Synopsis of ‘Central Bankers at the End of Their Rope’ Book

Synopsis of ‘Central Bankers at the End of Their Rope’ Book

Now publicly available for order from the publisher, Claritypress/RasmusIII.html, from public bookstores, and from this blog, the following is the synopsis of the book, ‘Central Bankers at the End of Their Rope?: Monetary Policy and the Coming Depression’.

BOOK SYNOPSIS

“Central banks of the advanced economies—despite having been
designated by their respective economic and political elites as
their states’ primary economic policy institution—have failed
since 2008 to permanently stabilize the world’s banking systems or
restore pre-2008 economic growth.

Rather, central bank liquidity injections since the 1970s not only
produced the 2008-09 crisis, but they then became the central
banks’ solution to that crisis; and now promise to cause of the
next one, as a further tens of trillions of dollars of liquidity-
enabled debt has since 2008 been piled on the original trillions
before 2008.

Fed policy since 2010 has represented an historically
unprecedented subsidization of the financial system by the State,
implemented via the institutional vehicle of the central bank.
Central banks’ function of lender of last resort, originally
designed to provide excess liquidity in instances of banking
crises, has been transformed into the subsidization of the private
banking system, which today is addicted to, and increasingly
dependent upon, significant continuing infusions of liquidity by
central banks.

Taking away this central bank artificial subsidization of the private
sector, especially the financial side of the private sector, would
almost certainly lead to a financial and real collapse of the global
economy. It is thus highly unlikely that the Fed, Bank of England,
Bank of Japan or European Central Bank will be able any time
soon to retreat much from their massive liquidity injections that
have been the hallmark of central bank policy since 2008. Nor will
they find it possible to raise their interest rates much beyond
brief token adjustments. Nor exit easily from their bloated
balance sheets and extraordinary historic policies of liquidity
provisioning. That liquidity not only bailed out the banks and
financial system in 2007-09, but has been subsidizing the system
ever since in order to prevent a re-collapse.

Truly, as this book addresses in painstaking detail, central
bankers are at the end of their rope. Wrought by various growing
contradictions, central banks, as currently structured, have failed
to keep pace with the more rapid restructuring and change in the
private capitalist banking system. As a result, they have been
failing to perform effectively even their most basic functions, or
to achieve their own declared targets of price stability and
employment.

Official excuses for that failure are critiqued and rejected.
Alternative reasons are offered, including:
• the declining effects of interest rates on investment,
• the relative shift to financial asset investing at the expense
of real investment,
• failure of central banks to intervene and prevent financial
asset bubbles,
• the purposeful fragmentation of bank supervision across
regulatory institutions,
• mismanagement of the traditional money supply,
• rapid technological changes transforming the very nature of
money, credit and financial institutions and markets worldwide,
• monetary tools ineffectiveness and incorrect targets, and
• central bankers’ continuing adherence to ideological
notions of the mid-20th century that no longer hold true in the
21st—like the Taylor Rule, Phillips curves, and, in the case of ZIRP(zero interest rates) and NIRP (negative interest rates), the idea that the cost of borrowing is what first and foremost determines real investment.

Central banks must undergo fundamental restructuring and
change. That restructuring must include the democratization of
decision making and a redirecting of central banks toward a
greater direct service in the public interest. A Constitutional
Amendment is therefore proposed, along with 20 articles of
enabling legislation, addressing what reforms and restructuring
of central banks’ decision making processes, tools, targets,
functions, as well as their very mission and objectives, are
necessary if central banks are to become useful institutions for
society in general. The proposed amendment and legislation
defines a new mission and general goals for the Fed—as well as
new targets, tools and new functions—to create a new kind of
public interest Federal Reserve for the 21st century.