There has been an economic coup d’état in America and most of the world. We are now ruled by about 200 unelected central bankers, monetary apparatchiks and their minions and megaphones on Wall Street and other financial centers. Unlike Senator Joseph McCarthy, I actually do have a list of their names. They need to be exposed, denounced, ridiculed, rebuked and removed.
The first 30 includes Janet Yellen, William Dudley, the other governors of the Fed and its senior staff. The next 10 includes Jan Hatzius, chief economist of Goldman Sachs, and his counterparts at the other major Wall Street banking houses.
Then there is the dreadful Draghi and the 25-member governing council of the ECB and still more senior staff. Ditto for the BOJ, BOE, Bank of Canada, Reserve Bank of Australia and even the People’s Printing Press of China. Also, throw in Christine Lagarde and the principals of the IMF and some scribblers at think tanks like Brookings. The names are all on Google!
Have you ever heard of Lael Brainard? She’s one of them at the Fed and very typical. That is, she’s never held an honest capitalist job in her life; she’s been a policy apparatchik at the Treasury, Brookings and the Fed ever since moving out of her college dorm room.
Now she’s doing her bit to prosecute the war on savers. She wants to keep them lashed to the zero bound—-that is, in penury and humiliation—–because of the madness happening to the Red Ponzi in China. Its potential repercussions, apparently, don’t sit so well with her:
Brainard expressed concern that stresses in emerging markets including China and slow growth in developed economies could spill over to the U.S.
“This translates into weaker exports, business investment, and manufacturing in the United States, slower progress on hitting the inflation target, and financial tightening through the exchange rate and rising risk spreads on financial assets,” she said, according to the Journal, which said she made the comments on Monday.
In the name of a crude Keynesian economic model that is an insult to even the slow-witted, Brainard and her ilk are conducting a rogue regime of financial repression, manipulation and unspeakable injustice that will destroy both political democracy and capitalist prosperity as we have known it. They are driving the economic lot of the planet into a black hole of deflation, mal- distribution and financial entropy.
The evil of it is vivified by an old man standing at any one of Starbucks’ 24,000 barista counters on any given morning. He can afford one cappuccino. He pays for it with the entire daily return from his savings account where he prudently stores his wealth.
After a working lifetime of thrift and frugality his certificates of deposit now total $250,000. Yes, the interest at 30 bps on a quarter million dollar nest egg buys a daily double shot of espresso and cup of milk foam.
What kind of crank economics contends that brutally punishing two of the great, historically-proven economic virtues——-thrift and prudence—-is the key to economic growth and true wealth creation?
In this age of relentless consumption and 140 character tweets, what kind of insult to common sense argues that human nature is prone to save too much, defer gratification too long, shop too sparingly and consume too little?
Forget all of their mathematical economics and DSGE model regressions. Our 200 unelected rulers are enthrall to a dogma of debt that is so primitive that it’s just plain dumb.
By purchasing existing debt with digital credit conjured from the “send” key on central bank computers, they make room for more and more of it. And they do so without the inconvenience of deferred consumption or an upward climb of interest rates owing to an imbalance of borrowings versus savings.
Likewise, by pegging the money market rate at zero or negative, they enable even more debt creation via daisy chains of re-hypothecation. That is, the hocking of any and all financial assets that trade at virtually zero cost of carry in order to buy more of the same and then to hock more of them, still.
The truth is, the world is up to its eyeballs in debt. Since the mid-1990s, the 200 rulers have ignited a veritable tsunami of credit expansion. Worldwide public and private debt combined is up from $40 trillion to $225 trillion or 5.5X; it has grown four times more than global GDP.
Whatever has caused the growth curve of the global economy to bend toward the flat-line, it surely is not the want of cheap debt. Likewise, the recurring financial crises of this century didn’t betray an outbreak of unprecedented human greed; they were rooted in heretofore unimagined excesses of leveraged speculation.
That’s what margined CDS wraps on the supersenior tranches of portfolios of CDOs squared were all about. That’s how it happened that upwards of 10% of disposable personal income in 2007 consisted of MEW ((mortgage equity withdrawal). It’s also how the US shale patch flushed $200 billion of junk debt down drill boreholes that required $50 per barrel oil to breakeven on the return trip.
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