See what Ben Bernanke did? See what central bankers are doing now...?
EVEN after 25 years of writing these commentaries, receiving that single word 'Unsubscribe', unsolicited and unaccompanied, in one's inbox causes a degree of soul-searching, writes Tim Price on his ThePriceOfEverything blog.
Did we overstep the mark somehow? Well, the truth hurts sometimes, whether it's our truth or somebody else's.
For the avoidance of doubt, and at the risk of triggering more unsubscription requests, here's our perspective, and our truth.
We utterly reject the discredited, statist, Keynesian, inflationist, banker-friendly, central banking god worshipped by Wall Street and the City and certain high-profile columnists for the New York Times and the Financial Times. As a wise man once said:
"I contend that we are both atheists. I just believe in one fewer god than you do. When you understand why you dismiss all the other possible gods, you will understand why I dismiss yours."
But before we delve further into debating a secular religion, a brief history lesson:
"The basic plan for the Federal Reserve System was drafted at a secret meeting held in November 1910 at the private resort of J.P.Morgan on Jekyll Island off the coast of Georgia." – The creature from Jekyll Island' by G. Edward Griffin
This is not conspiracy theory. This really happened.
Present at this secret meeting were:
- Nelson W. Aldrich, Republican "whip" in the Senate and business associate of J.P.Morgan, and father-in-law to John D Rockefeller, Jr;
- Abraham Piatt Andrew, Assistant Secretary of the United States Treasury;
- Frank A Vanderlip, president of the National City Bank of New York;
- Henry P Davison, senior partner of the J.P.Morgan Company;
- Charles D Norton, president of J.P.Morgan's First National Bank of New York;
- Benjamin Strong, head of J.P.Morgan's Bankers Trust Company;
- Paul M Warburg, a partner in Kuhn, Loeb & Company, a representative of the Rothschild banking dynasty in England and France.
What emerged from the Jekyll Island meeting was, in the words of Griffin...
"...a cartel agreement with five objectives: stop the growing competition from the nation's newer banks; obtain a franchise to create money out of nothing for the purpose of lending; get control of the reserves of all banks so that the more reckless ones would not be exposed to currency drains and bank runs; get the taxpayer to pick up the cartel's inevitable losses; and convince Congress that the purpose was to protect the public."
So the US Federal Reserve, rather than being an arm of the US government, is actually a private banking cartel. Note, in particular, that fourth objective:
"Get the taxpayer to pick up the cartel's inevitable losses."
Three years later, the Federal Reserve Act became law, and the creature from Jekyll Island was finally born.
Now fast forward to the Financial Crisis starting 2007. The former Fed chairman Ben Bernanke, now doing victory laps around the world to celebrate the launch of his new book, The Courage to Act, simply delivered according to that fourth objective.
Courage to act, indeed.
Or maybe it really does take courage for unelected economic bureaucrats to print up trillions of Dollars of taxpayers' money in order to bail out Wall Street banks. It will certainly be courage if and when the taxpayer finally wakes up to it.
Sooner or later, even the most powerful cartel fails. The Fed (along with its cousins in Europe and Asia, not all of which are necessarily run by alumni of Goldman Sachs; Haruhiko Kuroda at the Bank of Japan was previously with the ADB) is up against a force of nature in the form of the free market. A banking cartel can clearly achieve an awful lot, albeit entirely in its own interest, but in the fullness of time, the market will win out. To suppose otherwise is to believe that central planning works. As Jim Grant observes:
"The Fed is a relic of the age of command and control, the Fed is an anachronism."
So now we have this fatuous "will she, won't she?" Dance of the Seven Veils as orchestrated by world famous veil dancer, Janet Yellen.
Whether the Fed can really hike interest rates by – gasp – a quarter of a point next month is functionally irrelevant.
The reality, at least as we see it, is that the Fed has lost the plot; the Fed has also lost control of the bond market; and a sceptical crowd is finally paying a little more attention to the man (or woman, in this case) behind the curtain.
The FT today carries a feature, 'Peak Independence', indicating the growing political pressure to rein in central banks that are "hubristically attempting to tame the business cycle while storing up threats of bigger crashes down the road".
But, irritatingly, its authors don't take the logical next step of asking why we even require central banks to (try and fail to) manage the business cycle – free markets used to be good enough.
According to the film 'The Usual Suspects', "The greatest trick the Devil ever pulled was convincing the world he didn't exist."
The greatest trick central bankers ever pulled was convincing the world they were acting in anyone's interests other than those of the banks.
Here in the UK, we have a crime known as High Treason: the crime of disloyalty to the Crown. "Adhering to the sovereign's enemies, giving them aid or comfort" is a High Treason offence. So is "counterfeiting money". Destabilising the monetary system to the point of potential collapse would probably qualify, we think, perhaps on both grounds.
So the next time Andrew Haldane, the Bank of England's Chief Economist, or one of his banker buddies, proposes the abolition of physical cash or the introduction of negative interest rates, in somebody's interests – but clearly not those of the taxpayer, the saver or the general citizenry – they should be grateful that we no longer have the death penalty for High Treason.
The threat of life imprisonment should be a sufficient deterrent against such fatuous, dangerous, undemocratic, banker-friendly intellectual poison. We'd also like to unsubscribe, to opt out from this dialogue of the insane.
Sadly, we don't think it's possible to.