Are Central Banks Losing Control?

Tyler Durden's picture

Via Charles Hugh-Smith of OfTwoMinds blog,

Eight years after the crisis of 2008-09, central banks are still injecting $200 billion a month into the global financial system to keep it from imploding.

If you want a central banker to choke on his croissant, read him this quote from socio-historian Immanuel Wallerstein: "Countries (have lost the ability) to control what happens to them in the ongoing life of the modern world-system."

Stated another way, Wallerstein is asking: what do central banks no longer control?

The quote is from Wallerstein's recent meditation on China: China is Confident: How Realistic?

"The question is how realistic is this self-assessment of China? There are two premises embedded in China’s self-confidence, whose validity need to be investigated. The first is that countries, or rather the governments of states, can actually control what is happening to them in the world-economy. The second is that countries can effectively contain popular discontent, whether by suppression or by limited concessions to demands.

If this was ever even partially true in the modern world-system, these assertions have become very dubious in the structural crisis of the world capitalist system in which we find ourselves today."

Central banks still claim absolute control over their currency, interest rates, what's legal/outlawed in their financial systems, and so on.

Wallerstein is suggesting that era has ended and central banks are losing control of the value of their currency, their role in the global economy and the social discontent that is the ripening harvest of central bank policies that have greatly enriched the rich at the expense of everyone else.

I don't think Wallerstein picked China out a hat. Though every central bank is experiencing the same erosion of control, China is visibly losing control of the value of its currency, the yuan, and its runaway debt burden, which has skyrocketed from less than 20 trillion RMB 13 years ago to over 160 trillion RMB.

This matters because instability in a nation's currency quickly spreads to the economy and then to society: as a currency depreciates, the value of everyone's money declines, i.e. the purchasing power of their money is diminished.

When a currency is devalued, everyone holding that currency is instantly poorer.

When people become poorer through no fault of their own, they become angry with the authorities who engineered the devaluation or let it happen.

This leads to the social discontent Wallerstein references.

Another erosion of purchasing power occurs when wages stagnate while the price of goods and services rises. Can central banks control the erosion of wages' purchasing power? There is little evidence they can.

As for a central bank's control of its role in the global economy: those confident in China's ascent to global #1 power assume China will remain the world's workshop at least until its domestic populace can absorb all the goods it produces.

But it seems increasingly evident China's role as the world's workshop is under threat, and that it doesn't control the erosion of that role. Domestic populism is trending against globalism, wages are rising in China as the populace urbanizes, prices are rising faster than wages and the potential for disruptive trade wars is rising.

As for what's outlawed/banned: recently, I've been engaged in some lively online debates about the possibility of China banning bitcoin transactions.

Most people in the discussion reckon China (or any government with a high degree of control of its populace) can shut down bitcoin with no difficulty. The threat of a severe penalty would be enough, or so I'm told.

I'm not so sure. Look what prohibiting alcohol did: it created an entire economy devoted to bypassing the authorities' restrictions on alcohol. The penalties were fairly severe, but threats didn't work when profits beckoned.

If a nation's currency is losing purchasing power, threats are unlikely to be effective. Indeed, threatening the populace as they try to retain the purchasing power of their capital/savings would be an act of desperation born of a recognized loss of control.

Wallerstein is right: central banks--including the Federal Reserve-- are losing control of the value of their currencies, their role in the global economy and the social discontent that arises as central bank policies negatively impact average citizens.

It's by no means guaranteed that central banks will be able to maintain their death-grip on interest rates, either.

Eight years after the crisis of 2008-09, central banks are still injecting $200 billion a month into the global financial system to keep it from imploding. The returns on their "investment" is diminishing rapidly, and they're losing control of everything that matters.

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Consuelo's picture



'China's debt breakdown'


Like I said....  Sure am glad it's them Chinks, and not U.S.





hedgeless_horseman's picture


...central banks are still injecting $200 billion a month into the global financial system...

Read this article!

We are stupid marks.


What is the con?  The con is that economic growth is both good and real.  It is most often neither  The long con is nominal returns versus real returns


What keeps the con going?  Apart from greed?  Money printing.  


Please, understand that if the amount of money in a closed system doubles, the value of each monetary unit halves, and the price of everything, including stocks, increases 100%.


Stop funding the casino owners' art collection.

remain calm's picture

Nope, not as long as they keep increasing debt/QE into the future.It is the only gig they have and they will play the same card until it no longer works. Then its over.

hedgeless_horseman's picture


...they will play the same card until it no longer works. Then its over.


What do you mean over?

Won't they still offer the "free" all-you-can-eat buffet?

What about the "free" booze?

Are we going to have to pay for our "free" luxury suite?

jus_lite_reading's picture

Yes and no. It's like war time. After WW2, the private property was taken by the Russians and rogue elements. Are you ready for a repeat?

They will print to infinity. You know that.

hedgeless_horseman's picture


Are you ready for a repeat?

Name the last war caused by deflation.

Four chan's picture
Are Central Bank jews Losing Control? no they are crashing the market to make trump look bad like jimmy carter.
bobsmith5's picture

When they can no longer smash the price of gold and silver like they have been doing for the past week, then and only then will they have lost control.  Until then, it's business as usual.

rf80412's picture

To think that it's the owners of assets who might benefit most directly from inflation.  All this time everyone's been blaming credit-dependent schlubs (and Uncle Sam) for wanting low interest rates and loose monetary policy.

Heh, remember when the "free silverites" were mocked as a bunch of deadbeat farmers who were going to destroy the Republic with inflation?

Belrev's picture

China is already succumbing to pressure from Trump

BigFatUglyBubble's picture

China had and has no respect for us.  They will not succumb to shit.  They have reserves and own a bunch of our treasuries.  Just because they are starting to crap out doesn't mean they won't be strong for a while.

GUS100CORRINA's picture

No, the centrol banks are NOT loosing control.


This KEYNESIAN CRAP that the CBs have forced onto everyone is for IVY LEAGUE RETARDS!!!!

R.E.M. - It's The End Of The World

Adullam's picture

To be clear - loosing control is quite different from losing control.

Buck Johnson's picture

If china goes it will take alot of the western economies down with them.  Because most if not all their companies depend on China in some part in their manufacturing process.



shizzledizzle's picture

"Dock that Chink a days pay for nappin on the job!"

I am Jobe's picture

Americans will be sacrificed for a greater cause. Let the Wars begin. Need to see Yellow Ribbons and Support our Troops bumper stickers to jump start the economy. So many countries left untouched. 

Hohum's picture

No, they are not. J Yellen xoxoxo

actionjacksonbrownie's picture

If you think the most infuential CB in the world has been sitting on it's hands for the past 3 years, I've got some prime oceanfront property to sell you in Arizona.

Iconoclast's picture

Present tense losing.
Past tense lost.

They lost it back in the early 2000's, we are Fubar. They killed it for all of us.

hooligan2009's picture

(as i said on another thread (spike in bund yields)) - central banks have LOADS of control


Pliskin's picture

I like your articles Hugh (Charles - Smith) but seriously are you trying to compare the prohibition of alcohol to the possible prohibition of Bitcoin?  How many people do you know have purchased Bitcoin?  How many people do you know who have purchased alcohol?

Silly comparison IMO, but then what do I know?

BigFatUglyBubble's picture

So are you saying implementation of prohibition is likely, but the outcome would be much different?

Pliskin's picture

No.  I guess I'm saying just because you ban something doesn't mean more people are going to do it!

Heroin is banned, but I don't WANT to do it, Peadophilia is banned, but I don't want to do it.

If they banned tobacco, or cheeseburgers I would stil want to do it...because I always have.

How many people actually buy Bitcoin in China?  My guess is that most of the people that buy it are CCP members, trying to find ways to get ther money out of the country!  Because the CCP LOVE China, so much so that they send ther kids to U.S. Universities, and buyt houses in Canada and send their money to Switzerland...OH, but they LOVE China, hypocritical snidy cunts that they are!

Herd Redirection Committee's picture

Loot is only what you get away from the scene of the crime with.  Hence the splurging on real estate worldwide, and sending their kids out of country for school.

Dr. Engali's picture

"Markets" are up, looks like they are still in control to me. I don't think Charles quite grasps the power of digital currency, or the fact that central bankers can distort pricing any way they wish by a push of a button.

Farqued Up's picture

Some believe that China is also controlled by Rothschild, but that grip is slipping.

venturen's picture

Market will be a term for doctor's diagnose for always be able to get it up

Bill of Rights's picture

Of course they are....and I'm taking on as much Debt as possible lol...the last year alone well over 100k ,,,,,like the Oligarchs I don't plan on paying it back this time next year I hope to be at 200k plus...Fuck'em.

voxale's picture

Losing control? They seem to have a pretty good handle on eliminating volatility. What's there to worry about? Everything's AWESOME!

I Write Code's picture

>Eight years after the crisis of 2008-09, central banks
>are still injecting $200 billion a month into the global
>financial system to keep it from imploding.

What about me, why doesn't somebody inject me with $200b a month to keep me from imploding?

silverer's picture

Central banks lost control shortly after 1913.

Conax's picture

On another thread yesterday a poster mentioned QE5 coming. A commenter remarked, "what about QE4?"

This is QE4 - "central banks are still injecting $200 billion a month into the global financial system"

syzygysus's picture

Bah, the shart shows FED stopping its injection.  We know its buying equities through Belgium. 


Probably triple the rest of the chart, just through invisible hands...

DisorderlyConduct's picture

The illusion of control is not control. They are damming up economic forces, but the market will be heard. They will not like what it has to say.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Mar 9, 2017 11:23 AM

How do you lose control when you own all the money and all the things?

TheRideNeverEnds's picture

Let's see; Russell up, Nasdaq up, S&P up, DOW up, gold and silver down hard.

Neh, looks like everything is just fine.

harrybrown's picture

lol that chart doesnt showthe hidden QE of the fed, i like a laugh but PLEASE

every other central bank outside of the US is printing like mad, to protect the $$$
with a gun to their collective heads, the finger on the trigger being the joo's In the Fed

Lets just blame everything on china for trying to protect their ecconomy against the western hegemony

GunnerySgtHartman's picture

Injecting $200B a month to keep it from imploding is like the drug addict that keeps injecting cocaine to keep from having withdrawls - its effect diminishes with time and you wind up crashing anyway (with much more serious consequences).

This is not going to end well, people.  PMs all around!

Iconoclast421's picture

They just need to print more money. The yacht market is showing signs of stagnation. And the Picassos are falling in value.

Publicus's picture

We the people are gaining control!


Make America great again!

A. Boaty's picture

Overthrow bourgeois authority, establish a people's government!

Rich Monk's picture

Injecting $200 billion a month? You mean monopoly money, physical or digital, created from thin air. Arrest the International Bankers - Jews.

Erwin643's picture

Who cares? The smart people are staying long and making money.

neuronius's picture

The Guided Decision

I Will Seek Wisdom.

Knowing that wisdom waits to be gathered, I will actively search her out. My past can never be changed, but I can change the future by changing my actions today. I will change my actions today!

I will train my eyes and ears to read and listen to books and recordings that bring about positive changes in my personal relationships and a greater understanding of my fellow man.

No longer will I bombard my mind with materials that feed my doubts and fears. I will read and listen only to that which increases my belief in myself and my future.

I will seek wisdom. I will choose my friends with care. I am who my friends are. I speak their language, and I wear their clothes. I share their opinions and their habits.

From this moment forward, I will choose to associate with people whose lives and lifestyles I admire. If I associate with chickens, I will learn to scratch at the ground and squabble over crumbs.

If I associate with eagles, I will learn to soar great heights. I am an eagle. It is my destiny to fly.  I will seek wisdom. I will listen to the counsel of wise men. The words of a wise man are like raindrops on dry ground.

They are precious and quickly used for immediate results. Only the blade of grass that catches a raindrop will prosper and grow. The person who ignores wise counsel is like the blade of grass untouched by the rain—soon to wither and die. When I counsel with myself, I can only make decisions according to what I already know.

By counseling with a wise man, I add his knowledge and experience to my own and dramatically increase my success.

I will seek wisdom. I will be a servant to others. A wise man will cultivate a servant’s spirit, for that particular at tribute attracts people like no other.

As I humbly serve others, their wisdom will be freely shared with me. Often, the person who develops a servant’s spirit becomes wealthy beyond measure.

Many times, a servant has the ear of the king, and a humble servant becomes king for he is the popular choice of the people. He who serves the most grows the fastest.

I will become a humble servant. I will not look for someone to open my door—I will look to open the door for someone. I will not be distressed when no one is available to help me—I will be excited when I am available to help.  I will be a servant to others. I will listen to the counsel of wise men. I will choose my friends with care.

I will seek wisdom.

-Andy Andrews, The Seven Decisions


Goodbye ZeroHedge, thanks for all the fish!


Erwin643's picture

What's the matter? 

Tired of all the Doomer Porn that's been keeping the average person from making money these last eight years?

bankbob's picture

Which Idiots actually believed that the Central Bank was in control?

Adam Smith's Invisible Hand can squash it like a bug.

East Indian's picture

Banksters are using that invisible hand to massage a sensitive part of their anatomy.