Alexei Bayer: Central bankers’ crime
Money — or rather corruption, the nexus of money and power in the way it existed during the Dark Ages in Europe — is the ideology of the new Age of Dictators. Vladimir Putin is driven by massive, pathological greed. Ukraine has been stuck in the post-Soviet limbo because of the greed of its oligarchs and the venality of its political class. The Donald Trump administration had corruption written all over it, but the oligarchic structure of the American system predated Trump by some 30-40 years.
Public servants are not really interested in the well-being of the Res publica entrusted to them, and, even more remarkable, the oligarchic classes don’t care if they destroy the very system in which they prospered.
Rupert Murdoch is a textbook example of a rich man willing to burn down the house to make a buck. His media assets are notorious for stoking and feeding the anger of the radicalized underclass — but the extent to which he plays this game very much depends on the individual market. His Times and Wall Street Journal are as conservative as they need to be, and BSkyB was fairly moderate in the UK context.
The Koch brothers are not unusual for the American super-rich for whom no amount of wealth is ever enough. They were stirring the base instincts of the uneducated even as one of the family, the late David Koch, was buying his way to the refined “libtard” New York society by funding the city’s ballet theaters and museums. He and George Soros were frequent chess partners.
But the interesting question is why today’s middle and lower-middle class are willing to side with the rich against their own vital interests. American industrial workers supported the New Deal and British ones were the backbone of the Labor Party. American trade unions were staunchly anti-communist and fiercely anti-Soviet — think of George Meany, the long-time head of the AFL-CIO — but the rank-and-file also knew that the bosses did not have their best interests at heart and didn’t ally themselves with them.
They knew very well, for example, that the unwillingness to pay taxes by the rich translated into poor prospects for their kids’ higher education, bad infrastructure, and a nonexistent safety net. They certainly didn’t vote for politicians who would cut taxes for the ultra-rich and then cut benefits for everyone else because the federal deficit was too high.
They also knew that an activist, benign government starting with Roosevelt’s New Deal was what turned the mass of blue-collar workers into the middle class and made them the envy of the world, which other countries — in Western Europe in particular — set out to emulate after World War II. Social democracy — a system in which many share in the nation’s prosperity and the extremes of wealth and poverty are eliminated — is a key reason why Ukrainians want to join the West and not remain a Russian vassal state.
What does Trump have in common with a miner in the Appalachia? Or Boris Johnson with a bloke in Northern England? Or for that matter Putin with a Russian guy in a prefab housing project?
How did it change? Why did the average voter in so many countries turn toward an ideology which is harmful to himself while hailing corrupt self-serving leaders as saviors of the nation?
This is where the US Federal Reserve comes in. Ever since inflation was defeated in the 1980s, the Fed under then-chairman Alan Greenspan and subsequently under his successors has been steadily loosening its monetary policy. The Fed gradually gave up all pretense of managing the business cycle and calibrating interest rates to moderate growth in recoveries and pain in recessions.
This created a bubble economy and when the housing bubble massively burst in 2008, ushering in the Great Recession, the Fed slashed rates to zero where they have been, more or less, ever since. Apparently, the Fed’s conception has become to let an even bigger bubble inflate as a way out of a recession.
The Fed being the central bank of the dollar, the global reserve currency, the rest of the world had little choice but to follow its lead.
The policy produced some positive results. Some permanent — such as the IT and biotech revolution. Others possibly temporary — such as allowing millions in poor countries to exit extreme poverty.
But there were side effects as well. One was the rapid emergence of China, which probably would have happened anyway, but much slower. In the event, its economic and industrial development occurred too quickly thanks to the dollars provided by the Fed in an environment of loose US fiscal policy, which allowed Americans to consume more than they produced. The Chinese communist party was thus able to ensure considerable economic prosperity for its citizens without instituting any meaningful political reforms. It stayed in power, unchanged from the time of Mao, and inevitably reverted to its old repressive ways under its current Dear Leader.
While headline inflation has been very low, the CPI calculations are very obviously worthless. The Fed and other central banks devalued and degraded paper money very much in line conservative economists and gold bugs had always predicted. The economic consequences of this are as yet unknown but are likely to be dire.
Loose monetary policy has a major impact on the political landscape. It engendered cheap, readily available credit and was ultimately responsible for the influx of cheap imports produced and sold without regard for externalities — such as climate change, debasement of the currency, growth of debt, and strangling of the world with plastic waste. This created an illusion of well-being. The average consumer has his today’s needs provided for but present well-being comes at the expense of the future. The future of the planet, the economy, our children, and ourselves in retirement, just to mention a few concerns.
Subconsciously or not, we resent our precarious situation. But at the same time, we are not your grandfather’s poor. We have enough of our needs provided for to entertain the illusion of some kind of prosperity. This makes us receptive to the oligarchic right-wing media as it skillfully deflects our resentment onto “the other” — be that immigrants and people of color in the US, Ukrainians or any foreign nation in Russia, Brussels and Polish immigrants in the UK, Muslims in Israel, Western Europe and India and so on.