Nomi Prins: The Central Banking Heist That Put The World At Risk

Authored by Liam Halligan via Unherd.com,

“The 2008 financial crisis was the consequence of a loosely regulated banking system in which power was concentrated in the hands of too limited a cast of speculators,” Nomi Prins tell me. “And after the crisis, the way the US government and the Federal Reserve dealt with this corrupt and criminal banking system was to give them a subsidy.”

Such strong, withering analysis is, perhaps, unexpected from someone who has held senior roles at Wall Street finance houses such as Bear Stearns and Goldman Sachs. But Prins is no ordinary former banker.

The US author and journalist left the financial services industry in 2001. She did so, in her own words, “partly because life was too short”, and “partly out of disgust at how citizens everywhere had become collateral damage, and later hostages, to the banking system”.

Since then, Prins has chronicled the closed and often confusing world of high finance through the 2008 crisis and beyond. Her writing combines deep insider knowledge with on-the-ground reporting with sharp, searing prose. Alongside countless articles for New York TimesForbes and Fortune, she has produced six books – including Collusion: how central bankers rigged the world, which has just been published.

Her main target in the new work is “quantitative easing” – described by Prins as “a conjuring trick” in which “a central bank manufactures electronic money, then injects it into private banks and financial markets”. Over the last decade, she tells me when we meet in London, “under the guise of QE, central bankers have massively overstepped their traditional mandates, directing the flow of epic sums of fabricated money, without any checks or balances, towards the private banking sector”.

Since QE began, in the aftermath of the financial crisis, “the US Federal Reserve has produced a massive $4.5 trillion of conjured money, out of a worldwide QE total of around $21 trillion”, says Prins. The combination of ultra-low interest rates and vast monetary expansion, she explains, has caused “speculation to rage... much as a global casino would be abuzz if everyone gambled using everyone else’s money”.

Much of this new spending power, though, has remained “inside the system”, with banks shoring up their balance sheets. “So lending to ordinary firms and households has barely grown as a result of QE,” says Prins, “nor have wages or prosperity for most of the world’s population”. Instead, “the banks have gone on an asset-buying spree”, she explains, getting into her stride, “with the vast flow of QE cash from central banks to private banks ensuring endless opportunities for market manipulation and asset bubbles – driven by government support”.

Prins describes “the power grab we’ve seen by the US Federal Reserve, the European Central Bank, the Bank of Japan and other central banks”. Using QE, she argues, “these illusionists have altered the nature of the financial system and orchestrated a de facto heist that has enabled the most dominant banks and central bankers to run the world”.

She says all this looking me straight in the eye, with the deadpan delivery, supreme confidence and unflinching focus of the senior investment banker she was. But the words are those of an angry and committed activist – someone who is absolutely determined to do what she can to reform global finance, starting in her native country.

Nomi Prins deals in bold statements and fearless analysis. While often accused of hyperbole, her deep research, financial expertise and former ‘insider status’ means only a fool would dismiss her. She is just at home within academia as she is on the political front line – a regular on the university lecture circuit, Prins was also a member of Senator Bernie Sanders’ team of economic experts, advising on central bank reform. Yet, such is her reputation that she commands a place among those she chides – and is regularly consulted, formally and informally, by senior officials at the Fed, the ECB and other major central banks.

Surveying the history of the response to the 2008 financial crisis, Prins tells me that explicit bank bailouts were only a small part of the story. “First, there was the $700bn package agreed in Congress to save the US banks that caused the crisis,” she says. “But the real bailout was the trillions of dollars of QE produced by the Fed – a massive subsidy to banks and financial markets, that has created an enormous bubble, a subsidy agreed by unelected officials and barely debated or remarked upon.”

After initiating QE in late 2008, the Fed then “exported the idea – and that required the collusion of other major central banks”, Prins argues. She points out that even though the Fed and the Bank of England have currently stopped doing QE, new money amounting to hundreds of billions of dollars a month is still being pumped out by central banks elsewhere, not least the ECB and the Bank of Japan.

“When the asset bubble pops, the fragile financial system and the broader economic environment could be thrown into deep depression and turmoil,” she says.

“That’s why the QE baton has been passed from the US to other nations, and why the central banks are so desperate to collude.”

I put to Prins the conventional wisdom: there was no alternative to QE, and without it, the global banking system would have collapsed in 2008, causing untold economic and political damage. While she accepts there was a need for immediate post-crisis action, she argues the time for emergency measures has now long since passed. “If financial markets so much as wobble, the world’s leading central banks, between them, do more QE,” she says. “The insiders maintain the status quo of subsidies to the financial system – but there is no world war, aliens are not invading our planet, this is totally unjustified.”

Prins says that QE has been “a massive deceit and a huge factor in driving inequality – a dedicated effort by institutions with the ability to create money, deciding that it doesn’t go to ordinary people”. While it was sold “as a massive trickle-down programme, helping the incomes of regular households, the benefits have been focused at the very top”.

Stock markets have benefitted, she acknowledges, “but a mere 10% of Americans own 85% of the market”. Prins also argues that low interest rates have harmed most Americans. “We need to normalise the rate environment, so ordinary people get some kind of return on their pensions and savings,” she says.

QE and low rates, says Prins, have also caused “a debt explosion” – as not only have governments taken on more borrowing but financial institutions have too, keen to boost the scale of their investments in QE-driven markets that look like a one-way bet. US government debt has soared from $9 trillion to over $20 trillion since the financial crisis, Prins observes. “And public and private debt combined amount to a staggering 225% of global GDP – much of it accumulated since the financial crisis,” she says.

“The next financial crisis will be sparked by a debt failure somewhere – then this QE bubble will pop very quickly,” Prins predicts. “And when the new crisis comes, rates are already low and we have little in the way of fiscal ammunition, so mitigation will be very tough – and it will be ordinary people who suffer the most”.

In response to the financial crisis, Prins maintains it would have been far cheaper and more effective for the state to intervene directly, providing explicit assistance to cash-strapped householders struggling to service the distressed mortgages at the heart of the crisis. “There was half a trillion dollars of sub-prime mortgages across the US in 2008,” she recalls. “You could have bought up these properties, or just temporarily covered the loans,” she says. “That would have cost much less than half a trillion, and would also have helped the banks by turning their junk assets into performing loans.”

Prins says the “banks and central banks together” instead concocted QE. “We’ve allowed a grotesque $21 trillion global subsidy which has seen the bankers not only avoid punishment for the huge mess they created, but then entrench their financial advantage even more.”

What we need, she says, is “better regulation” – in particular, a return to the “Glass-Steagall environment where investment banks can’t leverage their balance sheets by so much and rely on government support”. Since the Depression-era separation between risky investment banking and run-of-the-mill commercial banking was repealed by the Clinton administration in 1997, “a financial crisis was unavoidable”, she says. “As long as the deposits of ordinary people and companies can be used by investment bankers as fodder for reckless speculation, in the knowledge those deposits are backed by the state, the world is at risk.”

Prins is dismayed at how easily on-going QE, continuing years after the financial crisis, has been accepted by the political and media classes. “There is joint approval across the middle of the left-right spectrum,” she says. “The economics profession and almost all commentators don’t seem to care that this money is completely unaccountable and untracked – and has caused an enormous bubble.” The reason, she observes, is that contemplating the end of QE is too difficult. “The unwind will cause pain and could result in a meltdown, as the markets and the debt mountain collapse.”

In Collusion, Prins takes us on a whistle-stop tour of global finance, describing how the leaders of the Banco de México tried to navigate their country’s complicated relationship with the Fed and how Brazil has led the charge in challenging the dollar’s all-important “reserve currency status”. The book goes to China, where we learn how Beijing is using “dark money” to upend dollar-hegemony, helping to drive the country’s ascent as a global superpower.

We read how Europe’s response to the financial crisis has heightened tension between the ECB and Germany – fuelling intra-EU resentments that have fuelled populism and help explain Brexit. Prins describes how Japan “leverages the rivalry between the US and China”, while embarking on “the most ambitious money-conjuring scheme to date”.

But it is in the US where the bulk of the narrative is set and it is there the arguments Prins makes will be most keenly read. The Federal Reserve has just lifted interest rates by a quarter point, and signalled that two more increases are likely in 2018. As the world’s most important central bank continues the long, gradual march away from emergency measures, and with the ECB also committed soon to ending QE, the warnings in this important book about extent of today’s asset price bubbles, and the role central banks have played in causing them, are about to be severely tested.

“What we’ve witnessed, since 2008, is the unbridled ability of the so-called people at the top to implement socialism for the banks,” Prins tells me. “If anyone had said we are going to give $21 trillion to the global banking sector, it would never have happened – so we’ve had a backdoor process instead, under the pretense it would help ordinary people.”

Leaning forward for the first time, Prins ups the ante. “Well, real people don’t believe that – and they’ll believe it even less as and when we have another crash, a crash off the back of ten years of emergency measures that were supposed to fix the system.”

“The issue isn’t whether this money-conjuring game can continue,” she says as she prepares to leave. “The issue is that central banks have no plan B in the event of another crisis – and that’s going to create an even more massively negative view among ordinary people towards those who see themselves as elites.”

Listen to Liam Halligan’s interview with Nomi Prins here:

Comments

Blue Steel 309 house biscuit Sat, 06/16/2018 - 17:39 Permalink

One of her obfuscations is the concentrating on "asset bubbles" rather than the fact that these Banksters are obtaining ownership of the worlds real assets without having to pay for them. As if they didn't have enough power.

Ownership of corporations (and control of them), is one of the subjects carefully avoided by the Rotschild media machine.

 

There is only one group of people who it is illegal to question in a good number of ethnic European countries.

In reply to by house biscuit

PhilofOz Blue Steel 309 Sat, 06/16/2018 - 18:13 Permalink

Prins describes “the power grab we’ve seen by the US Federal Reserve, the European Central Bank, the Bank of Japan and other central banks”. 

Replace “....the US Federal Reserve, the European Central Bank, the Bank of Japan and other central banks” with "....the Rothschild Crime Family" would be a more appropriate comment.

The Rothschild Crime Family own and control every central bank on the planet except three, Iran, North Korea and Cuba, lending money at interest to governments everywhere. Do you have debt, a home loan, a car loan, student debt, credit card debt?! What about the debt your Federal, State and Local governments have on behalf of you, your children and grand-children? Just imagine that over 50% of all that debt is owed and the interest continually paid to the Rothschild clan and their tight knit group of international bankers. Do you feel good about yourself still, being nothing more than a serf to them? Money makes money, and in this case the biggest crime syndicate that will ever exist, one that has the military of various countries continuing their protection racket for them as well as IRS type institutions doing their debt collecting, will never be satisfied until they have everything!

In reply to by Blue Steel 309

Jack Oliver house biscuit Sat, 06/16/2018 - 18:33 Permalink

Alternative thinking would suggest that Prins is spot on ! 

The reason she gets MSM ‘coverage’ is because she has not revealed the true enormity of it ! 

The scenario’s she suggests have definitely played out ! 

Although, she is withholding the TRUE scale of it - it’s MASSIVE ! 

There is NO plan B and there is NO way out ! 

Apart from WAR !! 

In reply to by house biscuit

chunga Sat, 06/16/2018 - 17:27 Permalink

Sure, and this caused a huge amount of inflation the experts say doesn't exist. Everything went up except wages and now what are we up to? 100 million people who've just gone missing?

There is not a single thing these days that does not have it's roots in pure, solid fraud.

Not one.

VolAnarchist Sat, 06/16/2018 - 17:30 Permalink

Never trust anyone, man or woman, who says that the answer to anything is "more regulation". No wonder why she was on Bernie the Dinosaur's staff, she knows just as much about economics as Bernie does! She also neglected the fact that governments pushed banks to lend to people/businesses that could never pay their debts and that it was the government's shitty policies, not just the banks', that has and currently stifles any economic growth!

Not if_ But When Sat, 06/16/2018 - 17:48 Permalink

I just received her new book "Collusion: how the central bankers rigged the world" through special order with my library.  She is by far the best writer on central banks and the financial crisis.  Her "It Takes a Pillage" is superb and easily followed.  The problem is, hardly anyone outside of the few who care (or know) read it.

BetterRalph Sat, 06/16/2018 - 17:49 Permalink

I once heard this story where this kid stole a bike (was stripping it down) and got caught, but the owner said, have it put back together the same way it was before tomorrow and I will let you go.

That bike was back together before the next day. 

Theres's the lesson I have for the banksters.

Boris Badenov Sat, 06/16/2018 - 18:19 Permalink

 

 

I'm with her....

 

She's says a lot, and has said alot since then, but seriously folks, Obama gave them all a pass when he made Tim Geithner the TreaSec......

 

(Remember Jim Carrey's character Fireman Bob on Living Color?) Cue visual....

 

Timmy's job BEFORE the Obama appointment was Federal Reserve Bank President of NEW YORK

 

He was the guy in charge to watch over 90% of the banks that caused the crisis

 

When Geithner claimed on 60 minutes that he had to land an airplane in flames,

 

It was HIM who allowed Gas Cans and Matches to be handed out with the boarding passes!

 

Nomi has good instinct, I think those banks (and countrywide...) Frauded FNMA , as FNMA was frauding itself. The dust has settled now, but that was a big deal and people have forgotten it.

 

FNMA still exists as an entity and a stock, and Obama somehow was able to suck out MORE money from FNMA and funnel it towards his ObamaCare "concept".

 

Rambling On......

 

"There were no scandals in my administration".   Yeah, right.

 

FOLLOWUP of any kind, from Chaffetz, Gowdey, they all get the cold shoulder brushoff, "We'll get back to you..." And they forget what they asked for when they never get it.

 

I like Nomi because I consider this FOLLOWUP.   Too big to forget. 

 

Keep up the good work Nomi!

 

 

 

 

 

 

Balance-Sheet Sat, 06/16/2018 - 18:30 Permalink

A 1950s outlook repeated for 6 books. We are not going anywhere near 20th Century anything and this is populist. Glass-Steagall is DEAD but promoting its return sells!

Now the money the Fed creates is "Outside Money" injected to the banking system which creates the "Inside Money" that usually finances the economy. The INTENTION of the "Outside Money" being injected into the banking system is to prevent the banking system from dying after which it would no longer be able to create the "Inside Money" you borrow.

The Fed is NOT going to send individual citizens their mortgage payments. This is also populist tripe.

If this were to be done Congress would have to legislate it and the Fed would assist in arranging the financing for such a deficit.

The Congress DOES send trillions to all the people through various transfer and entitlement programs and this coming year will be 2.8T from the federal level alone as well as arranging all the student and mortgage loans.

As long as it is taken to be entertainment any of this is fine. Oh yeah, NO GOLD Standard, Bimetal money, or any sort of commodity currency EVER again.

rickster Sun, 06/17/2018 - 07:40 Permalink

Why bother commenting when the barn door was open long enough for the cart and horse to get out?  Just shut the barn door and move on back to the gold standard again though it's way too late to even do that after all the money printing that's been going on so...?  As far as that can kicking thing well the road's end is just ahead so brace for it!