Soviet BS Hits the Bank of England
Coming soon everywhere: socialism, MMT, whatever...
RECENTLY the Financial Times published an op-ed with the title 'Why the Bank of England (BOE) should target climate risks', writes Dan Denning, co-author of The Bonner-Denning Letter, in the Diary of a Rogue Economist.
The authors' argument was pretty straightforward: The central bank of Great Britain should add "[addressing] issues like climate change, inequality and asset price inflation" to its mandate.
These issues contribute to the financial instability of the country, the FT argues. The BoE, therefore, has a responsibility to solve them!
Precisely HOW the BoE would "solve" climate change is also simple, according to the authors. Simply restrict the flow of credit away from companies that pump out carbon emissions and towards companies with "social and environmental objectives."
As Bill shows regularly in the Diary, centralized planning has never worked...not once in history.
But for years, we have centralized the allocation of credit in the economy and given more control to the central bank. The argument from the FT is an almost unavoidable outcome if you follow quantitative easing (QE) and Modern Monetary Theory (MMT) to their logical conclusions.
Now, you have so-called serious people arguing that the central bank should restrict the flow of credit to industries and sectors. In this case, fossil fuels, because of climate change.
As I wrote in the May issue of The Bonner-Denning Letter, these are what science fiction author Robert Heinlein called "the crazy years".
We are fast descending into national madness. The collective wackiness and disease that infected academia and politics over the last two decades is now moving into finance.
How can we be sure?
You hear the same language used ("privileged industries" are a second cousin of privilege based on race or gender). You hear the same zany calls for a "revolution".
The loss of political independence by central banks (they were always acting for private interests anyway) will result in their complete politicization and their use for a specific political agenda (not just propping up a bogus stock market with fake money).
We tend to think of financial repression as a way of keeping individuals in check by limiting where they can take their money (borders), how they can spend it (your cash is no good here), or what rate of interest they can earn on it (increasingly, the prospect of negative interest rates).
But it's going to another level. If the lunatics on the op-ed pages have their way, financial repression will be used by the central bank against businesses that don't conform to the political agenda du jour.
At that point, it's not just the central bank that's lost political independence. It's corporate America that's become fully politicized (a trend that's been taking shape in "socially conscious" corporate boardrooms for years). And then, there's the financial aspect.
A politicized central bank gives corporations a purely rational incentive to "financialize" their business and use the balance sheet to generate profits (so far from win-win capitalism, it's on another planet). Bill has discussed the "financialization" of corporate America at length in the Diary. It's picking up speed.
It means an entire global energy industry would be choked out of capital markets if a politically motivated central bank (in charge of capital allocation) decided that fossil fuels were a danger to the planet.
It's pure Soviet BS, to be direct.
You can see why the crypto people have the right idea – decentralize money and get it out of the hands of the centralizing, revolutionary, political zealots...before they take us all back to the Stone Age, where we're cold, hungry, and in the dark.
This is what I mean when I tell readers of The Bonner-Denning Letter that "we're doomed". It's not a fatalistic point of view. It's a realistic one.
I mean there's very little we can do, as private citizens, about big historical and monetary trends – except to think about them, connect the dots, and follow them through to their logical conclusions.
We're witnessing the deliberate mass impoverishment of an economy and the systematic destruction of all the institutions which allowed it to flourish. I'm talking about private property, sound money, the rule of law, limited government, and win-win trade.
All you can do, all you SHOULD do, is try not to get wiped out financially (in the fake market) or caught up in the mess politically (resorting to what James Madison called "faction").
That's why I've been telling readers to "definancialize" their life. That means moving more of your money out of a financial system that is vulnerable to collapse.
An overzealous, politically motivated central bank is a danger to your wealth. Physical things that you own – especially gold and silver, of course – are one way to fight back.
Something is happening. Call it whatever you like. Call it socialism. Call it MMT. Call it the death of win-win capitalism. It's the same thing. And it's coming faster than you realize.