Chronopunk: A novel (Episode 12)
If you went back in time, what knowledge would you gift the past to save the future?
Chapter 35
Present (2006)
“They’re going to bail out Wall Street banks with public money—literally. The American people will underwrite the checks that keep those banks afloat. It will spark outrage, including a movement called ‘Occupy Wall Street.’ But despite all the noise, Wall Street will emerge unscathed. Bonuses will be paid, private school tuition covered, luxury apartments in Manhattan bought—all on the dime of hardworking people across the country. It’s appalling. We have to stop it. If the Fed chooses to rescue Wall Street using money that belongs to future generations, they’re infringing on our property rights.”
Mody delivers his speech to Deborah and her two assistants.
“Most importantly, this won’t be the end. It’ll be the beginning—of a culture of bailouts, government handouts, and creeping collectivism. In the early 2020s, the government will literally send checks to people. Mailed out. During a pandemic that will sweep across the country.”
“What do you mean?” Deborah interjects.
“There’ll be a pandemic—something like the Spanish Flu after World War I. And Donald Trump will be president…”
“Donald who?!” Deborah makes a face of disgust.
“Yeah, the casino guy from TV. That one. Anyway—he’ll be president. He’ll push a Reagan-style agenda: low taxes, pro-business, and some international stuff I won’t get into now. What matters is that toward the end of his first term, a virus will break out in China. It’ll spread across the globe and scare the hell out of everyone. Our government will be hijacked—literally—by health officials and their cronies. They’ll take over policy single-handedly. Whatever remained of ‘checks and balances’? Gone. We’ll have lockdowns in many states. Real lockdowns—as in, you’re not allowed to leave your house. Imagine: a curfew, imposed by people who’ve spent their lives studying viruses. Crazy. As a result, the economy will grind to a halt. And then the federal government will start mailing out checks to businesses and individuals. Real helicopter money—the kind Milton Friedman only hypothesized about. Needless to say, this will trigger inflation and tear at the fabric of society. That’s my point: Bernanke’s actions laid the groundwork for this kind of disaster to even be possible. Imagine the U.S. government paying people not to work. We’ll have an entire generation—call them the Covid generation—in their twenties and early thirties, who get used to earning money without working. Even after the pandemic fades, they’ll keep expecting handouts—from the government, even from businesses. Take remote work, for example. It’ll become a thing. People working from their couches, from the porch of their lakefront cabins, and getting paid. Businesses will push back, but they’ll be up against a growing mob of self-proclaimed liberals who won’t give up these perks easily. Society will be disrupted. Productivity will plunge. In response, businesses will outsource as much as they can—either abroad or to machines. Anyway, I’m getting ahead of myself.”
Mody looks around the room, then continues.
“The real point is this: Bernanke’s QE in 2009 will ignite a culture of entitlement—not just in America, but globally. One of the biggest consequences will be the destructive polarization of American politics. And this won’t be some 1960s-style revolution, with idealistic young people challenging outdated systems in the name of liberty and opportunity. No, it’ll be the opposite. Instead of ideology, we’ll get vulgar philosophizing disguised as social justice. A mob of elite academic cronies with pseudo-degrees will work relentlessly to erode our values, our traditions, and—most dangerously—the foundation of the U.S. Constitution. And that’s why I was sent here: to reverse this process, which, according to our studies, began with Ben Bernanke and his QE program in 2009. “
He pauses, looks down on a sheet of paper.
“Let me read you an excerpt from the Fifth Amendment; ‘This clause applies to the federal government and guarantees that no individual can be arbitrarily deprived of life, liberty, or property without due process of law.’”
He looks up again facing Deborah.
“Bernanke did exactly that—arbitrarily denied property. And he didn’t just steal from us. He injected moral hazard into an entire generation of investors and business leaders. Moral hazard is real. It’s not just some abstract concept from an economics textbook. It works like a drug—slowly eroding the fabric of society until it finally triggers disaster. Quantitative Easing is the clearest example. You know, Debbie,”—his eyes grow glassy, a melancholy settling over his face that makes Debbie’s palms begin to sweat.
Mody approaches her, almost face to face.
“They fought against the creation of the Fed back in the early 20th century. They saw this coming. They tried to stop it—but they couldn’t. Nearly a century later, Bernanke opened the can, and all the worms spilled out. It’s a shame. That’s why I’m here. We have to stop them.”
Deborah reaches for his hand.
“It’s okay. You’re here now—and we’re going to get them.”
Chapter 36
“Letting Wall Street banks collapse would have triggered a major recession—far worse than the one we're experiencing now, and likely even worse than the Great Depression. We had to act,” Bernanke responds to Deborah’s question about why he chose to bail out Wall Street.
“Yes, sir, that may be true. But you could have nationalized the banks, fired the incompetent managers, and recapitalized them.”
“Objection.”
“Overruled.”
“We’re not advocating for the total collapse of the banking system. What we’re here to prevent is you handing out marshmallows to kids who misbehaved.”
“Objection.”
“Overruled.”
“You know what happens to kids who keep eating sweets without consequences? They gain weight, get sick, and eventually—they die. We can’t let that happen. And more importantly, we can’t let it happen to future generations who don’t even have a say in this matter.”
Deborah turns from Bernanke to the jury bench.
“Dear members of the jury, my client, Mr. Massraoui, is going to testify about the consequences of Chairman Bernanke’s actions...”
“Objection!”
“Okay, I apologize, Your Honor,” Deborah says, turning to the judge before facing Bernanke again. “But you’re opening a can of worms here.”
“Objection.”
“Sustained. Mrs. Fidler, please refrain from using flashy metaphors. This is not a high school poetry contest—it is a serious court proceeding, arguably one of the most consequential cases in our nation’s history. I urge you to stay on point and avoid misleading imagery or B-grade rhetoric.”
“Yes, Your Honor.” She turns back to Bernanke.
“Mr. Chairman, are you familiar with the concept of moral hazard?”
“Yes, ma’am.”
“Would you be so kind as to enlighten the court on its meaning?”
“Objection.”
“Overruled. Go ahead, Mrs. Fidler,” the judge says, appearing genuinely interested in Bernanke’s explanation.
“Well, moral hazard refers to situations where people, under certain conditions, may receive the wrong signal from authorities and then behave accordingly.”
“With all due respect, Mr. Chairman, that explanation wouldn’t even earn a C in an introductory economics course.”
“Objection.”
“Overruled. Quite frankly, I agree with Mrs. Fidler—I didn’t understand a word of that. Would the witness please make an effort to elaborate?” the judge says, turning to Bernanke with a modest smile.
Bernanke doesn’t seem to share her amusement. He shifts in his seat, struggling to keep the contempt from showing on his face.
“How about this,” Deborah interjects. “Let me offer an explanation, and you can tell us whether you agree.”
She walks to her desk, picks up a notebook, and begins to read:
“Moral hazard is when a person is incentivized to take on greater risk because they don’t bear the full consequences of their actions. In other words, they get all the profits while sharing the burden of loss with others. Do you agree with this statement, Mr. Chairman?”
Bernanke’s face turns pale. It’s clear he doesn’t like where this is going.
“I don’t disagree.”
“Well, my math may not be perfect, but that sounds like a double negative—which means you do agree. Is that accurate?”
“…Yes.”
“Mr. Bernanke, please state for the court whether you agree with Mrs. Fidler’s definition of moral hazard—with a clear yes or no,” the judge interjects, now visibly irritated.
“Yes, Your Honor,” Bernanke replies, his tone clipped. “I agree with Mrs. Fidler’s statement. Moral hazard incentivizes people to take excessive risks because they don’t bear the full cost.”
“Now, Mr. Chairman,” Deborah continues, “would you say it’s accurate that most people don’t see the true cost of Quantitative Easing? In other words, while your actions are advertised as saving the economy, aren’t they, in reality, saving bankers, their jobs, and their bonuses?”
“Objection—this is a baseless accusation.”
“Sustained.”
“Alright then,” Deborah presses on. “Is it accurate to say that Quantitative Easing, as you’ve presented it, doesn’t fully disclose its true cost? Or let me put it another way—what is the cost of QE?”
Bernanke hesitates for a moment, then replies:
“The cost is the risk that we might be wrong in our assessment of balance sheets.”
“Hm.” Deborah places a finger thoughtfully on her cheek and pauses.
“I disagree. I believe there are more entries on this particular ledger.”
She turns back to Bernanke, her tone calm but pointed.
“For example— Is it conceivable that your actions might encourage bankers to continue taking excessive risks in the future? Is it further conceivable that these actions could end up costing future generations far more, as banks escalate their risk appetite and trigger even larger financial crises? And finally, would you agree that quantitative easing opens a pathway for other actors—namely, the government—to exploit the Fed’s balance sheet by issuing debt without the traditional checks and balances imposed by market forces?”
She steps forward slightly, holding his gaze.
“In other words, Mr. Chairman, is it conceivable that the government, at some point, might issue debt that is effectively monetized by the Federal Reserve? Or to put it simpler, is it possible that the Fed finances future government spending?”
Bernanke stares at Deborah as she turns to the jury.
“Let me be clear. I am not suggesting that this will definitely happen. My question to you, Mr. Chairman,” she says, turning back to Bernanke, “is whether your actions are opening the door for such events to occur. Can Quantitative Easing lead to increased government debt, higher deficits, more financial instability, and greater volatility in the markets?”
Bernanke’s face turns blank. The subtle expressions of contempt and nervousness that had accompanied him throughout his interaction with Deborah vanish, leaving him cold as ice.
“Under specific circumstances, this could happen. But we do not anticipate such events occurring.”
“Who is ‘we’?” Deborah interjects sharply. “When you say ‘we,’ do you mean the Federal Reserve Board of Directors?”
“Interesting.” Deborah turns to the jury, her tone incredulous. “I am flabbergasted by the alleged unanimous conclusion reached by our so-called ‘central bank decision-makers’—that buying bonds from insolvent banks, saving the jobs of incompetent bankers, and passing the bill onto taxpayers will not lead to precisely what moral hazard is supposed to create: that economic actors will increase their risk appetite because they don’t have to bear the full cost of their actions. I’m curious, Mr. Chairman—how did you arrive at that conclusion? Would you please elaborate a bit more? Explain to the court why you and your fellow Fed members believe that Quantitative Easing is such an isolated action.”
Bernanke speaks without any facial movements, his lips the only part of him that conveys emotion.
“Well, for starters, we are clear that Quantitative Easing is solely intended to support a short-term liquidity crisis in the markets, which was triggered by the unexpected collapse of Lehman Brothers. We have communicated extensively to Congress and the financial markets that this will be a one-time action. We do not intend to repeat this measure.”
Deborah interjects, “Are you saying that quantitative easing is a one-off? A once-and-never type of action?”
“I can’t say for certain whether it’s a one-off, but it is our intention not to repeat the process.”
“Yes, Mr. Chairman, but this is precisely what moral hazard means—it’s an ongoing process that starts small and then grows. It might not be your intention, but what would you say if I told you that, say, ten years from now, there will be a massive crisis—some sort of medical emergency that forces the government to lock down the economy to slow the spread of a pandemic? Can you assure us that, from today’s perspective, with all that you know about QE and the Federal Reserve’s process of buying assets in the market, you will not intervene and purchase bonds that the government will issue to support the economy?”
Bernanke stares at her.
“Objection.”
“Sustained. Mrs. Fidler, I don’t see how a hypothetical scenario like this is relevant to the case at hand. Please refrain from hypothesizing.”
“Your Honor, we are discussing the repercussions of moral hazard. I would like the Chairman to affirm that the Fed’s actions today won’t create exactly what moral hazard predicts: an increase in risk-taking by economic actors, whether they are banks or the government.”
“Alright, I’ll allow it. But please stay on course and refrain from getting too carried away with fear-mongering scenarios like pandemics and lockdowns. Our government would never do such a thing,” the judge replies.
“Thank you, Your Honor. Mr. Chairman, once again, can you attest that your QE action today categorically excludes any possibility of future actions in which the Fed will monetize debt for banks or governments?”
“I can’t.” A look of command and relief crosses Deborah’s face.
“Let me ask you another question, Mr. Chairman.
Who is paying for the QE program? You’ve injected over a trillion dollars into the balance sheets of Wall Street banks. Who does this money belong to? Who is footing the bill?”
“It’s money that the American people must lend to Wall Street so the system doesn’t collapse,” Bernanke answers.
“The American people? Which people?” Deborah interjects, pointing to one of the jurors. “You?” Then she points to the judge. “Or you?” Finally, she gestures toward Mody. “Which American people are we talking about?”
“All of us. We are a nation, and we have a central bank responsible for stabilizing financial markets,” Bernanke responds.
“Let me give you my interpretation of what it means when you say ‘the American people.’ The Fed’s actions to stabilize the banking system constitute an infringement on property rights—rights that are guaranteed under the Fifth and Fourteenth Amendments of the U.S. Constitution. Under your leadership, Chairman Bernanke, unelected Fed officials have taken it upon themselves to seize wealth from people like us,” she gestures around the room, “and distribute it to one particular part of their constituency: Wall Street. That is illegal and must be prevented.”
“Objection!”
“Sustained. Mrs. Fidler, it is not your place to determine what is legal and what isn’t. That is the jury’s job.”
“Apologies, Your Honor. Of course. Based on what the U.S. Constitution says about property rights—particularly in the Fifth and Fourteenth Amendments—I presume that my plaintiff has ample reason to sue Mr. Bernanke and seek to prevent him from conducting Quantitative Easing. It is up to you, the jury, to decide whether those actions are lawful or not. Of course.”
Chapter 37
Present (2006)
“How is it even possible for the U.S. to rack up this much debt?” one of the assistants asks, leaning forward. “We’ve got a Congressional Budget Office, elected representatives who are supposed to keep spending in check—and most importantly, why is the bond market tolerating it?”
Mody leans back, calm but firm.
“Good question. Look, there’s never a single moment where it all unravels. It’s more like watching the grass grow. It starts with good intentions—say, the Fed trying to save U.S. homeowners from mass bankruptcy. Then another crisis hits, and another. And before you know it, the government keeps spending, and the Fed keeps printing.”
The assistant presses on.
“Yeah, but aren’t there checks and balances? What about Congress? Elections? Why aren’t people putting a stop to this?”
Mody speaks with measured intensity, eyes fixed on the assistant.
“As the Fed steps in to facilitate bailouts, they'll introduce programs designed to keep liquidity flowing—giving them complex names like Quantitative Easing or Standing Repo Facility. You can’t blame the public for being fooled. What the Fed and its Wall Street allies will do is steadily obscure how the Treasury market really works. They’ll effectively hand the government a blank check—spending without accountability. QE was just the beginning. By the mid-2020s, the Fed will establish what they call a Standing Repo Facility. Primary dealers—Goldman Sachs, Citigroup—will have permanent access to it. That means, at any moment, they can hand a Treasury security to the Fed and instantly receive cash in return. “
Mody pauses, looks around.
“Now here’s where it gets subtle—deceptive, even. Congress and the Fed will impose limits on how many assets banks can hold on their balance sheets. In other words, banks like Goldman and Citi will be constrained. After a major financial crisis in 2008 the Fed will have to step in and buy bonds. That’s QE, which—ironically—is the very policy I'm here to challenge. After 2008, Wall Street’s primary dealers will face tighter caps. But at the same time, the U.S. deficit will skyrocket. By the mid-2020s, total debt will be pushing $40 trillion. Even if you subtract intergovernmental borrowing—like the Pentagon borrowing from the Treasury—you’re still left with over $30 trillion in real public debt. So how do you reconcile that mountain of debt with restricted bank balance sheets? You introduce hedge funds. They’ll call it shadow banking. By the mid-2020s, the bulk of Treasury securities will be traded not by banks, but by hedge funds like Citadel, Millennium, or Jena Partners. They’ll brand themselves as ‘algorithmic traders,’ staffed with armies of computer wizards. The public will admire their profits and supposed brilliance. But the truth? All they’re doing is skimming a small percentage off the ever-growing river of funds flowing from the Fed to the Treasury. And the Fed will use these hedge funds as camouflage—to obscure the unethical, possibly unlawful, monetization of government deficits.”
Mody walks to the whiteboard and begins scribbling a flow chart. His voice is calm, but deliberate.
“Let me break this down. The government issues debt—Treasury securities—to finance its deficit. Goldman Sachs, as an authorized primary dealer, buys them directly from the Treasury. Then, almost immediately, Goldman sells those securities to Citadel. “
Mody draws a circle around the words ‘hedge funds’. Now, Citadel—being a hedge fund, not a bank—might try to offload those Treasuries to a foreign buyer, say China. But if China isn’t buying? No problem. Citadel looks for another buyer. And if nobody shows up, they just repo those Treasuries back to Goldman and get their cash back. Goldman, in turn, takes those same repoed Treasuries and taps into the Fed’s Standing Repo Facility—getting cash in exchange for the securities.”
He underlines a bold arrow on the board.
“What does this mean? It means the Fed is ultimately the backstop for all of it. Every step in this chain, from issuance to repo, is built on one assumption: that the Fed will always be there to take Treasuries and hand out cash. This is the hidden machinery of modern deficit finance. The Fed creates the illusion that government debt is risk-free—not because it actually is, but because the Fed guarantees a buyer of last resort. That perception changes everything. And that,” Mody says, tapping the whiteboard, “is the true source of Moral Hazard.
He underlines the words ‘Moral Hazard’.
The Standing Repo Facility isn’t just a liquidity tool. It’s a blank check for deficit spending, disguised as monetary policy.”
Deborah crosses her arms, leaning back against the table, her tone shifting from stunned to incredulous.
“You’re telling me the fourth estate—the supposed watchdogs of democracy—are just going to roll over?”
Mody lets out a dry chuckle.
“Roll over? No. They'll spin it. ‘Necessary intervention,’ ‘unprecedented times,’ ‘tools to ensure market stability.’ You’ll hear every euphemism under the sun. The narrative will be that the Fed saved the economy. And if anyone dares to ask, ‘Wait, who actually got saved?’—they’ll be told they’re unpatriotic, or worse, uninformed.”
Deborah shakes her head, half in disbelief.
“But that’s insane. I mean—what happened to accountability? Transparency?”
Mody steps closer, his tone sharpening.
“You want transparency? The Fed operates with more secrecy than the CIA. You think there’ll be cameras rolling while they authorize trillion-dollar backstops? You think CNBC is going to break the story when Citadel gets a sweetheart repo deal at 2 AM?”
He softens slightly.
“Look, Deborah. People aren’t stupid. They’re just exhausted. Distracted. Busy trying to pay rent, mortgages, raise kids, keep up with life. They don’t have time to untangle the Byzantine mechanics of monetary policy.”
“So they just... trust the experts?” she asks.
Mody shrugs.
“Or they just give up. And the ones who don’t?”
He leans in. “They end up like us. On the outside. Watching the greatest heist in history, trying to explain it to people who’ve been told the vault was never robbed.”
“Why?” one of the assistants asks.
“Because they all get a cut. The closer you are to the Fed’s faucet, the more money you make. Investment banks will essentially become facilitators of deficit financing—no different than the Fuggers in Augsburg during the 15th century or the Medici in Florence.”
Mody turns around, now gathering momentum.
“Think of it like a waterfall: the Fed pours cash into the system, and gathered beneath it are banks, hedge funds, media, and politicians—open palms raised, trying to catch as much as they can. By the mid-2020s, the entire so-called fiat economy, run by economists who speak ‘Fedlish,’ will be in control. Even institutions like the University of Chicago won’t object. Of course, the Fed’s official line will be that they’re doing it to help the economy. Some politicians will disguise the scheme as wealth distribution; others will call it economic relief. But no matter what name they give it, the essence of this Ponzi scheme will always be the same: they are milking the credit and good faith of the U.S. government at the expense of us—future generations.”
Then he pauses. Looks at Deborah.
“I’m here to stop that.”
“What will happen to values like balancing the budget, accountability, not spending more than you make? What will happen to fiscal responsibility?” Deborah interjects.
“Those common-sense values will become melancholic residues of a hopeful past— echoes from a time when this country was built rather than exploited. They’ll stand as fading reminders of how mankind takes its best ideas and mangles them into farce. Whether it’s free markets, freedom of speech, or the free flow of ideas, all of these ideals will erode—first slowly, then suddenly. It’s like anything good in this world. It takes decades, even centuries, to build. And sometimes only months to destroy.
Mody looks at the white board. Then turns back to the audience.
“My mission here is simple: ‘to stop Ben Bernanke from launching Quantitative Easing’. We’ve identified QE as the beginning of a deep and pernicious decay—of both economic and societal values. Pernicious, because the consequences won’t show up right away. And perfidious, because the Fed’s financing scheme will be deliberately opaque, designed to confuse the public for as long as possible. By the early 2060s—which is where I come from—many of the freedoms we cherish today will be shadows of themselves. The moment Bernanke decides to buy bonds, to save Wall Street, to interfere with markets, to print money and pick winners and losers—that’s the moment the government learns it can get away with anything. Frivolous spending. Endless deficits. No accountability.”
He looks at the assistant.
“Moral hazard is real. And it destroys societies.”
Then turns to Deborah.
“I am here to stop that.”
Mody stretches his arms across the table, glancing from Deborah to the two assistants and then down to his palms.
“We must succeed. The alternative is simply unacceptable. The U.S. has been the only successful experiment in self-rule since antiquity. Even then, self-rule and democracy were selectively practiced, as the persecution of Socrates demonstrates. We are the only real-world example, and yet we’ve chosen to mangle our ideals and values to the point where American society resembles the Soviet Union or Nazi Germany more than the bastion of the free world.”
“What do you mean?” Deborah interjects, her voice rising in alarm. “There won’t be gulags and concentration camps, right?” She continues, worry etched on her face.
“No, but we’ll descend into the same destructive coercion of free speech that characterized both Communism and Fascism. People won’t be able to express their beliefs—whether in person or online. Jobs will be lost simply for saying the wrong thing. The media will be censored, and obscure fringe groups will rise to power, ruling by fear. Our society will increasingly resemble an Orwellian nightmare.
Just throw in some modern concepts like identity politics or a new form of religious intolerance—where the once-rejected harass the rest—and you’ll get a clear picture of where we’re heading. Most importantly, people’s constitutional right to sovereignty will drown in the mud of government agencies, bureaucratic greed, and inefficiency.
Unfortunately, our society will increasingly mirror Orwell’s 1984 dystopia, filled with truth manipulation, suppression of individuality, pervasive surveillance, and permanent warfare. And most strikingly, nobody will be in charge. The system will literally take over, and you won’t even know who to blame.
There will come a time—I believe it was around the 2024 election—when we might not even have a president because the sitting president will be incapacitated by illness. But guess what? The government will continue to spend other people’s money. Laws will be made arbitrarily by unelected bureaucrats, and Congress will be in permanent gridlock over issues like whether kids should be allowed to change their gender.”
“And you think undoing QE will stop this political pathology?” Deborah asks, her expression stoic.
“We can’t guarantee anything,” Mody replies. But the surge of state power and political intolerance is directly tied to deficit spending and the oversized role of government in the economy. All we’re trying to restore are the old-fashioned checks and balances. If we remove the Fed's blank check from the equation, politicians will face accountability and constraints. It’s conceivable that freedom and prosperity will have a better chance under such a regime. We can’t promise anything, and it’s not my place to speculate. My mission is to stop Bernanke from launching QE. That’s it. And I need your help.”
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