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How central banks have assumed a new primary function, no longer just ‘lender of last resort’ (bank bailout) but ‘permanent subsidization of the private banking system’ in the post-2008 period, when central bank monetary policy has become primary and austerity the policy for government spending. Dr. Rasmus reviews the 5 main themes of his just released book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Next Depression’ and explains why Fed and other central banks’ now raising interest rates and planning to sell off their balance sheet debt will precipitate another crisis if rates are raised much further or sell-offs are substantial. Central banks today confront a ‘Great Contradiction’.

TO listen go to:

http://prn.fm/?s=Alternative+Visions

Or go to:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Dr. Rasmus explains how the global capitalist economy entered a new phase of evolution with the 2008-09 global financial crash and recession, and how central banks have become the primary economic policy institution for the advanced economies. Central banks have been transformed since 2008 from institutions designed to bail out the private banks in periods of crises, into institutions that permanently subsidize the capitalist banking system by means of constant, massive liquidity injections to the private banks, shadow banks, and their investors. About $15 trillion in central bank liquidity has been provided by means of QE alone, and capitalist banking has become addicted to, and chronically dependent upon, central banks’ free money. Rasmus notes corporate debt has not been removed but only transferred to central banks’ balance sheets, and the global financial and real economy remains fragile and in the late phase of a real growth cycles that are now ending. Rasmus explains the ‘Great Contradiction’ of central bank monetary policy, as the only policy game in town, is that the subsidization of the banking system since 2008 is providing the conditions for the next financial crisis of that system. The 5 major themes of his just released book, ‘Central Bankers at the End of Their Ropes?: Monetary Policy and the Next Depression”, Clarity Press, July 2017, are reviewed. For more book information, go to: http://www.claritypress.com/RasmusIII.html

My most recent book will be published this month, entitled “Central Bankers at the End of Their Ropes?: Monetary Policy & the Next Depression”.

Here’s the TABLE OF CONTENTS, MAIN THEMES, and SYNOPSIS of the book with an expanded description of table of contents. Check out this blog and my website for ordering information this coming weekend. For more information in the meantime, check out the publisher, Clarity Press, website at:

http://www.claritypress.com/RasmusIII.html

TABLE OF CONTENTS:

Chapter 1: Problems & Contradictions of Central Banking
Chapter 2: A Brief History of Central Banking
Chapter 3: The US Federal Reserve Bank: Origins & Toxic Legacies
Chapter 4: Greenspan’s Bank: The ‘Typhon’ Monster Released
Chapter 5: Bernanke’s Bank: Greenspan’s ‘Put’ On Steroids
Chapter 6: The Bank of Japan: Harbinger of Things That Came
Chapter 7: The European Central Bank under German Hegemony
Chapter 8: The Bank of England’s Last Hurrah: From QE to Brexit
Chapter 9: The People’s Bank of China Chases Its Shadows
Chapter 10: Yellen’s Bank: From Taper Tantrums to Trump Trade
Chapter 11: Why Central Banks Fail
Conclusion: Revolutionizing Central Banking in the Public Interest:
Embedding Change via Constitutional Amendment
MAIN THEMES:

Theme #1: Central banks of the advanced economies—despite having been assigned by their respective economic and political elites the role of primary economic policy institution—have failed since 2008 to achieve their major objectives of long run stabilization of their banking systems or the restoration of pre-2008 economic growth.

Theme #2: The decades of central liquidity injections since the 1970s, that produced the 2008-09 crisis in the first place, then became the central banks’ solution to that crisis; that same liquidity solution, 2009-2016, has become the cause of the next crisis, as tens of trillions of dollars of even more liquidity-enabled debt has since 2008 been piled on the original trillions before 2008.

Theme #3: Central banks’ function of lender of last resort, in the past designed to provide excess liquidity in instances of banking crises, has in the 21st century been transformed into a new function: the subsidization of the private banking system by means of constant central bank excess liquidity. The private banking system today has become addicted to, and increasingly dependent upon, significant continuing infusions of liquidity by central banks.

Theme #4: Central banks have failed to evolve apace with the rapid transformations of the global private capitalist banking system. Structural change in the global financial system, the continuing fragility of banking systems, and excess levels of debt and leveraging mean that interest rates post-2016 cannot be raised very much, and central banks’ balance sheets cannot be reduced to any significant extent, without provoking a widespread credit crisis throughout the private banking system.

Theme #5: Central banks must undergo fundamental restructuring and change. That restructuring must include the democratization of decision making and a redirecting of central banks toward a greater direct service in the public interest. New functions, new targets and new tools will be required.

SYNOPSIS with Expanded Chapters Descriptions:

Central banks emerged from the 2007-09 crisis as the primary economic policy institutions in the advanced economies. Tasked not only with stabilizing the banking system during the worst financial crisis since the great depression, central banks were given the additional task as well of restoring economic growth to pre-crisis historical levels. Fiscal policy as government spending and public investment was relegated to a minor role at best; at worst, and more frequently than not, recast as fiscal austerity rolling back government spending and investment.

The banking systems in the advanced economies—and indeed throughout the global economy—were temporarily stabilized after 2009 but only to a degree, and at a cost of tens of trillions of dollars, euros, pounds, yen and other currencies. Cumulative QEs alone amounted to nearly $15 trillion central bank investor and bank bailouts. Nevertheless, deep pockets of banking weakness and fragility still remain a decade after the 2008-09. Non-Performing bank loans in the advanced economies still exceed $10 trillion. Pre-2008 private and corporate debt has been only transferred to central banks’ balance sheets, not eliminated. Post 2008 private business debt has again been allowed to accelerate by tens of trillions in dollars and other major currencies. Meanwhile, household and government debt levels have continued to climb, while the ability to service that debt with wage income growth and tax revenue has stagnated or declined.

With their massive liquidity injections, the central banks have been the original enablers of the unprecedented past—and continuing—debt escalation, and are thus ultimately responsible for its consequences. Nor have central they fared any better with regard to their other mission of restoring real economic growth to pre-crisis levels. Rates of growth in GDP have lagged significantly from pre-crisis levels, and in some regions—like Europe and Japan—have stagnated or worse over the long term. Global real investment, productivity and even trade have meanwhile all slowed under the hegemony of global central bank policy regimes since 2008.

The central banks’ decades-long, chronic injections of liquidity into the global private banking system since the 1970s enabled the record levels of debt and leveraged borrowing in the ensuing decades, culminating in the financial crash of 2008-09. The same central banks provided even greater magnitudes liquidity to bailout their banking systems—initially the US and UK in 2008-09, then Europe after 2010, and more recently Japan and China. The bailout and liquidity continued for nine years.
The book then considers the question: why central banks of the advanced economies have been fueling the massive liquidity binge since the 1970s while failing to restore real economic growth since 2008? It concludes the following combination of forces and developments have been responsible:

• The collapse of the Bretton Woods International Monetary System in 1973 and central role assigned to central banks to stabilize currencies and economies
• The ascent of Neoliberal policies in the US-UK after 1978 and their adopted by others
• Deregulation of international money capital flows in the 1980s and accompanying domestic financial deregulation
• Rapid and radical restructuring of global financial institutions, markets, and products
• Rise and growing political influence of a new global finance capital elite
• Economic elites’ shift to fiscal austerity and elevation of monetary policy as primary
• Unprecedented rapid technological changes transforming the very nature of money and credit and its effects on liquidity, debt, and financial markets’ contagion
• Growing frequency and magnitudes of financial instability events globally and consequent more frequent recessions and slower growth
• Increasing demands on central banks to expand their lender of last resort function, and the bailout of banks and financial systems, while assuming primary responsibility for generating real economic growth

EXPANDED CHAPTER DESCRIPTIONS:

In Chapter One the point is raised that these new forces have led to growing contradictions between the central banks and the broader global capitalist banking system. Several of the more fundamental contradictions are listed and briefly described in the chapter, to be returned to for further consideration later at the end of the book under the subject of why central banks have been failing to achieve their broad objectives as well as their basic functions and targets.

Chapter Two describes the evolution of central banking over the past two centuries, as well as evolution of central banks’ functions, targets and monetary policy tools. The point is made that the evolution of central banking since the late 20th century has increasingly failed to keep up with the more rapid restructuring and change in the global private banking system. Falling further behind the curve of global capitalist change, central banks’ consequently have been further failing to adequately perform their primary functions of money supply management, bank supervision, and lender of last resort; have failed to attain their price level and other targets; and their monetary tools have deteriorated in terms of effectiveness in performing those functions and attaining those targets.

In the core chapters Three through Ten of the book describe the evolution of monetary policies of each of the advanced economy central banks in turn—and to what extent each central bank performed its primary functions, attained its declared targets, and how effective have been its tools—whether traditional or the more recently experimental like quantitative easing (QE), zero bound rates (ZIRP), negative rates (NIRP), forward guidance and other innovations.

In chapters Three to Five special consideration is given to the US central bank, the Federal Reserve, from its origins in 1913 to the present. Chapter Three describes how the Fed was created and run by the private banks directly from 1913 to 1935, enabling the financial asset bubbles of the 1920s that burst in the great depression that followed; how the Fed failed miserably to manage the money supply, adequately supervise the banks, and failed to function as lender of last resort during the first four years of the depression, 1929-1933.

Chapter Four describes how the Roosevelt reforms of 1933-35 were insufficient to prevent indirect private banker interests hegemony over the Fed over the long run; how those interests came to dominate the Fed once again during the period 1951 to 1986; and how the Fed under its chair, Alan Greenspan, 1986-2006, came progressively to elevate central bank monetary policy over government fiscal spending. Chapter Four describes how US central bank policy of massive liquidity injections became a norm under Greenspan’s 20 year tenure, and how Greenspan’s liquidity ‘put’ in turn accelerated debt and levering, thus contributing to a series of US and global asset bubbles from the late 1980s to 2006 that culminated in the housing and derivatives great credit bubble and crash of 2007-09.

Chapter Five addresses the Fed under chair, Ben Bernanke, and describes how his policies were a continuation of Greenspan’s until the 2008 crash, at which time Bernanke’s Bank became Greenspan ‘on steroids’ so far as central bank liquidity and interest rate policies are concerned. The chapter debunks Greenspan notions of ‘conundrums’ and Bernanke’s ‘global savings gluts’ that were proposed to explain away the failure of Fed policies, and explains why Fed policy has been to always assiduously avoid interceding to prevent financial asset price bubbles. The chapter concludes with an analysis of the Bernanke Fed, 2006-2014, as to what extent it achieved or not its primary functions and targets. Detailed considered is given to the Bernanke bank’s innovations in new monetary policy tools like QE and ZIRP, which are then critiqued for their effectiveness and unanticipated consequences.

Chapters Six through Nine consider in turn the evolution and performance of the other major central banks, including the Bank of Japan (BOJ), European Central Bank (ECB), Bank of England (BOE), and the People’s Bank of China (PBOC), respectively. Addressing the period from roughly 1990 to the present, the chapters describe the evolution of central banking functions of money supply management, bank supervision, and lender of last resort for each of the central banks, as well as evolution in terms of the targets and the monetary tools they employed. Special attention is given to QE, ZIRP and NIRP programs and tools in Japan and Europe and why price targeting has failed so miserably in both nonetheless, despite trillions of euros and yen liquidity injections by their central banks. Why fiscal austerity has been the most extreme in both, and in the UK, and why growth rates have stagnated or slipped in and out of recession. Chapter Thirteen on China considers the unique case of the PBOC and China’s equally unique banking structure, as well as its contrary policies of fiscal stimulus as government spending and investment. Nevertheless, it is argued China and its PBOC have after 2011 increasingly resorted to massive liquidity injections accompanying that fiscal stimulus, with the result of business and household debt exploding by 210% and more than $20 trillion since 2007.

Chapter Ten returns to the US central bank, the Fed, under the chair of Janet Yellen since 2014. Yellen Fed policies through 2016 are described as the extension of the Bernanke Fed in terms of functions, targets and tools. How the Yellen Fed has performed in those terms is examined. Special challenges faced by the Yellen Fed are discussed, including raising interest rates from near zero, the effects of sell off of the Fed’s balance sheet, how to supervise the banks in an environment of renewed financial regulation rollbacks, how to maintain central bank monetary policy hegemony amongst growing calls for fiscal infrastructure government spending, and how to prepare new tools for the next financial crisis and bank bailouts.

Chapter Eleven returns to broader themes associated with the failings and challenges confronting central banking in the 21st century. The chapter revisits and summarizes the reasons why central banks have been failing with regard to functions, targets and tools effectiveness. Official excuses for that failure are critiqued and rejected. Alternative reasons are offered, including the declining effects of interest rates on investment, the relative shift to financial asset investing at the expense of real investment, failure of central banks to intervene and prevent financial asset bubbles, the purposeful fragmentation of bank supervision across regulatory institutions, mismanagement of the money supply, monetary tools ineffectiveness and contradictions, and central bankers’ continuing adherence to ideological notions of the mid-20th century that no longer hold true in the 21st—like the Taylor Rule, Phillips curves, and, in the case of ZIRP and NIRP, the idea that the cost of borrowing is what first and foremost determines investment.

The Concluding Chapter raises the question: what reforms and restructuring of central banks’ decision making processes, tools, targets, functions, as well as their very mission and objectives, are necessary if central banks are to become useful institutions for society in general? Central banks, as currently structured, have failed to keep pace with the more rapid restructuring and change in the private capitalist banking system. Contradictions have arisen in the gap that unbalanced evolution has created. Failure of performance in turn has been the consequence of failure to restructure and to evolve in tandem with the private banking system.

A Constitutional Amendment is therefore proposed, along with 20 articles of Enabling Legislation, to restructure the US Fed by democratizing its decision making and redirecting it to serve in the broader public interest, and not just the interests of the private banking system. The amendment and legislation defines a new mission and general goals for the Fed—as well as new targets, tools and new functions—to create a new kind of public interest Federal Reserve for the 21st century.

Bond markets in Europe and US are in rapid retreat this past week, in the wake of central bank announcements of coming rate hikes and balance sheet sell-offs. Will it spread to bubbles in stock markets in the US and elsewhere? Listen to the Alternative Visions radio show of June 30, 2017 for the discussion.

Go To:

http://prn.fm/?s=Alternative+Visions

Or Go to:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Dr. Rasmus reviews key decisions by central banks this past week that are making investors nervous about stock and bond market bubbles that have been created since 2008. Heads of central banks in Europe—the ECB and Bank of England—this week signaled they too may raise interest rates and sell off their QE balance sheets—following the US Fed’s announcements of last week. Is the free money provided by central banks to private bankers and investors now coming to an end? QE free money alone has amounted to $15 trillion since 2009—feeding the financial bubbles in stocks, bonds, currencies and derivatives. Pulling this ‘life support’ of free money from the banks—i.e. off the free money oxygen ventilator—has investors now nervous, Rasmus explains. An emerging ‘bond rout’ may be the tip of the financial iceberg. At the same time, the US Fed this past week also announced its annual phony bank stress tests and it will allow banks to reduce their capital safety cushions by accelerating bank dividend and stock buyback payouts to shareholders. US banks are projected to increase payouts to 100% of this year’s profits. (Chase to 110% and $27 billion). Bank stock prices surged driving US stocks higher into bubble territory. Will the bond rout spread? Will the stock bubble end? Central banks now perform a new function of ‘permanent subsidization of private banks’ in the 21st. century, Rasmus explains.

Listen to the past two Alternative Visions shows on the Federal Reserve Bank topic. June 16 on the recent Fed Interest Rate hike and June 23 on How the private banks really control the Fed, not the government. (Additional comments on Trump’s failed job promises and what’s really happened at Carrier Corp., Ford, and jobs).

TO listen go to:

http://alternativevisions.podbean.com/

or go to:

http://prn.fm/?s=Alternative+Visions

2 Show Announcements:

JUNE 23 SHOW ANNOUNCEMENT:

Dr. Rasmus continues the review of the Federal Reserve Bank, showing how the private banks today control the Fed more than ever in recent decades. How the Fed’s structure permits private banking interests to dominate strategic decisions of the central bank, and how there control of the Fed is about to deepen further under Trump. Jack explains how the expansion of Debt before 2008 was the source of the crisis, and how $50 trillion more debt has been added globally since 2009. Debt is the appearance of the crisis. Excess credit has enabled it but excess liquidity provided for decades by the Fed and other central banks is the source of the excess credit and debt. How the Fed and other central banks contributed to the last financial crisis and have been creating the next. The explosion of central bank liquidity under Greenspan from 1986 to 2006 is detailed, leading to multiple financial bubbles and culminating in the 2008 financial crash. Jack previews the show with comments on ‘Donald the Trumpet’s claim he saved 1100 jobs at Carrier Corp, but facts show Carrier is sending 600 jobs to Mexico and automating away the rest in the US. How ‘The Trumpet’ claims of jobs in auto and mining also are false. (Next week: The Fed under Bernanke and Yellen).

JUNE 16 SHOW ANNOUNCEMENT:

Dr. Rasmus reviews the Federal Reserve’s interest rate hike decision this past week, showing how the Fed’s justifications for the rate hike based on ‘data’ are contradictory. How the data show no hike was justified. Rasmus explains how the Fed has been manipulating reporting the data on prices, unemployment and wages in order to justify 8 years of zero rate borrowing by the banks—i.e. 7 years after the banks were fully bailed out in 2010. More than $15 trillion in virtually free money was provided by the Fed to bankers and investors since 2009 as a result. Rasmus also addresses the Fed’s announcement this past week to begin selling off its $4.5 trillion balance sheet, but explains that will be token and temporary. Rasmus predicts the Fed’s recent string of 3 rate hikes has reached its limit now that the US economy is weakening once again. The second half of the show returns to the theme of ‘Central Banks at the End of Their Ropes’ and the origins of the Fed as a creation of the private banks, a corporation funded by and run by the private banks. (Next week: The Fed under Greenspan and Bernanke).

To listen to my continuing analysis and critique of central banks (and the collapse last week of Banco Popular in Europe), go to my Alternative Visions show of June 9:

Go to:

http://prn.fm/?s=Alternative+Visions

Or go to:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

In the first half of the show, Dr. Rasmus reviews key economic events of the past week, including the collapseof ‘Banco Popular’ bank in Europe and what it might mean in coming weeks to Europe’s fragile banking system, the emerging problems in Junk Bonds and the retail sector in the US, renewed falling oil prices, the US House passing the ‘Financial Choice Act’ and new bank deregulation, and Turmp’s phony ‘Infrastructure Week’ announced this past week and why ‘infrastructure’ really means privatization. Rasmus then discusses the origins of the US central bank, the Federal Reserve, in 1913 and how central banks evolved out of private banks and still retain deep connections to private banking systems. How the Federal Reserve originated from the Financial Crisis of 1907 and was developed by big New York banks as a way to capture control of a monopoly of a single currency, become the national ‘clearing house’ of all banks, and create an institution, the Fed, that would provide money to bail themselves out during periodic bank crises instead of having to bail themselves. Jack describes the early structure of the Fed, and how it was owned, financed, and directly controlled by the private banks, with the New York Fed operating as the ‘central bank of the central bank’. (Next Week: The Evolution of the Federal Reserve from the great depression to the crash of 2008).

To watch my June 6, 2017 Interview on the TV show, ‘Other Voices’, on the Trump Budget’s $1 trillion spending cuts and attack on the working poor, and why central bank monetary policies of 8 years of free money to the banks is the ‘new policy norm’,

Go to:

Or go to:

http://www.peaceandjustice.org/video-war-on-the-poor-and-just-about-everyone-else/

Why did the Federal Reserve bail out the banks by 2010 to the tune of more than $10 trillion–and keep providing them free money for the next 7 years? Listen to the first of a four part series by Dr. Rasmus, summarizing his forthcoming June 2017 new book, ‘Central Bankers at the End of Their Ropes? Monetary Policy and the Next Depression’, by Clarity Press, June 2017.

To listen to the Alternative Visions show of June 2 on the Progressive Radio Network on this first of a four part series, go to:

http://prn.fm/?s=Alternative+Visions

Or Go to:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Dr. Rasmus begins a four part series examining the role and function of central banks in the global capitalist system, and how that role evolved through the 20th century and is changing again in the 21st. In Part 1 of a proposed four part presentation, Rasmus explains how central banks have been the primary source of runaway money and liquidity generation that is the root cause of accelerating global debt. Debt is but the reflection of the more fundamental problem of excess liquidity creation by central banks since the 1970s. It is liquidity that enables debt accumulation, which then leads to financial asset bubbles, busts, deflation, defaults, which then transmits the crisis to the real side of the economy producing ‘great recessions’ and eventually depressions. Central banks then bail out the banks—injecting still more liquidity again—leading to a renewed cycle of debt, bubbles, and crisis. Rasmus asks why the Fed, which bailed out US banks by 2010 has nonetheless continued for 7 more years providing free money to the banks to the tune of more than $10 trillion? Their ole of central banks has expanded beyond its primary task of bank bailouts this century, Rasmus argues. Continued injection of trillions of free money has become their new 21st century primary function—i.e. to continue to subsidize the financial sector and financial markets (stocks, bonds, derivatives, forex, etc.) . Central banks are evolving, Rasmus argues, along with the rest of the capitalist State toward an ever growing subsidization of Capital in general. Can global capital survive without expanding State subsidization of profits—central banks subsidizing financial markets and finance capital and other sectors of the State other non-financial forms of capital. (Next week Part 2: The origins of the US central bank, its 20th century performance, and why in the 21st it is failing as it evolves toward its new subsidization role).