It's the same with medicine; how many people in government are doctors, which means politicians have to rely on doctors for advice, but what if most of the doctors also work for the pharmaceutical industry who want to push more and more drugs onto the nation?
But I'm sure there are many good people in banking and medicine who do want to work for the national interest. This can be overcome. KV.
Central bankers are now aggressively playing the stock market. To say they are buying up the planet may be an exaggeration, but they could. They can create money at will, and they have declared their “independence” from government. They have become rogue players in a game of their own.
Excluding institutions such as Blackrock and Vanguard, which are composed of multiple investors, the largest single players in global equity markets are now thought to be central banks themselves. An estimated 30 to 40 central banks are invested in the stock market, either directly or through their investment vehicles (sovereign wealth funds). According to David Haggith on Zero Hedge:
The result, as noted in a January 2017 article on Zero Hedge, is that central bankers, “who Q fiat money out of thin air and for whom ‘acquisition cost’ is a meaningless term, are increasingly nationalizing the equity capital markets.” At least they would be nationalizing equities, if they were actually “national” central banks. But the Swiss National Bank, the biggest single player in this game, is 48% privately owned; and most central banks have declared their independence from their governments. They march to the drums not of government but of big international banks.
In a paper presented at the 14th Rhodes Forum in Greece in October 2016, Dr. Richard Werner, Director of International Development at the University of Southampton in the UK, argued that central banks have managed to achieve total independence from government and total lack of accountability to the people, and that they are now in the process of consolidating their powers. They control markets by creating bubbles, busts, and economic chaos. He pointed to the European Central Bank, which was modeled on the disastrous earlier German central bank, the Reichsbank. The Reichsbank created deflation, hyperinflation, and the chaos that helped bring Adolf Hitler to power. The problem with the Reichsbank, says Werner, was its excessive independence and its lack of accountability to German institutions and Parliament. The founders of post-war Germany changed the new central bank’s status by significantly curtailing its independence. Werner writes, “The Bundesbank was made accountable and subordinated to Parliament, as one would expect in a democracy. It became probably the world’s most successful central bank.”
But today’s central banks, he says, are following the disastrous Reichsbank model, involving an unprecedented concentration of power without accountability. Central banks are not held responsible for their massive policy mistakes and reckless creation of boom-bust cycles, banking crises and large-scale unemployment. Youth unemployment now exceeds 50 percent in Spain and Greece. Many central banks remain in private hands, including not only the Swiss National Bank but the Federal Reserve Bank of New York and the Italian, Greek and South African central banks.
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I like some of what Ellen Brown says in her posts. For example, I support publicly owned banks.
Unfortunately Ms. Brown suffers from acute EBS (Ellen Brown Syndrome), a crippling malady that makes people falsely insist that all money (all of it ) is created by banks as loans.
In reality, a lot of money is created by banks as loans, but money is also created by government spending, and not as loans.
I once spoke to Ms. Brown personally, in an attempt to cure her illness. I failed.
Regarding central banks “going rogue,” this has always been the case. Central bankers owe allegiance to each other, not to any national government. For instance, throughout World War II, Hjalmar Schacht (head of the Nazi Reichsbank) was close friends with Montagu Norman (head of the Bank of England). During the war, Schact joined the resistance against the Nazis, until Hitler finally removed him from the bank on 23 July 1944.
Ellen Brown: “The European Central Bank was modeled on the disastrous earlier German central bank, the Reichsbank. The Reichsbank created deflation, hyperinflation, and the chaos that helped bring Adolf Hitler to power.”
The Reichsbank was only “disastrous” during the Weimar era. When the National Socialists took power, they sacked much of the Reichsbank’s staff, and lifted Germany from being Europe’s weakest nation economically to Europe’s strongest. This happened because Hitler never let the Reichsbank have too much power. (However Germany lost the war, and was therefore “evil.”)
Ellen Brown: “Many central banks remain in private hands, including not only the Swiss National Bank but the Federal Reserve Bank of New York and the Italian, Greek and South African central banks.”
The Greek and Italian central banks are special cases, since the Greek and Italian governments cannot create euros out of thin air. Since Greece has a trade deficit, the Greek government must borrow all its euros from bankers. (Italy had a trade deficit until mid-2012.)
Ultimately Ms. Brown says that private bankers (especially central bankers) have too much power.
I agree. Mankind will never evolve past its current state until bankers are brought under control.
All fiat creation should be for the general welfare of the citizens (i.e. deficit spending by the National government) or via equal distributions to all citizens.
That should be drop dead obvious but isn't because the banks hold the economy hostage via a single payment system (besides mere physical fiat, aka "cash") that MUST work through them or not at all.
We should free the hostage economy and in the process eliminate a lot of private debt without disadvantaging non-debtors.
How? Consider that the proper abolition of government-provided deposit insurance should* require a vast amount of new fiat to be equally distributed to all citizens to provide the needed** reserves for banks to borrow or buy from the citizens, not from the Central Bank.
*Assuming that the vast amount of reserves the banks currently have from the illegitimate purchase of private assets by the central bank are removed by the sale of those private assets.
**For the transfer of at least some currently insured deposits, as the depositors will, from the banks to inherently risk-free accounts at the Central Bank itself.
One day he recognizes that the U.S. government (like the U.K. government) creates its spending money out of thin air. The next day he says the U.S. government borrows its spending money, and has a “debt crisis.” One day he seems to understand how fiat money works. The next day he says that fiat money is worthless unless it is “backed by” gold. “
You guys are not too far from doing the same thing.... “out of money!” and “from thin air!” are both born from the same basis of incompetence...
Who is he, Franko? Ellen Browne is female.
But I'm sure there are many good people in banking and medicine who do want to work for the national interest. This can be overcome. kv
Medicine yes, but government privileges for private credit creation and public banks are inherently corrupt.
Why? Because what is, in essence, the public's credit or in the case of public banks, the public's credit itself, is extended but for private gain.
It can't work without violating equal protection under the law unless the loan terms are so generous as to constitute an outright grant anyway.
Then if outright grants, either targeted or to all citizens equally, are deemed to benefit the common welfare then let's have them but let's not drag in the ability to repay as a basis for receiving government aid since that discriminates in favor of the rich.
Hats off to Franko.
He never disappoints.
I agree with Andrew’s point in his first comment above, i.e. that stimulus when needed should come in the form of simply creating fiat and spending it (and/or cutting taxes), rather than having private banks create extra money. Indeed, that seems to be view of most MMTers, far as I can see.
The way central banks induce private banks to create and lend out more money is of course to cut interest rates.
There’s actually another argument for the above “create fiat” idea, which is that that’s pretty much what happens in a properly functioning free market, rather than a cut in interest rates. That is, there is no obvious obstruction to interest rates falling in a recession in a free market, ergo failure of interest rates to fall is not the market failure which causes recessions to persist. (I think I’ve been on about this point before on this blog, so sorry if I’m repeating myself).
In contrast, the all important market failure is Keynes’s “wages are sticky downwards” phenomenon: that is, in a perfectly functioning market and given a recession, wages and prices would fall, which would raise the real value of the stock of base money, which would encourage spending. So having the central bank and government simply create fiat and spend it comes to much the same thing: the value of the stock of base money rises. Plus of course there is what might be called a “fiscal effect” in the form of the actual additional spending (on infrastructure for example) employing more people before the base money increasing effect really gets underway.
I go into the latter point in more detail in section 3 of a recent paper:
http://www.openthesis.org/document/view/603834_0.pdf
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