Collusion

1. Central Banks: The New Power Brokers

Since the financial crisis, these illusionists have created money, altered the nature of the financial system, and orchestrated a de facto heist that enables the most powerful banks and central bankers to run the world.

Beyond Traditional Roles. Central banks, once primarily focused on managing inflation and interest rates, have morphed into powerful entities that shape the economic trajectory of entire nations. They now wield unprecedented influence over markets and governments, operating outside democratic norms.

• They are not elected by voters.
• They are appointed by government officials based on ideology and personal relationships.
• They are free to decide monetary policy as they see fit, without transparency or accountability.

A New Class of Power Brokers. The financial crisis of 2008 catapulted central bankers into a new class of power brokers, with their actions superseding governments. They have become the arbiters of the cost of money and the providers of confidence in ongoing liquidity. This shift has created a monetary oligarchy that operates beyond democratic norms and limits.

Influence over Sovereign Nations. Central bankers now influence the economic trajectory of entire sovereign nations. Their decisions on interest rates, currency movements, and debt creation have a profound impact on the lives of billions of people. This influence extends beyond national borders, as central banks coordinate their policies on a global scale.

2. Conjured Money: Fueling a Fragile System

The whole codependent cycle is what I call a “conjured-money” scheme, wherein the cost of money is rendered abnormally cheap.

Quantitative Easing (QE) Defined. QE is an unconventional monetary policy where central banks create electronic money and inject it into banks and financial markets by purchasing bonds or securities. This process increases the money supply, reduces interest rates, and boosts the value of those securities.

• It is a complex term that entails a central bank manufacturing electronic money.
• It is then injected into banks and financial markets in return for purchasing bonds or securities (or stocks).
• The result of this maneuver is to lift the money supply within the financial system, reduce interest rates, and boost the value of those securities.

The Illusion of Cheap Capital. This "conjured money" scheme renders the cost of money abnormally cheap, leading to rampant speculation and asset bubbles. The cheap money does not directly reach the real economy, but rather subsidizes the private banking system and the markets. This creates a system that is dependent on artificial stimulation.

Systemic Risk and Instability. The danger of relying on conjured capital is that when central bankers stop creating it, the system could go into shock. Markets could plunge, credit could seize, and a new crisis could emerge. This is why central banks are walking a tightrope between altering their policies and doing nothing to alter them, thereby continuing them by default, with no exit plan.

3. Collusion: The Global Central Bank Network

The international monetary system of interest rates, currency movements, and debt creation had become so intertwined with the US banking system that “saving” the latter meant co-opting the former.

Interconnectedness of Central Banks. The world's major central banks, particularly the G7, are deeply interconnected. They coordinate their monetary policies, often following the lead of the US Federal Reserve. This collusion is driven by both geopolitics and fear of a deeper liquidity crisis.

• They meet at G7 and G20 gatherings.
• They take each other’s calls.
• They tend to avoid mere mortals.

The Fed's Imperial Position. The Fed has adopted an imperial position in the global central bank hierarchy, pushing its strategies globally. The international monetary system has become so intertwined with the US banking system that "saving" the latter meant co-opting the former.

A Symbiotic Relationship. The relationships among central banks, major governments, and private banks are symbiotic. They operate in such a way as to continually grow and retain their power. This has led to a system where the most powerful banks and central bankers run the world.

4. Emerging Markets: Challenging the Status Quo

Emerging from the ravages of the financial crisis, developing countries challenged the status quo of US-and European-led money policies.

A Shift in Power Dynamics. Developing countries, once overshadowed by the US and Europe, have begun to challenge the status quo of Western-led monetary policies. They have formed new economic, trade, and diplomatic alliances to seek refuge from the Fed and the US dollar.

• They developed new economic, trade, and diplomatic alliances.
• They sought refuge from the Fed and the US dollar.
• They began to gravitate toward China for refuge.

The Rise of China. China has emerged as a primary critic of the Fed, offering a currency alternative and economic partnership for emerging market nations. The inclusion of the yuan in the IMF's SDR basket represents a seismic shift from the IMF's former adherence to G7 currencies.

A Divided World. The world is gradually being divided between those who depend on Fed policies and those who have been harmed by them. This has led to increased criticism of the systemic risk, low growth, and poverty being spawned by the collusion of elite central banks.

5. Mexico: Caught Between Two Worlds

In Mexico, the financial crisis and the Fed’s reaction to it presented a domestic conundrum.

A History of Dependence. Mexico has a long-standing economic dependence on the United States, making it particularly vulnerable to US financial crises. This dependence has created a domestic conundrum for the Central Bank of Mexico, which must balance its domestic responsibilities with the demands of the Fed.

Divergent Monetary Policies. The governors of Banco de México, Guillermo Ortiz and Agustín Carstens, reacted differently to the push from the Fed and the pull from their country. Ortiz, a product of the Mexican establishment, prioritized national needs, while Carstens, a multinationalist, believed the central bank was more tied up with the United States than either would have liked.

The Trump Effect. The adversarial relationship of President Donald Trump with Mexico affects not just the economies of both countries but also their central bank coordination. Carstens resigned his post as central bank governor after Trump became president, opting for a more international platform instead.

6. Brazil: A Battleground for Global Power

In the global struggle for supremacy between the United States and China, Brazil emerged as a leading financial and trading battleground.

A Latin American Powerhouse. Brazil, the largest Latin American economy, has emerged as a leading financial and trading battleground in the global struggle for supremacy between the United States and China. It has sought to adopt an alternative to a financial and monetary system centered around the US dollar.

The Rise of BRICS. The BRICS alliance has afforded Brazil sizable financial and political benefits, as China and India are destined to contribute more than 40 percent to global economic expansion through 2020. This has led to a shift in Brazil's allegiances and a challenge to the US-led monetary system.

Domestic Power Struggles. The story of Brazil probes the impact of the Fed's policy on a country that once had relatively little impact on the international stage from a monetary policy perspective. The Fed's policies have stoked domestic power squabbles between the central bank and the government, with the central bank often forced to balance domestic needs against the demands of the Fed.

7. China: Rising Beyond the Dollar

Raw disdain for the Fed’s policies catapulted China onto the global stage as a currency alternative and economic partner for emerging market nations.

A Critic of the Fed. The People's Bank of China (PBOC) has emerged as a primary critic of the Fed, its superpower rival. China's disdain for the Fed's policies has catapulted it onto the global stage as a currency alternative and economic partner for emerging market nations.

The Yuan's Inclusion in the SDR. The acceptance of the yuan into the IMF's SDR basket of currencies represents a seismic shift from the IMF's former adherence to G7 currencies. This move has elevated China's status as a prominent economic and diplomatic contender.

Forging New Alliances. As the United States has exuded an increasingly anti-China attitude publicly, China has forged other trade and economic alliances. These have been accelerated by China's reactions to the Trump administration, highlighting the reimagining of the existing global monetary system.

8. Japan: The Original Money Conjurer

Japan was caught in the crosshairs of its old US alliance and fresh opportunities with Europe and its former foe, China.

A History of QE. Japan was the original G7 money conjurer, formulating an early version of quantitative easing in 2001. The Bank of Japan (BOJ) has a long history of using unconventional monetary policies to combat deflation and stimulate its economy.

Abe and Kuroda's Collusion. When Haruhiko Kuroda became governor of the BOJ, he executed the largest conjured-money play in the world. The BOJ's quantitative and qualitative easing (QQE) augmented a negative interest rate policy with large-scale purchases of Japanese government bonds (JGBs). This was a result of collusion between Japan's government and its central bank.

Balancing Act. Japan has been caught in the crosshairs of its old US alliance and fresh opportunities with Europe and its former foe, China. It has chosen to follow the United States from a monetary standpoint but has quietly arranged monetary alliances with China.

9. Europe: A Continent Divided by Money

Political instability infused with conjured-money policy reshaped EU internal power dynamics.

Internal Conflicts. The financial crisis and its aftermath have ignited a battle between the ECB and the German Bundesbank, the area's strongest central bank before the euro existed. This has led to finger-pointing between central bankers and governments.

The Draghi Money Machine. To curtail market "contagion" in the Eurozone, ECB head Mario Draghi repeatedly invoked quantitative easing with even more creativity and enthusiasm than the Fed. This has led to internal political-economic turmoil and a fractured environment.

Austerity and Instability. Central banks in Europe and the troika (the European Commission, the ECB, and the IMF) have exacerbated the instability and growing inequality in Europe. This has been a leading cause of the fractured environment that promoted Brexit and gave rise to greater potential cracks in the wall of the EU project.

10. The Inevitable Fall: A Looming Crisis

The question is not if, but when.

No Exit Strategy. Central bankers have no exit strategy for their policies, no great unwind plan. They are walking a tightrope between altering their policies and doing nothing to alter them, thereby continuing them by default. This means we are headed for another epic fall.

The Illusion of Stability. Central banks have created an artificial money bubble, specifically crafted for the purpose of lavishing banks and markets with cheap capital. This has created the illusion of economic stability, but the underlying structural problems remain unaddressed.

A More Vicious Crisis. The financial crisis of 2007–2008 converted central bankers into a new class of power brokers. Their behavior ran roughshod over the very notion of free markets because they rendered markets sustained through artificial means. The question is not if, but when, the next crisis will emerge.

Last updated: January 15, 2025