Aletho News

Western central bankers: they’re God, they trust – a 10-part series on the QE economy

By Ramin Mazaheri | The Saker Blog | October 21, 2019

It’s not that the West’s central bankers are infallible – the similarity is that they cannot be held accountable. After all – who can call God to account for His decisions?

Like God, when things succeed it is They (central bankers) who deserve all the credit – when things fail it’s because we failed to properly follow Their policies.

And like God, they don’t need regulation – it is They who give the regulations, which must be accepted on faith alone and no matter how poor the results.

Central bankers are held partially accountable by only one sector – the markets of money. If markets go down based on any of their statements the bankers immediately reverse themselves, regardless of the situation. Countless times Bernake, Yellen, Trichet, Draghi and others have made statements purposely as clear as mud and then backtracked at the first lower lip quaver from the rich. Despite this exception, neoliberalism has proven to be the worship of bankers, as they rule and not markets – central bankers, of course, subvert and control the markets in many ways.

This idolatry is not new: for two centuries “capitalism with Western characteristics” has truly been “banker rule”. The most impressive victory of neoliberalism – their ability to extend their unholy domain despite provoking the Great Recession – proves this: Central bankers in the G7 nations and the Eurozone have all been given the power to set fiscal policy, to decide social policy priorities and to render domestic elections irrelevant. Western nations are no longer democracies (and they were all, every one, merely the types of democracies which pointedly refused to evolve after 1917) but bankocracies.

The Great Recession has exposed modern capitalism to be not just banker worship but also banker governance.

This is not some wild-eyed lefty nonsense – they are deciding public policy. If we called them a “Politburo” instead of a “central bank” the West would rally up a posse of Nazis and send them to invade.

This multipart series will – as many of my previous such series have also done – use an exceptionally important political book as a jumping off point, which also allows me to humbly impart my point of view gleaned from my work as a daily hack journalist in the heart of the Eurozone. This point of view is rarely heard, yet has virtues which academics, think-tankers, specialists and authors cannot possibly contain – even we hack journalists must have some virtues, after all?

The book is 2018’s Collusion: How Central Bankers Rigged the World by Nomi Prins, a former Wall Street executive who saw the light and is now informing on the crimes of Western imperialism-capitalism.

Quite simply, the book’s primary virtue is chronological: Prins gives a historical account of central banker doings in key areas – Mexico, China, Brazil, Japan and Europe – ever since US banker crimes set off the Great Recession in 2007. Prins gives us all the key happenings in these regions (only China is the one which is undoubtedly not capitalist-imperialist), and that is not something you can find all in one place elsewhere.

And because central bankers run the West, it is like reading the daily itinerary of a dictator – “this is how things were decided”.

What Prins does a good job in reminding us is that this has all been done to keep US banks solvent. Every policy of the US Fed is about defending this goal, and not at all about the health of the global economy; the idea that the US would be militarily aggressive and culturally overbearing yet financially benevolent is preposterous and unsupported by evidence.

But the book is essentially conventional journalism – it is a recounting of historical decisions, facts and consequences. The only radical, non-Western change Prins really suggests is to move away from the dollar. The world “class” is used less than a handful of times. Her mentions of the negative effect of central bankers’ decisions on the average person are clearly sincere but both sparing and brief. Few people get into Wall Street out of their love for poetry, after all. The book is a former Wall Streeter watching other Wall Streeters who have taken a brief detour into public service (except in China) – it is banker-centric. And this is quite useful in the 21^st century.

Prins clearly and correctly views bankers as the problem, but her solution is essentially limited to hoping that China’s central bankers will re-balance the status quo, and that their stewardship will allow developing countries to coordinate cooperatively instead of exploitatively. She does not believe that the entire system needs re-ordering upon new moral and political foundations (or even upon the very different moral foundations upon which Red China rests, and which account for their different policies).

But merely changing Western-centrism to Sino-centrism, with its obvious shift away from the US greenback (and even combined with her correct approval of cryptocurrency) cannot be enough. China is not insisting that Western capitalist-imperialist nations follow Beijing, but that they reform themselves – Iran does this too, but where Beijing uses a whisper Iran uses a megaphone amplified by a megaphone. Prins needed far more moral condemnation and to propose far more actual changes to the prevailing Western system, but – as I wrote – this is essentially a book of typical Western capitalist “objective” journalism, where moralising is supposed to be left entirely to the reader.

This series is advocacy journalism. What I have done is to take Prins’ useful chronological, globally-oriented journalism on modern economic history and analyse it from a perspective very different from her own: a pro-socialist and anti-imperialist one.

It’s a great book, but lacks a modern political viewpoint

Prins gets the main point across, though, and it’s there in her title: G7/G20 central bankers have colluded since 2008 to (greenback) paper over the causes of the Great Recession.

Her book makes it undoubtedly clear how monetary policy has been coordinated to inflate and appease the 1%-dominated “markets” at different points around the world at different times. She doesn’t use these correct political terms, but she shows that 21st century Western financial policies are fundamentally neo-imperialist: the world has slaved for the benefit of the former unipolar imperium since 2008 – even though said imperium provoked the financial crisis in 2008 – because of collusion orchestrated by the imperium to inflict policies on the global economy which were mainly to save their biggest, busted banks.

There you have it: three major points upon which the past 11 years of Western economic history have been resting. This also explains why the West’s financial foundation is even shakier than it was in 2008.

You don’t need a PhD in economics to immediately grasp the correctness of these allegations: Nobody in their right mind would buy the securities of the top US banks… except for unaccountable central bankers. Central banks West-wide routinely bought $200 billion of such assets per month. Taxpayers were not enriched by buying bad investments, of course, but the busted banks in the US, Germany and France were.

The collusion Prins refers to in her title is the way the Fed used their influence to force other G20 banks to adopt the same policies. These policies are: massive money printing via QE, ZIRP (Zero interest rate policies) to persuade banks to take the money, and relaxing collateral standards in order to make sure banks got that money no matter how unsound everybody knew they were.

The problem comes down to a simple difference between capitalist and socialist views of finance: governments with policies dominated by the former give taxpayer money to private banks with no rules or accountability, whereas governments with policies dominated by the latter give this money with massive oversight, regulations and directives in order to ensure that it is used as efficiently as humanly possible. The irony for socialist-inspired nations is that they are the ones who are painted as corrupt!

Governments influenced by the former can rely on compliant, privately-owned Mainstream Media to repeatedly insist that these loans are for the benefit of all even though there is no such evidence for such a claim, nor any logical reason to expect such an outcome. Governments influenced by the latter really don’t care what the Western MSM says – their own people don’t need to be propagandized in favor of capitalist lies, and thus they mainly try to keep a low profile as regards international media.

(Cuba spends almost nothing on their media; Iran only recently started PressTV (and this service is more notable for its “different” viewpoint – “Voice of the voiceless” is the official slogan – rather than its scope and size); Xinhua seems to spend most of its time on soft news and certainly doesn’t trumpet its own beliefs. Indeed, much can be said about that difference between Iran and China: the former is nearly screaming up to Heaven what it is thinking and doing, whereas inscrutability in China is not just a cliché but their government policy, which aims to avoid friction. But I digress….)

The ultimate problem with Prins is that – like all “I’m a capitalist but not THIS capitalism” – she is ultimately a historical/economic nihilist:

Prins is like so many fine commentators on the Anglophone fringe: accumulating, exposing and railing against the crimes of capitalism, and garnering many clicks and views, but remaining fundamentally supportive of the capitalist system. They don’t believe in the only philosophical and economic alternative humans have designed to capitalism – socialism – nor do such analysts ever thread the camel through needle and become the one capitalist who finally proposes a capitalist system which is not based on exploitation, competition, aggression, etc.

“There are ostensibly two main types of central bankers: the ones with more legacy power, and the ones with less but rising power, as is the case in China.”

Totally false: very real alternatives exist, and denying that – which Prins essentially does – only keeps people stuck in the political nihilism of TINA (There Is No Alternative).

The very real, very working alternative: the ‘terrorist’ central bankers of Iran & China

As I alluded to, China’s central bank is predicated on totally different foundations. And then you have Iran’s central bank: Iran’s central bank chief, Valiollah Saif, was declared a “terrorist” last month by Washington. Neither of these countries with socialist-inspired revolutions have banking leaders who are quotidian, interchangeable “central bankers minus legacy power”, as Prins describes.

Why was Iran’s Central Bank declared a “global terrorist”?

More flagrantly oppositional than Iran’s foreign policy are the tenets which guide Iran’s National Bank: it is totally state-owned, whereas the Fed is a consortium of private banks and set up like private corporations (something rarely understood). Iran’s National Bank is not “independent” from the government in the slightest. Iran’s central bank cannot meddle in – much less dictate – domestic policy, because that is why Iran has elections. Iran’s Central Bank, due to its fundamental independence, anti-capitalist and revolutionary nature proves that not all central bankers are the same.

Importantly, the independence of many Western central banks came after the Iranian Islamic Revolution of 1979: The Bank of Japan was made independent in 1998, the same year the ECB opened its doors to let greed rush in. Of course, their independence ensures that they follow policies which are for private concerns and not public ones.

Contrarily, China and Iran have central banks owned, literally, by the People. Former ECB chief Jean-Claude Trichet often talked about how the ECB was a “bank of the people”, but it was classic continental hypocrisy – the Maastricht treaty, in the neoliberal & anti-socialist model in which the EU and Eurozone were created, explicitly made the ECB independent of any government. Does anyone possibly persist in believing, 10 years into (not after) the crisis, that the ECB has chosen policies which benefit the 99% and not the 1%?

There is widespread agreement in Iran that Islam tolerates capitalism – there are plenty of private banks – but Iran has agreed with socialism that the only solution is to have the biggest banks owned by the state. That is the only way “strings” can ever be applied to taxpayer money-created-loans in order to create a virtuous – and not exploitative – monetary cycle between government and business.

Such a solution is not proposed by a capitalist like Prins. She even tries to intimate that China’s Central Bank is almost equally duplicitous (though she could never get away with implying that China’s central bank was as exploitative), which is pure political nihilism and easily disproved.

The reality is that governments must issue paper money and private bankers act as the middleman to get this money to citizens… but only in capitalist countries. In socialist-inspired countries government workers serve as the middleman, and that is why they are succeeding in the 21^st century. China and Vietnam are the two biggest boomers since 1980, while Cuba, Iran, Venezuela and a handful of others would be booming if they were not so terribly sanctioned.

Conclusion: There is no god but God

(That is perhaps the theological heart of Islam there, and repeated in every Salah daily prayer. Various stone idols with multiple limbs, the Christian trinity and Western central bankers all are not God because there is only one, single God and His name is God.)

Allow me to conclude with a few more indisputable truths, many of which have been painfully learned over the past decade:

• Neoliberal central bankers are not as competent as even those much-maligned Iranian Revolutionary Shi’a mullahs. Per Prins:

“With rates already near zero, or negative in some countries, there is little-to-no room to maneuver in the event of a looming crisis. After the decade-long money-conjuring policy, one with no real end in sight, one thing has become clear: central bank craftsmanship has been ineffective, at best, and has demonstrated gross negligence for the lasting consequences at worst. The assumption that these central banking policies will anytime soon evoke real growth is as preposterous as it is wrong.”

• Once these paper props are stopped, chaos is certain to result in the Western economy. This chaos was always merely postponed via QE’s “helicopter money” (money thrown from helicopters (to the rooftops of fancy banker soirees?) in the hope that it will do good); this chaos will be even worse because 10 years of failed policies logically means that the West’s economies are far weaker than they were 10 years ago.
• Capitalism is guaranteed to go from boom to bust, but the 2008 bust was both exceptionally bad and exceptionally driven by the US. The policy response was also exceptionally bad and also exceptionally driven by the US, and is also culturally designed to make Western society’s labor and financial laws even more exceptionally like those of the US.
• If Western central bankers wanted to do everything they could to empower their enemy – socialist China – only then can they consider themselves as having been a success. The past decade has seen China soar so high they have broken the glass ceiling of a unipolar world. In slower historical processes, China has floated its yuan since January 2016, no longer pegging it to the dollar, and they have gotten the yuan added to the IMF Special Drawing Rights basket. QE could have changed the nature of Western societies in a good way, as it did in China, per Prins: “In China, conjured money went to building real things, whether they were needed or not, whereas for the rest of the G7, it tended to go into less tangible and more speculative uses.” The idea that China is building “unneeded” things and ghost towns is pro-capitalist propaganda, and is debunked here, but the result is clear: QE has only made China stronger but the West weaker.
• The West has been told that the problem is developing countries not pulling their weight – China (alleged currency manipulation, their “slowdown” from incredible growth to merely fantastic growth, their trade war, etc.), Greece and other weak economies – when both the primary cause of the Great Recession and the primary cause of the continued global slowdown has been due to following the leading ideologies of the capitalist-imperialist West.
• What the MSM has refused to shout from the rooftops is that all these trillions of QE could have gone directly into the pocket of the average person and produced comparatively spectacular economic growth on the macro level and on the micro/individual level. Half could have gone to citizens and the other half to infrastructure growth, and the money-conjuring nations would have assured their people 50 years of success and modernity. Sadly, capitalism does not believe in controlling their banks or their 1%. Instead, as everyone reading this fringe series on a fringe website written by a fringe hack journalist likely already knows, it went into the FIRE economy (Finance, Insurance and Real Estate) and created massive bubbles worse than the ones a decade ago.

It comes down to a palpable feeling of social responsibility in government policy – there is none in hyper-competitive, “you have no right to a social safety net” Western neoliberal capitalism: contrarily, there is some of this rather holy spirit in Iranian Islamic Socialism, Socialism With Chinese Characteristics, Cuban-style socialism, etc.

It does not matter if this social responsibility comes from fear of God, or fear of incurring social shame or fear of el Norte, or whatever – results matter in social policy, because they mean life and death; because social policy always has and always will include very real judges dispensing very real (even if unfair) justice. Western distractions like “psychological motivation” are mainly overly-dwelled upon by existential Western urbanites who need to pay a psychologist to get them to finally accept that they are ragingly self-destructive, just like their economic principles and policies.

I will allow you to skip to the final page (of my series, not Prins’): At some point China will be asked to pick up the baton of QE collusion, because they are the only major economy which hasn’t done it yet… and they will not do it.

Why would they save the West? Not just because of their socialist ideals, nor their “Century of Humiliation”, but also because they have already been propping up the US monetarily (along with Japan) for quite some time.

But perhaps realizing that China won’t devalue its own economy via Western economic policies, the US has begun their fourth round of Quantitative easing. Their private media/propaganda outlets are ordering us “don’t call it QE4”, but it’s exactly the same as before: printing new money to give to private banks with no strings attached.

QE, like God, has to be permanent.

Unlike God, there will be a reckoning for QE one day and it will be worse than in 2008.

For now, the West remains righteous neoliberal believers, and heaven rain down furious destruction on any Yellow Vester who smashes the window of a Western bank!

An 10-part series may seem like a lot, but these articles are shorter than my usual output when it comes to analytical series (Part 1 is the longest, or nearly). This series is essentially a continuation, updating and expansion of a 7-part series I wrote in autumn 2017 which also covered the failed Western policy of QE. Here is the list of articles slated to be published, and I hope you will find them useful in your leftist struggle!

***********************************

Part 1 – Western central bankers: they’re God, they trust – a 10-part series on the QE economy

Part 2 – How QE has radically changed the nature of the West’s financial system

Part 3 – QE paid for a foreign buying spree: developing countries hurt the most

Part 4 – Iran vs Mexico: ‘economic inflows’ versus ‘economic independence’

Part 5 – Understanding the West’s obsession with inflation

Part 6 – The new ‘beggar thy neighbor’: wars to devalue labor, not currencies

Part 7 – Blaming China for the Great Recession… to avoid emulating China’s (socialist-inspired) success

Part 8 – 1941, 1981, 2017 or today – Europe’s mess is still Germany’s fault

Part 9 – Don’t forget the real root of Brexit: fear of Eurozone economic contagion

Part 10 – Bankocracies: the real Western governance model

Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books I’ll Ruin Everything You Are: Ending Western Propaganda on Red China and the upcoming Socialism’s Ignored Success: Iranian Islamic Socialism. His work has appeared in various journals, magazines and websites, as well as on radio and television.

October 21, 2019 Posted by aletho | Book Review, Economics, Timeless or most popular | China, European Union, Iran, United States | 4 Comments