The overwhelming source of what ails America economically is domiciled in the Eccles Building. During the past three decades the Federal Reserve has fostered destructive financial mutations on Wall Street and Main Street and among the household, business and government sectors of the national economy alike.

These Bubble Finance polices have fueled an egregious financial engineering spree by the C-suites of corporate America to the tune of $15 trillion of stock buybacks, debt-fueled M&A deals and LBOs during the last decade. These actions have stripped-mined balance sheets and cash flows from main street businesses, thereby garroting economic growth—even as they delivered multi-trillion windfalls into the hands of a few ten thousand speculators on Wall Street.

At the same time, the Fed fostered a borrowing binge in the household sector after the 1980s. It eventually resulted in Peak Debt and a $15 trillion albatross of debilitating debts on the homes, cars, incomes and futures of what used to be middle-class America.

All the while, it also led politicians down the primrose path of free-lunch fiscal policy. That is, by monetizing $4.2 trillion of Treasury and GSE debt during the last three decades, the Fed anesthetized the US economy from the baleful effects of crowding out and rising interest rates that would have otherwise resulted from soaring government deficits. At length, this left the public sector impaled on Peak Debt, as well.

Time to buy old US gold coins

In fact, since Alan Greenspan launched Bubble Finance in the fall of 1987, public debt outstanding has increased by nearly 9X. Measured against national output, the Federal debt ratio has risen from 47%to 106% of GDP.

These rippling waves of financial mutation are why the US economy is visibly failing and why vast numbers of citizens in Flyover America voted for Donald Trump for president—despite his lack of visible qualifications, temperament and policy agenda. The Donald simply postured himself as a hell-raiser against the status quo, and that was enough to turn the nation’s political tables upside-down.

Ironically, even as he stumbled to his unlikely victory on November 8, Trump barely recognized that the untoward force behind all the economic failure that he railed against during the campaign was the nation’s rogue central bank. Only when it occurred to him that Janet Yellen and her posse were doing everything possible to insure Hillary Clinton’s victory did he let loose an attack on the Fed and his famous warning that America was threatened by a big, fat, ugly bubble.

But there was never even a scintilla of policy content behind this campaign oratory—–to say nothing of a coherent plan to liberate the American economy from the deadly clutches of the Keynesian posse that dominates the nation’s central bank.

And then when Wall Street launched a phony Trump Reflation trade during the wee hours of election night, the Donald forgot all about the great bubble. In fact, he quickly embraced it as a sign that investors were enthusiastically embracing Trump-O-Nomics.

No new arrival in the Oval Office was ever more mistaken. The grotesque gambling halls of Wall Street were a clear and present danger to his presidency, but Trump had only a small window of time to mount a counter-strategy.

That is, he needed to quickly puncture the bubble, not embrace it; and his first, second and third actions on the economic policy front should have been to clean house—-lock, stock and barrel— at the Fed. At the same time, he should have named names and kicked rear to insure that the current Fed incumbents get the blame they will so richly deserve when the vastly inflated stock and bond markets finally implode.

All the tools were there. The Fed had three vacancies out of seven seats on the Board, and he could have cleared more deadwood by demanding the resignation of Janet Yellen and Stanley Fischer on day one.

They would have been badly wounded “lame ducks” and would have headed for the Eccles Building exits forthwith. The Trump White House would have then had an unprecedented opportunity to name five Fed governors at once, and put an end to the reverse Robin Hood policies that are savaging savers and retirees, sucking the lifeblood from the economies of Flyover America and pleasuring Wall Street speculators with insensible riches.

Instead, the Donald got off-track from the get-go with his jihad against immigrants and refugees; nonsense about a Great Wall on the Mexican border; and instant determination that the hideously bloated $600 billion Pentagon budget needed another $54 billion per year to make the American Empire great again.

On top of that he got bogged down in RussiaGate because he didn’t have enough good sense to declassify the alleged evidence of Russian election meddling, thereby proving it was nothing more than a politically inspired red herring.

That is, a tissue of lies and exaggerations confected by the Obama Democrats to discredit his candidacy and presidency; and a false narrative enabled by Deep State operatives to keep fear alive in America and taxpayer money flowing to its tentacles throughout the Imperial City.

Even the attempt to repeal and replace Obamacare has been a fiasco because the White House had no plan to implement a sweeping deregulation of the nation’s bloated, inflationary health insurance system, and to return tax-exempt cash to 160 million employee beneficiaries of company plans—so that they can manage and shop for their own health care services and coverages.

All of this was bad enough, but the Donald’s fatal error was to delegate economic policy to two Wall Street errand boys—-Steve Mnuchin and Wilbur Ross—-and especially to Goldman Sach’s next in line plenipotentiary to Washington, Gary Cohn.

These characters are an insouciant slap-in-the-face to the left-behind populations of the Wisconsin, Michigan, Ohio and Pennsylvania rust belts which elected him.

Wilbur Ross, for example, has made billions milking the bleeding carcasses of the steel, auto and textile manufacturing companies that Fed policies helped destroy. And then, when it added insult to injury by driving cheap debt capital into the hands of leveraged buccaneers like himself, Ross picked them clean with leveraged recaps before unloading their stock into the Fed’s manic equity bubble.

Treasury Secretary Mnuchin is even worse. He scored a $3 billion windfall owing to a double whammy of crony capitalism and bubble finance. We are speaking of his alleged resurrection of IndyMac—an original poster boy for the subprime fiasco fostered by Alan Greenspan during the last five years of his baleful tenure.

Under a regime of honest money and free market capitalism, IndyMac would have never existed in the first place. That’s because at-risk financial institutions would never have made NINJA loans (no income, no job, no assets) at teaser rates which later adjusted to prohibitive monthly charges.

Nor would the wreckage of IndyMac been bailed-out by the state when the obvious thing to do was close the institution and contract mortgage servicing to a run-off agent for a modest, fixed fee.

Instead, IndyMac was rescued with egregious sweetheart guarantees by Washington that forced the taxpayers to eat billions of losses. At the same time, Mnuchin and his cronies collected the run-off cash from solvent mortgages, paying themselves $1.5 billion in dividends before unloading the bank, for which it had paid just $1.5 billion, to another financial ward of the state for the princely sum of $3.4 billion.

The buyer was CIT group, a Greenspan boom-time business and consumer lender that crashed into bankruptcy during the 2008 crisis. But thanks to the Fed’s massive reflation of the financial sector through ZIRP and QE, it was able to re-emerge as serial acquirer capable of gifting Mnuchin &Co with the most undeserved windfall economic rents ever recorded.

And how in the world, of course, would you expect the ex-President and Goldman careerist, Gary Cohn, to warn Trump about the mortal threat to his Presidency posed by the Fed. After all, Goldman would have gone down in flames during September 2008 without upwards of $50 billion of direct and indirect TARP bailout money, and even more support from the Fed via its alphabet soup of bailout lines.

Indeed, having voted Democratic his whole life, Cohn was undoubtedly unaware that conservative economists even had a beef with the Fed—let alone the fact that a few surviving sound money advocates like Ron Paul had presciently fingered it as the primary cause of America’s economic decay.

Stated differently, Goldman’s market cap was about $100 billion and Cohn’s stock was worth $285 million on the eve of Trump’s inauguration. Under an honest free market, both would have been worth zero.

At the end of the day, the lines of demarcation are crystal clear. The Fed is Wall Street’s angel and main street’s enemy.

But since the Donald had no clue about what really ailed America’s economy—aside from his primitive, lifelong affinity for protectionist bluster—he ended up handing the keys to economic policy to a cabal of Wall Street operators, who have wasted six months doing exactly nothing on the central banking file.

No, Mnuchin has even toyed publicly with the idea that Yellen might be reappointed because she has done a “good job”.

Good god almighty! You absolutely cannot talk about reappointing Janet Yellen and making the American economy great again in the same sentence.

In fact, to do so is to voluntarily and insensibly take ownership of the very big, fat ugly bubble that has brought so much hardship to Flyover America, and which finally put a bombastic outlaw in the Oval Office.

Yet unaccountably taking ownership of the Fed’s great financial bubble is the single, solitary thing that Donald Trump has accomplished during his ill-starred tenure in the Oval Office. And if there was any doubt on that score, yesterday’s announcement— finally—of an appointment to one of the Fed vacancies leaves nothing to the imagination.

To wit, after finally getting around to announcing a candidate for a job which will determine whether American capitalism can even survive, the Trump White House picked the absolute worst resume available. Namely, that of one Randall Quarles, who is a veritable creature of the Wall Street/Washington establishment and has spent a lifetime alternately feeding the policy-induced mutations recited above and milking them for personal fame and profit.

His own self-promoting resume tells you all you need to know. It is a self-indictment and resounding proof that the Donald has now capitulated entirely to Wall Street and its monetary central planners at the Fed.

Randy Quarles is the former Under Secretary of the Treasury in the George W. Bush Administration. Before founding Cynosure, Mr. Quarles was a longtime partner of The Carlyle Group, one of the world’s largest private equity firms.

In addition to his record as a successful investor, he has long experience at the highest levels of the international financial architecture, having represented the U.S. for many years in the G7, G20, and Financial Stability Forum, and having served the U.S. as Executive Director of the International Monetary Fund, Executive Director of the European Bank for Reconstruction and Development, and as a member of the Board of Directors of the Overseas Private Investment Corporation.

Earlier in his career, Mr. Quarles spent many years working as a partner at the Wall Street law firm of Davis Polk & Wardwell, where he was the co-head of the firm’s Financial Institutions Group and advised on transactions that included a number of the largest financial sector mergers ever completed.

Read it and weep. And most especially, do not take comfort from the fact that Quarles lip-syncs the Hoover Institution’s version of Keynesian economics. That is, the notion that it’s just fine to intrude deeply into the mainspring of capitalism in the financial markets and thereby distort and falsify all financial asset prices, but it should be done based on formulaic “rules” rather than “data-dependent” policy discretion.

We are referring here, of course, to Quarles’ professed affinity for the Taylor Rule, a Rube Goldberg policy contraption invented by one of Milton Friedman’s unrepentant disciples, and named for its inventor himself, Professor John Taylor.

By now it should be clear to anybody that isn’t drinking the Fed’s cool-aid that it is impossible to accurately or rationally measure the twin Humphrey-Hawkins goals for unemployment and inflation on which the massive fraud of its $4.4 trillion balance sheet is predicated.

Otherwise, how do you account for the rampant gains in the cost of living plaguing Flyover America that the BLS doesn’t even measure, thereby causing the Eccles Building to pursue even higher inflation?

During the first 14 years of this decade, for example, the Fed claimed the price level rose by only 31.7% when everything households in Flyover America where buying just to survive had inflated by multiples of that figure—in some case 100-300%.

Likewise, how can there be “full-employment” at 4.4% unemployment by the lights of the BLS and the Fed’s monetary central planners, when there are 103 million adults without jobs —of which less than 45 million are actually retired on Social Security?

In any event, Professor Taylor invented some algebraic gobbledygook to peg interest rates to an arithmetic sum that results from plugging the BLS’s phony inflation and unemployment figures into a full-employment model of the economy.

If this monstrosity were ever tried in the Eccles Building the results would be so devastating that sound money people might even end up begging for the return of Janet Yellen or even Bubbles Ben.

Yet that’s what Randall Quarles brings to the table—-a vision of anti-market monetary central planning that is far worse than what has already brought American capitalism to its knees.

In any event, the Donald now owns the Bubble and has left his Presidency and the American economy squarely in harms’ way. That is, by failing to clean house at the Fed, he has defaulted to the clueless Keynesians who are still domiciled there.

If there is any doubt that they are utterly bubble blind and have no understanding whatsoever of the rampant speculation and momentum driven risk-taking their policies have unleashed in the casino, the most recent Barron’s cover story made it clear. That is, that robo-machines, ETF’s and other forms of passive”investing” have set the markets up for a thundering crash.

Needless to say, the denizens of the Eccles Building are only now beginning to apprehend the train wreck that lies dead ahead. Thus, the June FOMC minutes were grasping for something dimly worrisome:

According to the minutes, some FOMC members acknowledged that “equity prices were high when judged against standard valuation measures.” Some are even “concerned that subdued market volatility, coupled with a low equity premium, could lead to a buildup of risks to financial stability.”

Do ya think?

Does the Donald have a clue?

Reprinted with permission from David Stockman’s Contra Corner.

The Best of David Stockman