Loading ...Long before the financial crisis, I argued that “activist” central banking was on a very slippery slope. The evolution of New Age Finance took a giant leap with chairman Bernanke’s implementation of zero rates and QE. The Fed’s move to reflate the system through inflated market prices essentially ended the securities markets as mechanisms of self-adjustment and correction. Market discipline was dead. Today, financial markets now chiefly operate as a tool of government (“government finance quasi-Capitalism”).
This complex story turned only more convoluted as the world moved aggressively to adopt U.S.-style policies and, not to be left hopelessly behind, market-based finance. Are the profound changes in monetary management and the rise of the “strongman” politician mere coincidence? I would imagine Greenspan and Bernanke quietly abhor the rise of populism. Do they feel any sense of responsibility?
With central bankers so celebrated for blatantly manipulating markets, of course politicians, dictators and the like would insist on getting a piece of the action. Inflating financial markets became essential to power – economic, political and geopolitical. And as finance became integral to economic growth and the global power play, why not use financial sanctions or the threat of financial repercussions to dictate nation-state behavior? And, over time, attaining financial wealth became an absolute prerequisite for wielding geopolitical power and influence.
The old military variety appears almost feeble standing next to the contemporary Financial Arms Race. And if you seek dominance – domestically, regionally and/or internationally – you had better get a tight rein on the securities markets – whether you’re in Washington, Ankara, Moscow or Beijing. Beijing (and it’s “national team”) moved ahead in this regard, but it would appear Washington is today keen to play catch up. As market-based finance has commandeered the world, the centers of global power have moved to take command of the markets.