14 ms·

Central Banks Have Become Irrelevant

63 points by elsewhen 6y ago

jariel 6y ago
The amount of debt being created by governments, willy nilly, with lack of oversight due to 'COVID' is just scary. And that's just regular debt, not the broad-money creation problems articulated in the article. Anyone with the power to 'invent money' is going to abuse it an fight to the death to keep it. COVID was/is a fight, we're going to have to fight to rationalise finance, it may never happen. Since 2008 we've been living in a weird kind of financial fiction. FYI consumers have been 'paying' huge kinds of inflation on their homes. Having some degree of inflation would put that to bed quite nicely and it may not be so bad for quite a lot of people.
- yokaze 6y ago
  Hardly willy nilly. It is in accordance with the Keynesian economics school of thought. It's simply that the Chicago school of thought is getting out of fashion. Also, debt is currently cheap to get, so for the government not to invest would be rather unrational. And that is ignoring the downside on the income of a tanking economy.
  - jariel 6y ago
    "It is in accordance with the Keynesian economics school of thought" This is the magic money language of every 'debt doesn't matter' politician. First - this is not about 'business cycle' it's a meta-cycle and it's possible the money will literally never get paid back. Second - it's not just debt, it's tinkering with the monetary system itself. The Fed, since 2008 has been sitting on Trillions of garbage assets (bundled home loans) bought at 'face value' though they were underwater when purchased. This is a pretty direct attack on the integrity of the institution. Your dollars were backed by Gold, then The US Governments Ability to Pay Their Debt, then 'Toxic Loans' - and it's only going to get worse. Canada is throwing in 'a billion here, a billion there' with COVID spending, including a $1B shout out to the PM's favorite charity. It doesn't sound like a low when $250B is blown otherwise. The amount of spending, the terms (see: EU's deal released just yesterday) are fairly unprecedented and it's going to take generations to sort out. Both Canada and Germany in the 1990's had to undergo major restructuring, in Canada, due to excessive spending previously & facing serious credit ratings problems. Thankfully, their timing was perfect as the global situation was good. Spain is contemplating 'permanent UBI' - which they can't remotely afford. The difference between 'now' and '80 years ago' is that the future of Western nations entailed considerable growth and renewal, now, this is not the case. There's nothing to indicate there will be any way to reliably repay the debt. So - we are resorting to ugly new measures, which are changing the nature of what 'money' actually means. This is not 'Keynes' - it's a secular realignment of the entire system.
    - imtringued 6y ago
      I can't follow your comment. Really, the central banks have been trying to raise inflation for decades now but they did so with highly ineffective means. Now that governments found an effective way of increasing inflation to the expected target everyone is suddenly scared of governments abusing this power even though this is what was intended to happen for more than a decade. People were actively looking forward to this.
      - zby 6y ago
        Yeah - I think the ideal agreed was about 2%, but maybe that was just the monetarists who prefered it around 2%, I am not sure what other schools propose, maybe 4% is Keynesian? But the point is that what everyone tried to have inflation in a controlled way. The idea was that central banks can do that, but apparently that did not work well enough. Now we are back to letting governments control inflation - and the historical precedent is that this easily leads to hiperinflation.
        Proven 6y ago
        Government-created (this includes central bank-created) inflation is a form of theft from savers and laborers. Ideally there'd be none from that source. Theft executed in a controlled way shouldn't be viewed as ideal. As per the interview there is no doubt whatsoever what the intent is: create inflation higher than yield on government debt (which presumably includes the rate of inflation, perceived risk and other factors) and rob the bondholders (also known as savers, which includes workers with retirement plans or other savings). Before we muse on what inflation rates may be optimal, perhaps we should wonder about the morality and legality of institutionalized theft at scale. If I stole 2% of your savings you'd probably want me in jail. The government and central bank aims to steal 2% every year and statists wonder if 4% or 1% may be better.
      - raxxorrax 6y ago
        Depends on your country I guess, but those that didn't seem to be far more successful with their budgets. It would also mean that the practice of not increasing wages can continue. If you ask businesses to increase wages by 4% every year, I think the "new" economic model will quickly fall out of fashion again. edit: And you basically argue that the economic strategy of Spain or Italy is superior to that of nordic countries, which is questionable in my opinion. Maybe it is "popular" because some countries have large amounts of debt?
  - Proven 6y ago
    LOL. There's no "fashion" in economics. HN has its fair share of statists who due to their left-leaning values tend to be Keynesians (or worse, such as Magic Money Tree fans). There's no need to consider how economics actually works, because it's just a matter of choice and not right or wrong. For example Austrian economics is out of question because it favors minimal government spending, which doesn't play well with HN's Big Government fans. Why consider it when it's clearly a wrong choice? > Also, debt is currently cheap to get, so for the government not to invest would be rather unrational. Have you thought that one person's debt might be another person's asset? And did it occur to you that the cheaper it is for governments to borrow, the more they steal from all who own that debt (including, but not limited to, your retirement fund)? > And that is ignoring the downside on the income of a tanking economy. Who says that "government investments" generate more income compared to investments made by private investors who invest their own money in things they usually understand pretty well? I doubt you'd invest your money in a renewable energy fund managed by AOC. But here you are calling for exactly that because it's not your money. It's not hers either and that's how anyone who thinks can figure out how much income growth those investments can generate (none). Do you not remember how this investment went? https://en.wikipedia.org/wiki/Solyndra#Government_support https://en.wikipedia.org/wiki/Solyndra#Government_support What will happen is wealth destruction, malinvestment on a scale unseen in genrations. Wealth will be stolen from those who invest and grow it and wasted on unproductive investments that consume, rather than increase, wealth. Coast-to-cast Solyndras if Biden wins. Less worse, but still bad, if Trump wins.
  - raducu 6y ago
    God, I'm so tired of hearing this: "debt is currently cheap to get, so for the government not to invest would be rather unrational". Debt is cheap BECAUSE we had a financial crisis, BECAUSE we let people who shouldn't have indebted themselves indebt themselves. There will be grave consequences an suffering in enabling inept people and corporations take on more debt.
    - deleted 6y ago
      [deleted]
    - neilwilson 6y ago
      You can only borrow if you have collateral to discount against. The question is whether the bankers know how to do their job properly and can assess collateral.
      - raducu 6y ago
        But isn't collateral a tried an tested measure of knowing if you are actually able to repay your debt? Who would know better than the bankers, politicians?
        neilwilson 6y ago
        Lending stops when people run out of collateral. It's not the interest rate that determines what people can borrow. It's how much collateral they have. The financial collapse was due to bankers failing to assess collateral with sufficient haircut.
        raducu 6y ago
        Could you explain your last phrase more concretely? In my country mortgage loans stop when people don't have the downpayment of 5%-15% of the mortgage or when they have already indebted themselves for more than 45% of their income. Other loan types are also capped when you debt level exceeds a certain threshold of your income. This all seems reasonable to me. It also seems reasonable that banks would not issue more debt to people when their collateral value drops in market values, such as housing market bubble bursts.
pattusk 6y ago
The article mentions at several point how the "financial repression" will be negative to investors. But what about for the majority of the population that holds little to no financial assets? Are you expecting a repeat of the financial repression that dominated the decades after World War Two? Weren't those decades also characterized by unprecedented economic growth and increase in standards of living? Isn't what the author says government will do perfectly defensible from a Keynesian perspective, not to mention from a democratic perspective (why should unelected central bankers have this sort of economic powers over duly elected representatives?)
- core-questions 6y ago
  > But what about for the majority of the population that holds little to no financial assets? Inflation that is higher than the interest rate on savings is essentially a hidden tax, one that incentivizes people to not save their money because the time value of it changes, leading toward it being more valuable sooner rather than later. This will definitely impact the middle class more than anyone else: the price of goods will rise while salaries remain fairly stagnant (so-called "stagflation"). Essentially, all of our meager savings are going to be pillaged in order to > Weren't those decades also characterized by unprecedented economic growth and increase in standards of living? Consider this: dollars can be thought of as representing favours owed, in a prioritizing sense (i.e. if I want you to do something for me, to the exclusion of other offers, I'll offer you more money). In an inflationary environment with rising costs, we'll all have less money in terms of purchasing power as time goes along - essentially, we end up owing each other fewer favours in the future - so it behooves us to call them in earlier rather than later. This _should_ stimulate people into buying a lot of things and therefore boost business (and GDP) as people all start essentially forcing each other to work harder, hire more help, etc. but may backfire as people see it as a reason to start finding inflation-proof investment options. Some will invest in hard currencies, some in commodities or real estate, but of course, some in simple consumer goods. Either way, it stands to reason that if Napier is right, everything's about to get more expensive, though at the same time we'll probably also see a lot of consumer credit. Weird.
  - imtringued 6y ago
zackees 6y ago
X22 report had been talking about Trump taking control of the Fed since april. There’s a reason X22 get 100k-300k views per youtube is episode, he is constantly right on the money. I’m glad the rest of the intellectual class are finally acknowledging that the government has seized control of the central banks. X22 says we are going to see tremendous growth in our economy starting in Q4. His track record of being right on the money gives me optimism.
- temptemptemp111 6y ago
  You were working at YouTube during the shooting, correct? What were you working on when the shooting took place, if you don't mind me asking? :)
- dageshi 6y ago
  I think the entire point of the article is that governments have a way of pumping money into the economy that doesn't require central banks...
  - Fjolsvith 6y ago
    But that is not what Trump is doing. He is using the Fed to take on as much debt in the nation as possible. Why? Because there will be an audit of the Fed and it will be discovered that the Fed has been misusing their funds. This will allow the US government to cry foul and dis-organize the Fed - in effect, declare bankruptcy. What does that do the US? It basically stimulates the economy by forgiving that debt the Fed bought. What does it do to the central banks to whom the Fed owes money? Naysayers take note: The IRS stopped all collection actions back in January. IRS filing and payment deadlines were delayed. How was that possible? The president just can't wave a magic wand and make the Federal Reserve jump through a hoop. Or can he? What's the current EFFR?
RobertoG 6y ago
What a tortured logic this interview follow. It's funny that the period from the second world ward to the neoliberal revolution in the 80's is considered by this guy a bad thing. It was a period of grow shared by a big part of the population. I suppose if you work in the City or Wall Street, something like that looks like the end of the world. And he believe two contradictory things, he thinks that politicians control the central bank and that they need private saving institutions to control the bond yields. But if you control de central bank you already control the yields (see Japan), you don't need any private institution help. Mainstream economics is arriving to what Modern Monetary Theory has been telling us the last 20 years. There are not insights in this article that have not been repeated again and again by the MMT people.
nimbius 6y ago
>Governments have taken control of the money supply. laughable. The economist Wolfgang Streeck debunks this entire premise in his book 'how capitalism will end.' after the 1993 financial crisis and 2008 market collapse financial power eclipsed the state through the introduction of debt and credit as the means of financial operation. First at the personal level, through blank-check irresponsible issuance of credit cards and mortage loans, then through the insistance that states and entire nations operate on a debt model, sacrificing traditional tax revenue from the top earners instead for a system of infinite term, low and even zero interest credit. all they have to do is prove their solvency through austerity measures, which absolve the wealthy from paying evermore taxes in the process. Streeck even highlights how this happens in the EU, with northern nations routinely subsidizing obstinant southern nations in an uncomfortable exchange to push them toward a debt structure that only benefits the wealthiest. He makes a compelling argument that everyone knew what greece was doing, even encouraged it, and yet walked away blameless after the crisis. the only way central banks benefit the political class is in their employment as a cudgel to punish the wicked. Central banks disarm valid opposition like Edward Snowden, Julian Assange, and Kim Dot Com. Or at least they did, until cryptocurrency.
dageshi 6y ago
I think this is probably one of the more important/insightful articles that's been on HN in some time.
- alecco 6y ago
  And it's on the edge of getting out of the front page with barely 50 points in 9hs...
- sauwan 6y ago
  This guy also predicted significant inflation back in 2010 during the last crisis which...didn't happen. Take it with a bag of salt.
  - dageshi 6y ago
    Always take articles like this with various amounts of salt. My thought is most of what he's saying sounds plausible and it's relatively easy to see if it begins to happen.
  - defertoreptar 6y ago
    Was the author blatantly lying in the introduction paragraph? > In the years following the financial crisis, numerous economists and market observers warned of rising inflation in the face of the unorthodox monetary p0licy by central banks. They were wrong time and again. > Russell Napier was never one of them. Edit: maybe they were referring to the pandemic when they say "financial crisis"?
einpoklum 6y ago
> Politicians have gained control of money supply and they will not give up this instrument anymore The issuing of money is a key aspect of sovereignty. So, if anything, it's "restored control of money supply". But even this is a misrepresentation, since most money in modern Capitalist states is created by commercial banks, through a Fractional Reserve mechanism: https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking in a nutshell - banks only hold a fraction of the money they give out as loans, i.e. when they make loans they literally create new money. It's also a slight misrepresentation since governments are mostly not-really issuing their own money, just telling banks to issue a lot of loans. Having said that - the states may need to issue money to cover failing loans (or otherwise introduce stiff austerity programs). When the state issues money, it is typically not debt-based like commercial money. (officially it may be registered as sovereign "debt" to the central bank, but that debt is just an artifice, and is never collected). ---------- > QE was a fiasco. All that central banks have achieved over the past ten years is creating a lot of non-bank debt. Their actions kept interest rates low, which inflated asset prices and allowed companies to borrow cheaply through the issuance of bonds. But that's what they set out to achieve! That's the policy that government - or perhaps we should say, large corporations and financial institutions, through government - chose to enact. It is an aspect of the collective insanity of capitalism that millions of people lost their homes, and got no bailout or public housing etc. - but the financial institutions who had inflated the bubble of speculation and helped drive those people into ruin were showered with cheap money (after some of them having been bailed-out outright at public expense).
acd 6y ago
I think central banks cause deflation by increasing money supply through lower interest rates. Here how that may works the newly created money does not flow to wage inflation they flow to investing in more automation software/robots/machines. More automation is deflationary products become cheaper to produce lowering their cost to consumers. Further more, wages are no longer local through globalization so local central banks cannot fully control wage inflation on a global market as cheaper wages products from foreign wages are imported. There has been a race to the bottom from central banks on low interest rates where countries has competed in lowering their currency by lower interest rates. This cycle is now somehow broken. Interesting that the interest rate will go up and the potential effect on mortgages.

63 points by elsewhen 6y ago

The amount of debt being created by governments, willy nilly, with lack of oversight due to 'COVID' is just scary. And that's just regular debt, not the broad-money creation problems articulated in the article. Anyone with the power to 'invent money' is going to abuse it an fight to the death to keep it. COVID was/is a fight, we're going to have to fight to rationalise finance, it may never happen. Since 2008 we've been living in a weird kind of financial fiction. FYI consumers have been 'paying' huge kinds of inflation on their homes. Having some degree of inflation would put that to bed quite nicely and it may not be so bad for quite a lot of people.

yokaze 6y ago
Hardly willy nilly. It is in accordance with the Keynesian economics school of thought. It's simply that the Chicago school of thought is getting out of fashion. Also, debt is currently cheap to get, so for the government not to invest would be rather unrational. And that is ignoring the downside on the income of a tanking economy.
- jariel 6y ago
  "It is in accordance with the Keynesian economics school of thought" This is the magic money language of every 'debt doesn't matter' politician. First - this is not about 'business cycle' it's a meta-cycle and it's possible the money will literally never get paid back. Second - it's not just debt, it's tinkering with the monetary system itself. The Fed, since 2008 has been sitting on Trillions of garbage assets (bundled home loans) bought at 'face value' though they were underwater when purchased. This is a pretty direct attack on the integrity of the institution. Your dollars were backed by Gold, then The US Governments Ability to Pay Their Debt, then 'Toxic Loans' - and it's only going to get worse. Canada is throwing in 'a billion here, a billion there' with COVID spending, including a $1B shout out to the PM's favorite charity. It doesn't sound like a low when $250B is blown otherwise. The amount of spending, the terms (see: EU's deal released just yesterday) are fairly unprecedented and it's going to take generations to sort out. Both Canada and Germany in the 1990's had to undergo major restructuring, in Canada, due to excessive spending previously & facing serious credit ratings problems. Thankfully, their timing was perfect as the global situation was good. Spain is contemplating 'permanent UBI' - which they can't remotely afford. The difference between 'now' and '80 years ago' is that the future of Western nations entailed considerable growth and renewal, now, this is not the case. There's nothing to indicate there will be any way to reliably repay the debt. So - we are resorting to ugly new measures, which are changing the nature of what 'money' actually means. This is not 'Keynes' - it's a secular realignment of the entire system.
  - imtringued 6y ago
    I can't follow your comment. Really, the central banks have been trying to raise inflation for decades now but they did so with highly ineffective means. Now that governments found an effective way of increasing inflation to the expected target everyone is suddenly scared of governments abusing this power even though this is what was intended to happen for more than a decade. People were actively looking forward to this.
    - zby 6y ago
      Yeah - I think the ideal agreed was about 2%, but maybe that was just the monetarists who prefered it around 2%, I am not sure what other schools propose, maybe 4% is Keynesian? But the point is that what everyone tried to have inflation in a controlled way. The idea was that central banks can do that, but apparently that did not work well enough. Now we are back to letting governments control inflation - and the historical precedent is that this easily leads to hiperinflation.
      - Proven 6y ago
        Government-created (this includes central bank-created) inflation is a form of theft from savers and laborers. Ideally there'd be none from that source. Theft executed in a controlled way shouldn't be viewed as ideal. As per the interview there is no doubt whatsoever what the intent is: create inflation higher than yield on government debt (which presumably includes the rate of inflation, perceived risk and other factors) and rob the bondholders (also known as savers, which includes workers with retirement plans or other savings). Before we muse on what inflation rates may be optimal, perhaps we should wonder about the morality and legality of institutionalized theft at scale. If I stole 2% of your savings you'd probably want me in jail. The government and central bank aims to steal 2% every year and statists wonder if 4% or 1% may be better.
    - raxxorrax 6y ago
      Depends on your country I guess, but those that didn't seem to be far more successful with their budgets. It would also mean that the practice of not increasing wages can continue. If you ask businesses to increase wages by 4% every year, I think the "new" economic model will quickly fall out of fashion again. edit: And you basically argue that the economic strategy of Spain or Italy is superior to that of nordic countries, which is questionable in my opinion. Maybe it is "popular" because some countries have large amounts of debt?
- Proven 6y ago
  LOL. There's no "fashion" in economics. HN has its fair share of statists who due to their left-leaning values tend to be Keynesians (or worse, such as Magic Money Tree fans). There's no need to consider how economics actually works, because it's just a matter of choice and not right or wrong. For example Austrian economics is out of question because it favors minimal government spending, which doesn't play well with HN's Big Government fans. Why consider it when it's clearly a wrong choice? > Also, debt is currently cheap to get, so for the government not to invest would be rather unrational. Have you thought that one person's debt might be another person's asset? And did it occur to you that the cheaper it is for governments to borrow, the more they steal from all who own that debt (including, but not limited to, your retirement fund)? > And that is ignoring the downside on the income of a tanking economy. Who says that "government investments" generate more income compared to investments made by private investors who invest their own money in things they usually understand pretty well? I doubt you'd invest your money in a renewable energy fund managed by AOC. But here you are calling for exactly that because it's not your money. It's not hers either and that's how anyone who thinks can figure out how much income growth those investments can generate (none). Do you not remember how this investment went? https://en.wikipedia.org/wiki/Solyndra#Government_support https://en.wikipedia.org/wiki/Solyndra#Government_support What will happen is wealth destruction, malinvestment on a scale unseen in genrations. Wealth will be stolen from those who invest and grow it and wasted on unproductive investments that consume, rather than increase, wealth. Coast-to-cast Solyndras if Biden wins. Less worse, but still bad, if Trump wins.
- raducu 6y ago
  God, I'm so tired of hearing this: "debt is currently cheap to get, so for the government not to invest would be rather unrational". Debt is cheap BECAUSE we had a financial crisis, BECAUSE we let people who shouldn't have indebted themselves indebt themselves. There will be grave consequences an suffering in enabling inept people and corporations take on more debt.
  - deleted 6y ago
    [deleted]
  - neilwilson 6y ago
    You can only borrow if you have collateral to discount against. The question is whether the bankers know how to do their job properly and can assess collateral.
    - raducu 6y ago
      But isn't collateral a tried an tested measure of knowing if you are actually able to repay your debt? Who would know better than the bankers, politicians?
      - neilwilson 6y ago
        Lending stops when people run out of collateral. It's not the interest rate that determines what people can borrow. It's how much collateral they have. The financial collapse was due to bankers failing to assess collateral with sufficient haircut.
        raducu 6y ago
        Could you explain your last phrase more concretely? In my country mortgage loans stop when people don't have the downpayment of 5%-15% of the mortgage or when they have already indebted themselves for more than 45% of their income. Other loan types are also capped when you debt level exceeds a certain threshold of your income. This all seems reasonable to me. It also seems reasonable that banks would not issue more debt to people when their collateral value drops in market values, such as housing market bubble bursts.

pattusk 6y ago

The article mentions at several point how the "financial repression" will be negative to investors. But what about for the majority of the population that holds little to no financial assets? Are you expecting a repeat of the financial repression that dominated the decades after World War Two? Weren't those decades also characterized by unprecedented economic growth and increase in standards of living? Isn't what the author says government will do perfectly defensible from a Keynesian perspective, not to mention from a democratic perspective (why should unelected central bankers have this sort of economic powers over duly elected representatives?)

core-questions 6y ago
> But what about for the majority of the population that holds little to no financial assets? Inflation that is higher than the interest rate on savings is essentially a hidden tax, one that incentivizes people to not save their money because the time value of it changes, leading toward it being more valuable sooner rather than later. This will definitely impact the middle class more than anyone else: the price of goods will rise while salaries remain fairly stagnant (so-called "stagflation"). Essentially, all of our meager savings are going to be pillaged in order to > Weren't those decades also characterized by unprecedented economic growth and increase in standards of living? Consider this: dollars can be thought of as representing favours owed, in a prioritizing sense (i.e. if I want you to do something for me, to the exclusion of other offers, I'll offer you more money). In an inflationary environment with rising costs, we'll all have less money in terms of purchasing power as time goes along - essentially, we end up owing each other fewer favours in the future - so it behooves us to call them in earlier rather than later. This _should_ stimulate people into buying a lot of things and therefore boost business (and GDP) as people all start essentially forcing each other to work harder, hire more help, etc. but may backfire as people see it as a reason to start finding inflation-proof investment options. Some will invest in hard currencies, some in commodities or real estate, but of course, some in simple consumer goods. Either way, it stands to reason that if Napier is right, everything's about to get more expensive, though at the same time we'll probably also see a lot of consumer credit. Weird.
- imtringued 6y ago

zackees 6y ago

X22 report had been talking about Trump taking control of the Fed since april. There’s a reason X22 get 100k-300k views per youtube is episode, he is constantly right on the money. I’m glad the rest of the intellectual class are finally acknowledging that the government has seized control of the central banks. X22 says we are going to see tremendous growth in our economy starting in Q4. His track record of being right on the money gives me optimism.

temptemptemp111 6y ago
You were working at YouTube during the shooting, correct? What were you working on when the shooting took place, if you don't mind me asking? :)
dageshi 6y ago
I think the entire point of the article is that governments have a way of pumping money into the economy that doesn't require central banks...
- Fjolsvith 6y ago
  But that is not what Trump is doing. He is using the Fed to take on as much debt in the nation as possible. Why? Because there will be an audit of the Fed and it will be discovered that the Fed has been misusing their funds. This will allow the US government to cry foul and dis-organize the Fed - in effect, declare bankruptcy. What does that do the US? It basically stimulates the economy by forgiving that debt the Fed bought. What does it do to the central banks to whom the Fed owes money? Naysayers take note: The IRS stopped all collection actions back in January. IRS filing and payment deadlines were delayed. How was that possible? The president just can't wave a magic wand and make the Federal Reserve jump through a hoop. Or can he? What's the current EFFR?

RobertoG 6y ago

What a tortured logic this interview follow. It's funny that the period from the second world ward to the neoliberal revolution in the 80's is considered by this guy a bad thing. It was a period of grow shared by a big part of the population. I suppose if you work in the City or Wall Street, something like that looks like the end of the world. And he believe two contradictory things, he thinks that politicians control the central bank and that they need private saving institutions to control the bond yields. But if you control de central bank you already control the yields (see Japan), you don't need any private institution help. Mainstream economics is arriving to what Modern Monetary Theory has been telling us the last 20 years. There are not insights in this article that have not been repeated again and again by the MMT people.

nimbius 6y ago

>Governments have taken control of the money supply. laughable. The economist Wolfgang Streeck debunks this entire premise in his book 'how capitalism will end.' after the 1993 financial crisis and 2008 market collapse financial power eclipsed the state through the introduction of debt and credit as the means of financial operation. First at the personal level, through blank-check irresponsible issuance of credit cards and mortage loans, then through the insistance that states and entire nations operate on a debt model, sacrificing traditional tax revenue from the top earners instead for a system of infinite term, low and even zero interest credit. all they have to do is prove their solvency through austerity measures, which absolve the wealthy from paying evermore taxes in the process. Streeck even highlights how this happens in the EU, with northern nations routinely subsidizing obstinant southern nations in an uncomfortable exchange to push them toward a debt structure that only benefits the wealthiest. He makes a compelling argument that everyone knew what greece was doing, even encouraged it, and yet walked away blameless after the crisis. the only way central banks benefit the political class is in their employment as a cudgel to punish the wicked. Central banks disarm valid opposition like Edward Snowden, Julian Assange, and Kim Dot Com. Or at least they did, until cryptocurrency.

dageshi 6y ago

I think this is probably one of the more important/insightful articles that's been on HN in some time.

alecco 6y ago
And it's on the edge of getting out of the front page with barely 50 points in 9hs...
sauwan 6y ago
This guy also predicted significant inflation back in 2010 during the last crisis which...didn't happen. Take it with a bag of salt.
- dageshi 6y ago
  Always take articles like this with various amounts of salt. My thought is most of what he's saying sounds plausible and it's relatively easy to see if it begins to happen.
- defertoreptar 6y ago
  Was the author blatantly lying in the introduction paragraph? > In the years following the financial crisis, numerous economists and market observers warned of rising inflation in the face of the unorthodox monetary p0licy by central banks. They were wrong time and again. > Russell Napier was never one of them. Edit: maybe they were referring to the pandemic when they say "financial crisis"?

einpoklum 6y ago

> Politicians have gained control of money supply and they will not give up this instrument anymore The issuing of money is a key aspect of sovereignty. So, if anything, it's "restored control of money supply". But even this is a misrepresentation, since most money in modern Capitalist states is created by commercial banks, through a Fractional Reserve mechanism: https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking in a nutshell - banks only hold a fraction of the money they give out as loans, i.e. when they make loans they literally create new money. It's also a slight misrepresentation since governments are mostly not-really issuing their own money, just telling banks to issue a lot of loans. Having said that - the states may need to issue money to cover failing loans (or otherwise introduce stiff austerity programs). When the state issues money, it is typically not debt-based like commercial money. (officially it may be registered as sovereign "debt" to the central bank, but that debt is just an artifice, and is never collected). ---------- > QE was a fiasco. All that central banks have achieved over the past ten years is creating a lot of non-bank debt. Their actions kept interest rates low, which inflated asset prices and allowed companies to borrow cheaply through the issuance of bonds. But that's what they set out to achieve! That's the policy that government - or perhaps we should say, large corporations and financial institutions, through government - chose to enact. It is an aspect of the collective insanity of capitalism that millions of people lost their homes, and got no bailout or public housing etc. - but the financial institutions who had inflated the bubble of speculation and helped drive those people into ruin were showered with cheap money (after some of them having been bailed-out outright at public expense).

acd 6y ago

I think central banks cause deflation by increasing money supply through lower interest rates. Here how that may works the newly created money does not flow to wage inflation they flow to investing in more automation software/robots/machines. More automation is deflationary products become cheaper to produce lowering their cost to consumers. Further more, wages are no longer local through globalization so local central banks cannot fully control wage inflation on a global market as cheaper wages products from foreign wages are imported. There has been a race to the bottom from central banks on low interest rates where countries has competed in lowering their currency by lower interest rates. This cycle is now somehow broken. Interesting that the interest rate will go up and the potential effect on mortgages.