My unpublished (100,000 word) book “The Financial Jigsaw”, is being serialised here weekly in 100 Issues by Peter J Underwood, author
Having considered some of the key effects of central banking here is the link to last week: Issue 20 The European Central Bank (ECB) and Bank of Japan (BoJ) have been keeping QE going since 2014 after the Fed changed direction and started quantitative tightening (QT) by increasing target interest rates currently at 2 – 2,25% and gradually reducing its balance sheet (commenced 2017) by allowing bonds and mortgage-backed securities (MBS) to roll off at maturity. QE in Europe is soon to end with the ECB saying that it too will stop QE by the end of this year although it has said little about reducing its some 4 trillion euros of debt it is holding on its balance sheet. The BoJ is likely to continue with its current monetary policy for some time yet. These moves are likely to influence events as we enter 2019 so watching the markets carefully is going to be important once the holiday season is over.
CHAPTER 4
CENTRAL BANKING
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.”
James Madison, Jr. (1751-1836), 4th President of the United States (1809–1817).
“I care not what puppet is placed on the throne of England to rule the Empire. The man who controls Britain’s money supply controls the British Empire and I control the British money supply.”
Nathan Rothschild – Banker; after the Battle of Waterloo
Features of the global banking system
The International Monetary Fund (IMF) is an organisation of 187 nations and all of them have a central bank and use the same fractional reserve banking system devised by the Federal Reserve of the United States of America in 1913.
There are some good reasons why the system should be changed but at present those in charge are of course benefiting from it and have no incentive to take action that would damage their own interests.
Here are some unhealthy features of the global banking system, created by central bankers, which you might recognise:
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- Inflation: The very nature of the banking system requires there to be inflation which is, in effect, a virtual ‘tax’ as the purchasing power of currencies falls and is reflected in the prices we pay especially for the essential items of food and energy. The winners are the 10% of the world who hold assets which ‘appreciate’ at the same time the currencies devalue. The value of the US dollar has fallen by 83% since 1970 but prices have seriously escalated between 2002 and 2012 as these examples of basics show: Eggs 73%, Coffee 90%, Bread 39%, electricity 42%, and motor fuel 158%.
- Debt: The bankers’ system relies on trapping the government in an endless debt spiral from which there is no escape. When a government needs to spend more than it takes in taxes it cannot print the money; the treasury must go to the central bank offering an IOU (Treasury bond) which exchanges the bond for newly minted money. The bond is then auctioned off to the banks and financial institutions operating in the bond market. However the government must pay interest to the central bank on the money it receives therefore the amount of debt is greater than the amount of money created (this is called ‘servicing the national debt’). The government will remain in debt in perpetuity without being able to service the debt unless they borrow more! It is a one-way, crazy system and works only in the bankers’ favour.
- Markets: The central bankers intervene in the operation of most, if not all, global markets and influence prices and values artificially, not allowing markets to freely discover the open market price of commodities and products. This distortion creates artificial economic signals which challenge free trade and cause ‘bubbles’ to occur at regular intervals. The sudden bursting of these bubbles creates the recessions and economic misery we see around us continually and which are all too familiar.
- Central Banks are Privately Owned: The stockholders in the twelve regional Federal Reserve Banks are the privately owned banks that fall under the Federal Reserve System. These include all national banks (chartered by the federal government) and those state-chartered banks that wish to join and meet certain requirements. Even the Federal Reserve itself has argued in court that it is “not an agency” of the federal government and is not accountable to the people or society in general. Most central banks follow this pattern, even the BoE is believed to be ‘privately’ owned in spite of a supposed ‘nationalisation’ by a Labour Government. This arrangement causes conflicts of interest between private and social financial objectives which adversely impacts government policy affecting each and every one of their national populations.
The attitude of bankers toward their governments
Perhaps a recent interview with the current head of the Bank of England, Mark Carney (formerly the governor of the central bank of Canada), will illustrate the attitude of central bankers’ towards their governments and populace:
Carney would prefer not to talk about the enormous power central bankers have gained since 2008, saying only: “We have a tremendous responsibility … because of a series of mistakes that were made in the private sector and the public sector.”
As witnessed by the surge in central bank holdings, the creation of new money beginning in 2008 with bank bailouts and the acquisition of long-term securities to keep interest rates low.
Because Canada had performed better than most western nations, Carney, unlike the Fed, did not order any new monetary policy. But he did keep interest rates down and that energised the real estate booms over the last few years in Vancouver, Toronto, Calgary and the rest of Canada.
He scoffs at the suggestion that “the party” will end at some point. “I am not sure we are having a party right now,” he says. “It doesn’t feel like a party.”
He has repeatedly expressed concern at the huge debt levels Canadians are accruing, at least partly because of his low interest rate policies. Surely he understands the anger of an older person watching their savings being eroded? Carney smiles grimly. This question is clearly a sore point; he gets a lot of post on the topic. “Canadians”, he says, “must understand that the alternative is massive unemployment and thousands of businesses going under”, and “my experience with Canadians is that they tend to think about their neighbours and their children and more broadly … they care a little bit more than just about themselves.”
Asked whether central bankers are not in fact enabling irresponsible behaviour by speculators enamoured of cheap money, not to mention politicians who seem unable to curb their borrowing and excessive spending, Carney merely remarks that: “voters in a democracy get the governments they choose”. I think this really sums up central bankers’ tendency to be immune to ordinary peoples’ concerns; some would call it arrogant.
Bankers are in control
In the process of the largest liquidity injection in the history of the world it is politics and the entire financial system that has effectively been rendered obsolete. Politicians are now nothing more than figureheads in a central banker world and the general public would be very angry to know that the only institution remaining to make global macroeconomic decisions is a private organization run by academics who act as lackeys for the world’s private banks.
However this would require the co-opted, mainstream media to actually explain and illustrate just what is going on behind closed doors; a process that would entail the loss of their financial advantage which is why we expect confusion to remain about who actually pulls the strings of the global financial puppets.
There is little doubt that nothing will happen to change anything until another major crisis occurs. Nobody can predict when this might come to pass but we can be sure that it will happen and probably suddenly without warning just as last time, and thus now is the time to prepare by understanding the picture emerging from this jigsaw of financial mystery.
These first four Chapters complete a central part of our jigsaw puzzle picture and with this knowledge we can move on to the following Chapters about how governments handle their finances and interact with global markets.
To be continued next Saturday
He has discovered The Devil’s Triangle: Central Bankers-Politicians-Their Minions