CENTRAL BANK
How Central Planners and Central Banks manipulate the system and keep
everything under their control. These next questions and their answers will be
discussed in this file.
Just like the 70’s inflation where we were told it was due to external factors like war in
the middle-east which caused sanctions on oil which led to the price going from $3 in
september 1973 to $ 12 in January 1974. But what is the reason?
Answer: Conscious policies taken by the central planners at the central banks.
- Why the asset price bubbles and recurring banking crisis?
Answer: Conscious policies taken by the central planners at the central banks.
- After many decades of the same repeat businesses, why haven’t the regulators and
central planners learned how to avoid it?
Answer: Conscious policies taken by the central planners at the central banks.
- Why have all those developing countries who adopting the Wahington consensus
advice (IMF/World Bank) on development have failed to do so in the last 70 years?
Answer: Conscious policies taken by the central planners at the central banks.
- Since the creation of the IMF/World Bank only 5 countries moved decisively from
developing countries to developed all by ignoring the Wahington advice and adopting
different policies like Japan, Taiwan, Korea, Singapore and China -How did they do it?
Answer: Conscious policies taken by the central planners at the central banks.
- Why the inflation since late 2021? Why did QE in 2008 not cause it?
Answer: Conscious policies taken by the central planners at the central banks.
- Why was Japan highly succesfull on track to overtake the US in terms of GDP by 1993
but in 1992 moved into a 20 year recession
Answer: Conscious policies taken by the central planners at the central banks.
- Why the “low produvtivity puzzle” in the UK? why such high productivity in Germany?
Answer: Conscious policies taken by the central planners at the central banks.
There are 3 theory’s to what banks exactly do, the first one Which most people believe is
that banks are financial intermidiary’s and nothing more special.
The second: financial intermidiaries and there is something like money
manupilation/multiplication Thirdly no financial intermidiaries but each bank creates new
money individually, when a bank gives a loan where does the money come from?
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While the the last one seems most extreme it is the correct one. Will be further
explained.
By the UK law banks do NOT take deposits and they do not lend money?
Actually you create a loan with the bank for your deposit amount so they owe you that
amount but it is NOT a bankdeposit it is an (I owe you) construction. Which is called a
“DEPOSIT” where you become a creditor of the bank and the deposits are a bank’s
debts.
So a deposit is on the asset side of the balance sheet and what you take out of your
bank account is put on the liability side of the balance sheet but this Liability is created
out of thin air, there is no transfer in between accounts. How do you ask?
Banks are really special, these are some things banks do:
- Unlike non-bank financial institutions, banks create money
- They do this in the name of “Bank lending” which is credit creation
- The money for a bank loan is newly created
- Banks decide who gets newly created money and for what purpose
- Banks reshape the economy through their loan decisions or ‘Interest Rates”
- Now we know why Central Banks often conduct their true monetary policy by “guiding”
and ‘monitoring’ bank credit they do this in very clever ways but we are about to find out.
*IMPORTANT TO KEEP IN MIND*
What causes the recurring boom-bust cycles and crisis?
Credit creation is devided in 2 streams:
-Bad (GDP Credit) Credit used for real economy, causing GDP Growth “Consumption
Credit” (inflation without growth) No creation of things - Good “Investment credit” creation
of new goods and services or productivity gains that generate more income, which
creates growth without inflation.
-Very bad (Non-GDP Credit) Credit used for financial transactions, Asset inflation,
bubbles and banking crisis
Question: Just like the 70’s inflation where we were told it was due to external
factors like war in the middle-east which caused sanctions on oil which led to the
price going from $3 in september 1973 to $ 12 in January 1974. But what is the
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reason?
Answer: Conscious policies taken by the central planners at the central banks.
The 1970’s inflation wasn’t due to any middle eastern war or the raise in the price of oil,
it was the excessive printing of new money in the banking system, recording the highest
bank credit growth after the war in march 1973.
Evidence: The oil price only started to raise in October of 1973 where the credit boom
started in 1970 and peaked in mid 1973, which means it could never been of the oil price
nor the war.
How the 2022 inflation could’ve been predicted.
The lack of awareness in the 2020 inflationary Central Bank monetary policies?
Many believe this was a repeat of the 2008 QE (Quantative Easing) policies. IT WAS
NOT
Quantitative easing is a form of monetary policy in which a central bank, like the
U.S. Federal Reserve, purchases ‘debt securities’ from ‘normal banks’ this
represents borrowed money that must be repaid.
Central banks do this to reduce interest rates and increase the money supply.
Quantitative easing creates new bank reserves, providing banks with
more liquidity and encouraging lending and investment.
Here you can see the grey line which indicates the bank credit creation and the blue line
indicates the federal reserve credit creation.
You can also see in 2008 how the banks got a negative credit creation which brings the
overall total credit creation down which now doesn’t seem as extreme anymore.
Where in 2020 bank credit creation revved up a lot, the fed did the SAME THING.
Central Banks forced the banks to increase bank credit in the real economy by buying
assets from the non bank sector and were largely used for CONSUMPTION.
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Revealed Preference & the Theory of Bureaucracy
-Central banks have many levers to control bank credit creation.
-Over the past 50 years. Central banks have become more powerful than ever before in
history. They used the 1970s' inflation to push for independence.
-During this time period. the amplitude and frequency of business cycles has Increased.
-In fact, there are now recurring boom/bust cycles followed by banking crises.
-This is the Revealed Preference' of the central planners.
-I warned about this in 2003 and called this "Central Bank Risk" - we have given too
much power to the central planners and have not insured meaningful accountability.
-To the contrary, each crisis has resulted In more powers being given to the central
planners at the central banks (see 2008 crisis).
-This caused Regulatory Moral Hazard: the central planners get rewarded for each crisis
they create.
Question: Why is there a lack of knowledge about banks & inflation?
Mainstream economics assumes that monetary policy is best measured by the interest
rate, this view has been sponsored by the central planners for over 200 years.
What all mainstream theories of the past 200 years agree upon is the interest rate theory
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“Lower rates lead to higher growth, higher rates lead to lower growth” THIS ISN’T TRUE
Reality: High growth leads to higher interest / Low growth leads to low interest
-Interest rates are the result of economic growth
-So they cannot at the same time be the cause of economic growth
-The facts contradict the official story of monetary bannking policy
It is not rates, but bank credit that determinates economic growth.
Why do central bankers keep repeating the mantra that they use intrerest rates as a
policy tool? It is only a smoke-screen.
RULE in economics: The truth is the opposite of what they tell you. Economics became
the first scientific discipline that was systematically controlled top-down to tell convenient
untruths, cover up the truth, suppress people who go against and squeeze out those
people.
This has increasingly become the model for all scientific disciplines.
Question: Why the “low productivity puzzle” in the UK? why such high
productivity in Germany?
In Annual export figures up to 2008, Germany is the biggest exporter worlwide followed
by China, USA, Japan, France, Italy.
For the past 200 years the German economy has consistently been one of the strongest
in the world.
German exports have been almost as large as chinese exports, although the German
population is a mere 6% of the Chinese.
-Define “Market Champion”= a company that has a first second or third largest market
share in the world in its industry.
- Define “Hidden Champions”= a small or medium sized enterprise (SME) that is a
market champion
Why SMEs?
They account for two thirds of employment in most economies. They are the biggest
employer.
Small firms are a job multiplier: money invested in smalll firms creates many more jobs
than the same amount invested in a large firm.
Which country has most hidden champions in the world by far?
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-Independent study has found,: no other country in the world has so many “Hidden
Champions”as Germany: 1300 small firms are global market leaders in their respective
markets.
-This is unique in the world, how is this possible?
What is the relationship between bank size and borrower size?
Answer: Large banks prefer to lend to large firms. - Who lends to small firms? : Small
Banks
Germany has the most amount of banks in the EU(+-1500), almost ten times more than
in the UK.
There is a war against these banks as the ECB (European Central Bank) has an anti
bank policy where they already killed over 5000 banks since the start of the ECB.
Because they don’t want small banks having so much influence over these “Hidden
Champions, German community banks were not affected by the 2008 crisis.
This was because community banks increased SME lending when the 2008 crisis hit - so
there was no recession and no increase in unemployment.
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So the question is not “Banks VS Central Banks” But it is centralisation vs
decentralisation of decisions.
Should the allocation of money be done by central planners at unaccountable
independent central banks or be organised in a decentralised market based fashion?
The evidence to why centralised decision makingis bad in the UK
The UK banking system is one of the most concentrated ones in the world
About 90% of all deposits are with just 5 banks!
Decision making is centralised in the london headquarters (City of London)
There is a lack of competition in the UK banking industry.
That is why productivity is way lower in the UK because small firms can’t get funding.
The 5 big banks fail to provide long-term investment loans: mainly up to 1 year.
Evidence that central decision making isn’t productive. (China-SU)
The SU (Soviet Union) adopted the central system for over half a century, This failed
collapsing by the end of the 1980’s.
By contrast Deng Xiaoping reformed china’s former SU style and introduced many
commercial banks including 100’s local co-operative banks.
This made china a thriving country and delivering a ‘economic miracle’ for double digit
growth in several decades, it is becoming the largest economy in the world due to this.
”Window Guidance” is used by the government to suppress harmfull bank credit
creation (so bank credit for asset transactions & consumption) while they encourage
productive credit.
Which developing countries have ever made it to a developed country?
In the 20th century only 5 countries have made it to developed, which are all in eastasia.
Japan, South Korea, Taiwan, China, Singapore, delivered amazing results by double
digit growths and lifting millions out of poverty.
At 10% GDP growth per year national income doubled in 7 years. Economists in the US
and Europe claim that such enormous amounts of growth are due to deregulation,
privatisation, liberalisation, these neoclassical economics allow no other explanation.
Kind of weird right?
?GDP? (Real gross domestic product (GDP) is an inflation-adjusted measure that
reflects the value of all goods and services produced by an economy in a given year.)
We should do something with this growth model isn’t it?
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In fact this east asian high growth model is contrary and forbidden by the Washington
Consencus institutions. Such a growth model which is better for small firms or
companies is illegal????
Japan in the 1980’s: japanese central banks forced banks to boost bank credit for asset
purchasing to create an asset bubble and later on collapsing to bankrupt the banking
system and destroy banks and reduce number of banks while also forcing structural
change in the economy.
What do central planners want?
- Theory of Bureaucracy: Bureaucracies try to grow and increase their power
- Central planners want more power
- They want to increase the share of money controlled by them
- Their 'enemy': The amount of banks to be minimal. Not the CB because they have
some sort of power over them.
IMPORTANT
What changes are these same decision-makers or central planners proposing
today?
Monetary Reform
- Central banks have supported the monetary reform movement in several countries.
The goal is to break banks and concentrate all money creation in the hands of the
central planners.
- Over the past 20+ years, central banks have used monetary and regulatory intervention
to reduce the profitability of ordinary and especially small banks, driving them out of
business. Over 5000 small banks disappeared in the US, and the same in Europe during
this time around 5000 banks closed.
- Now the central banks, who are the key bank regulator, are proposing to directly enter
into competition with their regulated, the banks, by offering retail and business current
accounts at the central bank to the general public (marketed as "central bank digital
currency" - CBDC).
- This means that banks will be driven out of business entirely and will disappear. - The
next banking crisis (currently in the making, with a massive increase in US bank credit
creation while corporate bankruptcies and large-scale unemployment looms) will finish
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them off, given the G20 bail-in rules and negative attitude of the regulators (getting ready
to take over the market).
IMPORTANT
What changes are these same decision makers proposing today?
Again Monetary Reform
- The destroying of banks will reduce economic growth to zero.
- This is why the central planners favour the narrative that we need to "de- growth" and
we need "zero growth" for environmental reasons. Seriously?
- This is not true, since economic growth per se is not harmful to the environment remember, it is just a statistical illusion.
- What is harmful to the environment are harmful activities, pollution, exploitation of
resources, damage to ecosystems and nature. These need to be directly targeted, and
this can be achieved. but we will need economic growth to accomplish this.
- Green economic activity can instead be a boom sector and can result in very high
economic growth - if enough money is created by banks to allow this.
IMPORTANT
What changes are these same decision-makers proposing?
AGAIN Monetary Reform
- Central banks have propagated the abolition of cash - which will allow them to enforce
negative interest rates (withdrawals from your bank account).
- Universal basic income has been proposed to deal with vast large-scale
unemployment. This will be paid with central bank digital currency.
- The central planners will gain absolute insight into the activities and transactions of
every person - and control to intervene or shut down transactions.
- To render central planners' power absolute, a firm link between CBDC and people is
proposed, such as via microchip implants.
- The unprecedented restrictions to civil liberties that have been imposed in most
countries in the world in 2020 are an indication of the "new normal" that has been
planned for us by the central planners.
The anti-bank steps taken by the central planners
-Blaming the banks for the 2008 crisis, when it was actually caused by the central
planners, and directing media coverage against the banks. Why was there no critique of
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the role of the central planners/central regulators?
- Making traditional banking unprofitable by adopting risky zero/negative interest rate
policies that do not support the economy but emasculate banks.
- Increasing the costs of banking sharply by imposing yet more regulations on the banks,
driving the small banks out of business: under ECB, 5000 banks are killed.
- Support for pseudo-grassroots (astroturf) "activist" groups like PositiveMoney to
demand the abolition of banks
- Support for agents advocating the abolition of banks, with UK agents staging a
referendum in Switzerland on the topic.
- Organising conferences and publications giving the wrong impression the central
planners didn't know that 97% of the money supply is created by banks!
- Establishing separate payments regulators and authorisations for "electronic money"
providers, creating significant competition for banks
-Supporting the PSD2 EU directive forcing banks to share customer data with their
competitors
The Solution:
Decentralise and Break up the Concentrated Power
- We need decentralisation also in our monetary system: The future is in local,
decentralised public money backed by not-for-profit community banks.
- 97% of the money supply is private company credit, not privileged at law. It is best
created by small, locally accountable banks.
- Key principle: Self-determination, self-responsibility, self-administration
- These are the 3 fundamental principles of the co-operative movement (SchultzeDelitsch, Raiffeisen, Germany 19th century), which early on focused on establishing cooperative banks controlled by the local communities
- Lord Acton: "It is easier to find people fit to govern themselves than people fit to govern
others."
Lord Adair Turner (Chairman, FSA until 2014):
"Banks have become too large to be socially useful"
The Solution:
- The creation of a network of local, small-scale, not-for-profit Community Banks,
modelled on the successful German example.
- Community Banks that do not lend money for speculative purposes, but for productive
investment by SMEs in their local communities.
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- In most countries, this is what the banking sector looked like 150 years ago!
- But: banking is lucrative. The bigger banks eat up the smaller banks.
- Banking is prone to concentration, if small banks can be taken over or merged.
Why Local Banking is Popular
- Business (especially SMEs) gets access to finance (low-cost, long-term) at competitive
rates and is supported during recessions.
The wider community gets:
- A bank whose goals are aligned with theirs (and pays taxes!)
- Local growth and many new job opportunities.
- A place to put their money where it can benefit the local community, not far-flung
projects or speculators.
- Stable growth without financial crises.
- More equal income and wealth distribution.
The Best Track Record of any Banking System
Local First Community Interest Company establishes networks of local, small-scale, notfor-profit Community Banks.
- Introducing such a decentralised banking system will solve many of society's problems:
It will
- Reduce inequality
- Deliver true social inclusion and more equal opportunities
- Improve quality of life by decentralising the economy
- Avoid boom-bust cycles and banking crises, create stability
- Support the green economy - thriving in Germany thanks to local banks
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