeed, some say SVB and other banks like failed Credit Suisse are just the tip of the iceberg. This crisis runs deep. It is as if some agitated spirit is unleashed inside the system, wreaking havoc and causing anxiety.
The real cause of the crisis points to a moral problem, not a lack of regulatory rules. This moral disorder might be called frenetic intemperance—a restless and reckless spirit inside postmodern economy and culture that foments a drive to throw off legitimate restraints and gratify disordered passions.
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Until now, this turbulent undercurrent of frenetic intemperance has served to fragment American culture into a thousand directions as Americans follow their disordered passions. Money—free low-interest money, stimulus money, deficit money, helicopter money, profit money, quantitative-easing money—has kept everything together.
A Perfect Storm
Now the Fed’s 15-year easy cash reign is coming to an end. There are no more trillion-dollar patches to cover the disorder and unrestraint found everywhere.
This spirit of frenetic intemperance permeates every nook and cranny of the financial world. Banking institutions are finding new exposure and leveraged risks that could send shock waves rippling through the system. Everything is calibrated to prosper in times of easy money but woefully unprepared for financial hardship.
Thus, the fury of this frenetic intemperance is now unleashed against the financial infrastructure that helped generate a polarized society. A perfect storm is brewing around the dollar. America could soon face the drastic consequences of rising interest rates, destructive ESG investment strategies that fast-track sub-prime loans for “woke” projects, government over-stimulus bills turbo-charging inflation, reckless federal deficit spending and a looming apocalyptic government default because of the debt ceiling battle. This destructive spirit could well destroy world trust in the dollar.
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A Moral Choice
The solution is not more of disgraced Barney Frank’s regulations. The frenetic vices of the financial world are such that people will find ways around them every time. Like the old ones, new regulations will only penalize the honest, smash small and mid-size banks and consolidate those “too big to fail.”
Americans face a moral choice. They must either restrain their disordered passions or face the dramatic consequences of further fragmentation and ruin. The safety net of trust in the dollar will no longer serve to dull the pain. The dollar will divide, not unify.
For so long, the dollar has been the driving force of frenetic intemperance. Now it could be the victim of its own excesses. Alas, changing from frenetic intemperance to cautious restraint is not easy. Sometimes only the school of hard knocks gets the right message across. Turbulent days lie ahead.
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