Barnaby Is Right

MacroBusiness’ chief economist Leith van Onselen, aka Unconventional Economist, has today posted a video clip from CNBC featuring one Stephen Cecchetti, economic advisor to the Bank for International Settlements (BIS). The context of the interview is the recent annual report from the BIS warning against continued “stimulus” by the world’s central banks (my bold emphasis added):

“What we are saying is not that there needs to be immediate austerity, but that the trajectories, the long run health of the balance sheets of the governments in many of the advanced industrialised economies is pretty bad at this point; that with aging populations and with commitments that have been made to the elderly for pension and health care, that the debt that’s created by governments is going to skyrocket, and before it does that they need to implement reforms. Now what this means is that you have to worry about the long run…”

Note the use of the term “trajectories”. This is precisely the description that has been used by our own Barnaby Joyce in making the same warning, since late 2009.

However, that is not the primary point I wish to make here.

What most captured my attention on reading the Unconventional Economists’ post, was the title he chose.

“Are central banks living on borrowed time?”

Presumably this is referring to the BIS’s warning that central banks cannot continue “printing” monetary “stimulus”. But I see a deeper, if unintended truth in that title. I suggest that it might be interpreted literally.

It would not surprise this blogger in the least to see a global scenario begin to play out at some point in the not-too-distant future, one somewhat similar to the following abbreviated plot line:

1. GFC 2.0 — stock markets crash, global credit “squeeze”, economic collapse, mass bank failures.

2. Attempted “bail-in” to “save” banks using account holders’ deposits; proves insufficient, governments “have” to assist anyway.

3. Government balance sheets continue to explode with unsustainable debt; those (like Australia) not yet underwater are now drawn into the maelstrom.

4. Austerity measures plus unemployment lead to social chaos, war/s, etc.

5. Central banks increasingly blamed for (a) failing to foresee trouble, (b) poor interest rate settings leading to high debt levels, thus causing the crisis, and (c) excessive money “printing” in failed attempts to restore the economy.

6. Growing calls for Public Central Banking; (ie) the end of fractional reserve banking, and of “independent” central banks.

7. Under the “guidance” of a Grand Plan designed by a “neutral”, global body — the BIS, IMF, etc — national governments take over control of the money supply in their country — or region.

8. The BIS, IMF etc establish a new “global reserve currency”, that each national / regional currency must be linked to — for “financial stability”.

This scenario is not so far-fetched as some may imagine.

Already there are increasing numbers of “experts” and other august entities arguing for point #6. Perhaps the most prominent example being the IMF’s 2012 paper, “The Chicago Plan Revisited”:

IMF’s epic plan to conjure away debt and dethrone bankers

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money.

We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on “fractional reserve banking”. If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply.

And if the sovereign has lost (or loses) control over itself, due to that sovereign debt “trajectory”?

The real question we might ask ourselves is, “Who or what would really control the ‘money’ supply then?”

For my part, the long history of predatory incursions on national sovereignty by the IMF in particular, is reason sufficient to vigorously oppose any idea or suggestion that comes from within their ranks.

Or the BIS ranks.

Remember, it is thanks to the Financial Stability Board (FSB) — an entity under the auspices of the BIS — that the G20 Governments All Agreed To Cyprus-Style Theft of Bank Deposits … In 2010.

The speed with which the FSB co-opted the agreement of the world’s politicians, granting the FSB the power to design a new regulatory system for achieving “financial stability” — in April 2009, mere months after ‘Peak Fear’ in October 2008 — should cause any critically-thinking person to wonder whether this has come about entirely by “unforeseen” accident, or by design.

UPDATE:

With thanks to reader Kevin Moore, the following clip offers some insight into why supposedly “neutral”, harmless, above-politics, centralised global bodies such as the IMF, BIS, World Bank et al, should never be trusted –

UPDATE:

MacroBusiness contributor Greg McKenna, aka Deus Forex Machina, says that central bankers appear to be coordinating their language, and potentially causing increased negative sentiment, in the midst of the present global stock market falls (my bold emphasis added) –

Central banks want stocks lower

“With so many Fed Governors talking this week I thought we would get soothing words from them so as to not spook the market any further than it had already been but in the release from the BIS over the weekend, in the statement from the PBOC yesterday and in comments from two senior Fed Governors overnight I see almost the exact opposite to what I had expected.

Clearly there is a global central bank compact that has emerged which says that stock and property market bubbles are not the way to get a sustainable cure to the economic woes of the globe…”

Could it simply be that certain people now want the markets (thus, economies) to crash?

Tags: bail-in, bankers, full public banking, IMF, The Chicago Plan Revisited