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Sunday, July 15th, 2018

Book Review: This is your brain on “Collusion”

I did­n’t think it would be pos­si­ble to write a book that would make me feel sym­pa­thet­ic to cen­tral bankers around the world, but by the end of Nomi Prins’ “Col­lu­sion”— styl­ized, nat­u­ral­ly, “COLLU$ION”— I admit, she’d done it.

This was not her intention.

Prins’ main charge is an attrac­tive one: that cen­tral bankers around the world, led by the Unit­ed States Fed­er­al Reserve, col­lud­ed with one anoth­er in order to enrich those who were already the very wealth­i­est in soci­ety. To do this, they fab­ri­cat­ed mon­ey to be pumped into the glob­al econ­o­my through zero or near-zero inter­est rates, nev­er both­er­ing to address the fun­da­men­tal, under­ly­ing problems.

Because banks have been using all of their tem­po­rary, emer­gency mea­sures con­sis­tent­ly through­out the past decade, Prins says, they’ll have no oth­er tools avail­able when the next cri­sis hits, so it will be an even larg­er calamity.

As a senior fel­low at the lib­er­al eco­nom­ic think tank Demos after a life on Wall Street (her expe­ri­ence includes Gold­man Sachs, Bear Stearns in Lon­don, Lehman Broth­ers, and what is now JPMor­gan Chase), Prins has abun­dant cred­i­bil­i­ty to write this.

The author trav­eled through­out North and South Amer­i­ca, Europe, and East Asia as part of her research for the book, doc­u­ment­ed her sources with hun­dreds of cita­tions per chap­ter, lists four pages’ worth of finan­cial drama­tis per­son­ae before even get­ting to the first chap­ter prop­er, and then adds a glos­sary at the end for good mea­sure. She’s cov­er­ing the com­plex and typ­i­cal­ly impen­e­tra­ble world of inter­na­tion­al finance but clear­ly tak­ing great pains to make it intel­li­gi­ble to a gen­er­al audi­ence. This is commendable.

Collusion by Nomi Prins

Col­lu­sion: How Cen­tral Bankers Rigged the World, by Nomi Prins (Hard­cov­er, 384 pages)

How­ev­er, Prins has a nar­row fix­a­tion on one aspect of cen­tral banks that bor­ders on obses­sion and due to that, numer­ous blindspots that severe­ly weak­en both her expla­na­tion and criticism.

When I was in mid­dle school, I remem­ber we were taught to write “chunk” para­graphs as an essay-writ­ing technique.

All of your body para­graphs were sup­posed to be CD-CM-CM, or a Con­crete Detail sen­tence then Com­men­tary, Commentary.

I don’t know if they still teach it — I hope not — but Prins’ style approx­i­mates this.

She is not a child, so there are many more con­crete details than that ratio would sug­gest, and they are cit­ed with dizzy­ing thor­ough­ness, but the un-cit­ed sen­tences still appear as pejo­ra­tive com­men­tary, usu­al­ly only tan­gen­tial­ly relat­ed to the fac­tu­al state­ment imme­di­ate­ly adja­cent and, as often as not, they inter­pret each event as a sign of col­lu­sion or most com­mon­ly, “mon­ey conjuring.”

If you played a drink­ing game where you had to take a sip every time you read some vari­a­tion of “mon­ey con­jur­ing”, “con­jur­ing mon­ey”, “mon­ey con­jur­ers”, and so on, you would be in seri­ous dan­ger of alco­hol poi­son­ing even if you chose to go with kom­bucha. Lit­er­al­ly, it aver­ages out to some­thing like one per page. The index lists more than six­ty occa­sions, and it’s cer­tain­ly undercounting.

Yes, I get it. This is her cen­tral crit­i­cism: that it isn’t real mon­ey and does­n’t have real val­ue. Sure. But this los­es much when at the end, we find out her pre­scribed solu­tion is invest­ing in gold, keep­ing cash under the mat­tress, or — and I’m not mak­ing this up — Bitcoin.

You can’t decry the wealth of cen­tral bankers on the one hand then turn around and say the bet­ter alter­na­tive is an envi­ron­men­tal­ly dis­as­trous lib­er­tar­i­an fetish object with even worse wealth con­cen­tra­tion, which appar­ent­ly counts as real rather than fab­ri­cat­ed mon­ey to her because pro­duc­ing it requires greater ener­gy than con­sumed by the entire nation of Pakistan.

Of course fiat cur­ren­cy does­n’t have inher­ent val­ue, but no one exact­ly hoards sil­ver for its antibac­te­r­i­al prop­er­ties, either.

On a sim­i­lar note, Prins is much more bull­ish about Chi­na’s investi­ture in the coun­try’s infra­struc­ture with­out giv­ing much con­cern to whether that infra­struc­ture will ever be used before it’s torn down again or this has any salu­bri­ous effects on reduc­ing inequal­i­ty rel­a­tive to the Unit­ed States.

My sym­pa­thies toward cen­tral bankers grew when they received all sorts of blame that real­ly does­n’t belong on their shoulders.

Prins won­ders why in the U.S., we did­n’t invest more in need­ed infra­struc­ture improve­ments. There is a polit­i­cal answer to why stim­u­lus spend­ing was­n’t larg­er.

Why did we repeal Glass-Stea­gall with Gramm-Leach-Bliley? Maybe post-impeach­ment Bill Clin­ton should have vetoed it, but there’s a polit­i­cal rea­son the repeal passed in the first place, why Dodd-Frank hap­pened at all under Demo­c­ra­t­ic con­trol of gov­ern­ment, and why it has been repealed under Repub­li­can control.

Why did­n’t we do more to help poor home­own­ers? There’s a polit­i­cal answer to that, and the reac­tion to even the idea of doing that famous­ly sparked the Tea Par­ty.

Prins is high­ly crit­i­cal of these unelect­ed bureau­crats mak­ing deci­sions about overnight inter­est rates, but what rock has she been liv­ing under where she thinks mak­ing a cen­tral bank head an elect­ed posi­tion would cause there to be an improve­ment in any part of this or less behold­en to venal plutocrats?

“The call is com­ing from inside the House”— it’s called the Free­dom Caucus.

One of the few politi­cians Prins does go out of her way to quote and speak favor­ably of is Ver­mont Sen­a­tor Bernie Sanders.

She def­i­nite­ly should have men­tioned that she pre­vi­ous­ly was part of Sanders’ Fed­er­al Reserve Advi­so­ry Coun­cil and had been a sur­ro­gate for him dur­ing his polit­i­cal cam­paign, but their align­ment seems nat­ur­al rather than untoward.

(“Clin­ton would have been just as bad.”)

There­fore, she repeats one of the most mad­den­ing com­plaints from the Sanders cam­paign: that it’s the fault of the bankers and of wealth inequal­i­ty for mak­ing Trump’s brand of pop­ulism attrac­tive enough that white vot­ers were will­ing to over­look his racism, nativism, and misog­y­ny instead of those things being the cen­tral appeal. Black women expe­ri­ence wealth inequal­i­ty; black women did­n’t need to be lashed to a ship’s mast to avoid respond­ing to a big­ot’s siren call.

Now, I want to choose my words care­ful­ly because in no way did I read any­thing anti-Semit­ic in the book itself or have rea­son to believe Prins feels such.

How­ev­er, phras­es like “cen­tral bankers that run the world” tend to be the sort of dog­whis­tle that peo­ple who put (((triple paren­the­ses))) around Jew­ish names like to use. The call to break up the banks and have stricter reg­u­la­tions is obvi­ous­ly pro­gres­sive cat­nip, but the char­ac­ter­i­za­tion of a shad­owy cabal of inter­na­tion­al financiers col­lud­ing with one anoth­er to fur­ther prop­a­gate their own wealth is more akin to The Pro­to­cols of the Elders of Zion, and tends to excite the Lyn­don LaRouche fanat­ic or for­mer Ron Paul, for­mer Sanders, for­mer Jill Stein, present­ly lib­er­tar­i­an-mind­ed cryp­tocur­ren­cy enthu­si­asts with some social­ist tendencies.

Like Thomas Jef­fer­son read­ing the New Tes­ta­ment and strik­ing through the mir­a­cles to retain the more valu­able teach­ings only, the detail and breadth of Prins’ work track­ing the response to the finan­cial cri­sis in Mex­i­co, Brazil, Japan, Chi­na, the Euro­pean Union, and the Unit­ed States’ hand in all of it is worthwhile.

As a ref­er­ence to the time­line of post-crash bank­ing, it is worth read­ing. But the inter­pre­ta­tions in between are sin­gle-mind­ed, repet­i­tive, and not espe­cial­ly helpful.

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  1. Prins has some socailist(feminine) ten­den­cies. For a more schol­ar­ly (and dry) his­to­ry, see:

    [] Bank of England-Andreades
    [] The Income Tax-Seligman
    [] Fed­er­al Reserve-Meltzer
    [] Cen­tral Bank Cooperation-Toniolo
    [] IMF-Yago (plus IMF pubs & Per Jacob­s­son Lectures)
    [] From Obscu­ri­ty to Noto­ri­ety: A Biography
    of the Exchange Sta­bi­liza­tion Fund-Schwartz

    … and some more live­ly updates

    [] Ascent of Money-Ferguson
    [] When Genius Failed-Lowenstein
    [] Con­fes­sions of an Eco­nom­ic Hit Man-Perkins

    Although I do not agree with all her con­clu­sions, the book was enter­tain­ing and infor­ma­tive, well worth the lis­ten. As for the superla­tives in the cri­tique, I would recommend:

    [] The Bal­four Declaration-Schneer

    # by steve godenich :: July 19th, 2018 at 1:16 AM
  2. I was impressed with Page 253 …cen­tral banks should finance large invest­ment, and recov­ery programs. 

    This has been said by sev­er­al Nobel Prize win­ning econ­o­mists. They were inspired by the pre Nobel eco­nom­ics era Chica­go Plan.

    This link has a link to Phillip­s’s paper which pre­ced­ed his book. Min­sky did the fore­word to the book.

    # by Joe :: July 28th, 2018 at 2:46 PM
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