Right now, at the beginning of October, with the stock markets down in bear market territory, all voices are wondering if we are heading for a recession.

But President Biden is jawboning the oil companies not to raise gasoline prices.

“Do not, let me repeat, do not use this as an excuse to raise gasoline prices or gouge the American people,” Biden said at the start of a conference on hunger in America.

Oh please, Mr. President. You think we're dumb or something, as Lina Lamont once said? Why blame Big Oil? How about: ultra MAGAs?

Hey Little Joe, at the back of the class. Repeat after me: Almost all recessions, depressions, panics, crashes, you-name-its, are the fault of governments failing to get the economy right after going on an inflation bender -- to fight a war or a COVID.

Like, Joe, who was to blame for the Crash of 2008 and the Great Recession, whatever? Oh yeah, I remember now. "Greedy bankers" was the agreed-upon narrative of your devoted regime scribes. Er, no, silly boy. The proximate cause of the Great Recession was Little Ben Bernanke, Chairman of the Fed, who decided in September 2008 that he didn't have the authority to bail out Lehman Brothers after the jolly old inflationary real-estate boom of the 2000s.

Ben, oh Ben!  Didn't you know that the one and only justification for the Federal Reserve System -- apart from its vitally important role to print all the money that's fit to print – is to act as the "lender of last resort?"

Lender of last resort? Who he?

See, back at the Dawn of Time, in Britland in 1866, there was a nasty financial crash. And in 1873, a Brit, Walter Bagehot, published Lombard Street: A Description of the Money Market, to explain what went wrong. How thoughtful of him, because he was just in time to teach American bankers how to understand the Crash of 1873. If they had bothered to listen.

Bagehot's idea was that, to avoid crashes and bank failures, the credit system needs to observe two rules.

Rule One: loans must be collateralized so that, if a loan must be liquidated, the sale of the collateral can pay off the loan.

Rule Two, the debtor must have the income to service the payments of interest and principal.

Otherwise, disaster.

But if the banks are dumb or something and some bank is about to collapse -- e.g. Lehman Brothers in 2008 -- the central bank bails out the bank as "lender of last resort" and saves the credit system, and everyone lives happily ever after.

Remember? In the 2000s the greedy bankers in the U.S. were busily handing out real-estate loans on 100 percent of the assessed value of the property, because government. And the government was pressuring lenders to make loans irrespective of the borrower's ability to pay, because anti-racism. What could go wrong?

This is not that hard, Little Ben. Hey, Jerome Powell! You listening, pal?

Back to 1873. What went wrong? Well, back in the day when the world was on the Gold Standard, governments believed that after inflating the currency to e.g. fight a Civil War from 1861-65, they should deflate the currency to get back to the pre-war gold price. But farmers and workers and borrowers get annihilated by deflation. And deflation always leads to a Crash. Followed by a depression, in this case the Long Depression "beginning in 1873 and running either through March 1879, or 1896, depending on the metrics used."

After World War I, governments did the same thing, deflating to make creditors whole. The result was the General Strike in Britain in 1926 and the Wall Street Crash of 1929 and the Great Depression.

But after World War II, LGBT genius John Maynard Keynes and Commie Spy Harry Dexter White dreamed up the Bretton Woods system that restarted the economic system by pretending that the dollar was still at its pre-war price of $35 per ounce rather than putting the economy through the wringer of deflation. It worked like a champ until 1971 when the U.S. stopped honoring the pretend $35 price, and a decade of inflation ensued, that was stopped by the "amiable dunce" President Reagan and by Fed Chairman Volcker.

Unfortunately, 30 years later when the U.S. government was all-in on liar loans and 100% mortgages in the 2000s, Little Ben Bernanke had not read his Lombard Street and didn't bail out Lehman Brothers as "lender of last resort."

If anyone reading this is a pal of Fed Chairman Jerome Powell, you would be doing us all a favor if you took him out to lunch and gave him a link to this article.

And, over lunch, get him to repeat after me: "lender of last resort." Again: "lender of last resort."

Good dog.

Christopher Chantrill @chrischantrill runs the go-to site on US government finances, usgovernmentspending.com. Also get his American Manifesto and his Road to the Middle Class.

Image: Federal Reserve