Central bank policies have not only failed to ignite economies, they’ve enriched the tiny subset at the top of the economic pyramid and made everyone else poorer. From Charles Hugh Smith at oftwominds.com:
Central banks can only do one thing, and that’s provide monetary welfare for the wealthy.
The fact that central banks provide welfare for the wealthy is now entering the mainstream. The fact that all central bank policies since 2008 have dramatically increased wealth and income inequality is now grudgingly being accepted as reality by mainstream economists and the financial media.
The central banks’ PR facade of noble omniscience on behalf of the great unwashed masses has cracked wide open. Even The Wall Street Journal is publishing critiques of Federal Reserve policies that suggest the Fed has no idea how the U.S. economy actually works because their policies have failed to help the bottom 95%.
The grudging admission that central bank policies have enriched the rich while failing to benefit the bottom 95% is a breakthrough–the stone wall of denial has finally been pierced. The mainstream media and the Establishment have resolutely clung to the self-serving fantasy that the Federal Reserve 1) knows what’s it’s doing and 2) is boosting a “recovery” that will soon achieve self-sustaining “escape velocity”–that is, the economy will generate its own growth and the Fed can dial back its zero-interest rate policy and all its other unprecedented monetary easing measures.
But like a strung-out junkie that needs ever-stronger injections of smack just to stay alive, the U.S. economy is now totally and completely dependent on central bank heroin to keep from crashing. Rather then wean the economy of central bank largesse, the Fed has made the entire economy dependent on zero interest rates, central bank asset purchases and quantitative easing.
At the mere hint that rates might rise or the Fed might cease buying assets and goosing liquidity, the stock market swoons and every sector that’s dependent on cheap, abundant credit faints dead away.
We now have the charade of Chief Heroin Pusher Janet Yellen claiming the addict is “recovering” while she shoves another needle of monetary smack into the comatose U.S. economy. The Fed fantasy was that boosting the wealth of the obscenely wealthy would “trickle down” to the bottom 95% via “the wealth effect”–as stocks and bonds rose in value, households would feel wealthier and happily plunge deeper into debt.
Apparently the hordes of PhDs and “professional” economists in the Fed were incapable of observing that 3/4 of all financial wealth is held by the top 5%: the top 1% owns 43% and the next 4% own another 30%. The upper-middle class owns 15% and the bottom 80% own what little is left: “wealth” such household belongings and equity in homes that can no longer be extracted.
To continue reading: Central Banks = Welfare for the Wealthy
The FED! Reading this article has again reminded me of what it is and what it is not.
The marriage in 1913 between the politicians and the bankers, wherein the politicians vowed to assure the banks FRN’s were the only legal tender, and the banks vowed to provide enough of them to enable ANY spending and debt by the politicians, is finally reaching its inevitable separation and annulment/divorce.
At present, credit (debt) is the “creator” of FRN’s. As the truth of the matrimonial dysfunction gains notice, the Treasury will, through congress or by Executive Order, to take direct control and impose a “settlement.” Said settlement will amount to little more than this:
The Treasury will “print” whatever FRN’s (or whatever) may be needed, without regard for such annoyances as credit or debt.
On December 18, 1912, J.P. Morgan, in response to questioning posed by Samuel Untermyer, Chief counsel of a House sub-committee under the House Committee on Banking and Currency, responded as follows:
Mr Untermyer:
“I want to ask you a few questions bearing on the subject that you have touched upon this morning, as to the control of money. The control of credit involves a control of money, does it not?”
Mr Morgan:
“A control of credit? No.”
Mr Untermyer:
“But the basis of banking is credit, is it not?”
Mr Morgan:
“Not always. That [credit] is an evidence of banking, but it [credit] is not the money itself. Money is gold, and nothing else.”
Old J.P. calmly stated without fanfare, what, at the time, was obvious to most. Nothing can take the replace of “actual” money! Not its paper ghosts, not the movement of electrons in response to keystrokes, not whatever instruments of credit might be fashioned! ONLY gold is money.
That timeless reminder, when it finally again comes, will be a harsh one. It may be disguised by war, the usual harbinger of such reminders, but It is always accompanied by economic carnage.
For further elaboration of the real money theme, see the SLL article “Real Money.”