Nomi Prins: "Collusion: How Central Bankers Rigged the World" | Talks at Google
My. Opinion. How. We ended, over here. Kids. Left by video, changed. Momma's drunk most, of the year. We. Know it ain't. He. Goes. Without. End inside. We. Now. Last. And. I ever dress. Out on you, and me. If. It is not on the list can't. Have your Metis son, can't. Get no, education. Chuck it down to, lesson. Wait. Oh you. And, me. Opinion. We. Are paying. How. We ended. So. So so the imagery in that is is is sort of a walkthrough to, an extent the the, parts, of the world that that I was, in in. The putting together of this book and. That those part of the world were also historical, as well as geographical. The, last book I wrote all the presidents bankers was very much historical. It went through the last century. In a bit of the relationship, of presidents, in both parties and the bankers, and just sort of what the actual personal relationships, were and how they were, interacting. Before various, types of world events Wars policies. And so forth and this, was kind of that but, from just the 10 years since the financial crisis, of 2008. And. Rather going, back to, the history of one country, I sort of expanded, it to what's. Happened globally since the financial crisis, and, to get to the punchline first, because. I also want you to feel like you can interrupt me and ask questions, I know I'm here to speak to you but. You're you, know sort of a very, informed. Group and so I think that if I say, something that's either troubling, or confusing. Or you want me to expand or whatever it might be just you, know shout out because I think that that will be a good. Thing but. Anyway so I I divide, my book into the regions of the world that were, either, involved. Or, affected, or, impacted by, the financial, crisis and the sort of how they've acted, differently since then and I talked about collusion, it's not about Russia it's not about politics, well. Everything is ultimately about money in politics but that's not the point of the book the point of the book is to look at what the main. Central banks in the world have done in a sort of unprecedented way, since the financial crisis. To, artificially. Kind of stimulate, the financial, system the banks and subsequently. The markets in, a way that's been very. Historically, epic in terms of size but also in, terms of just their unlimited. Capabilities, in. Terms of the amounts that they've created in terms of not being able to no auditing, no no sort of information going in and out as to where that money actually goes, and.
So What I did was I didn't. Have a chapter on the Federal Reserve which I'll talk about in a bit more in a second which is kind of the central character, if, we look at central bank's is just sort of characters, throughout the world and the individuals, that run them is just the characters, that are part of those scenes. I took 2008. As the beginning of each chapter in, each region and I always started there and then looked at how that region, was impacted, so I go to Mexico, to. Brazil to China to Japan and throughout Europe and each time I sort of go back to the beginning and say okay well this is the perspective of what happened. Between the Federal Reserve the United States in this area and. This is how the fallout, occurred. Or this is how they expanded, but not really and, in my general theme is that, having. Had an unprecedented, amount of money being thrown into the system sort of fabricated, or manufacturer, or conjured, by the. Central banks has really distorted, the. Idea of value it's it's even distorted, the idea of where how companies who actually you. Know sort of show their profits and losses based on actual cash actual. Revenues. And so forth that aren't artificially. Stimulated. By, money. Coming in from an outside source are, sort. Of in operating, in a world in which they're also. Ones. That are and so, in terms of just the graph of that I wasn't again going to do slides because I tend to I. Can. Just write on this so. The so the way that looks, and if anyone wants me to just, mention what a central, bank is well making. Sure if these right, does. Everybody know what a central bank is, okay. So so so basically a central, bank and the Fed in particular, here was. Designed usually. Designed to provide emergency capital. In the, event that the financial, system can't produce it for itself it's going to create a bigger crisis, for the rest of the economy there, needs to be a, particular. Reaction to, say a war or like you know interplanetary. Aliens, coming or something like that and that the the. Reality. Is that they have clauses, in their mail dates that are emergency, clauses, to be able to do this so it's all quite legal, and, I'm not advocating that, the, collusion of central banks is something that's illegal. I do get asked that question but it is something that's to an extent deceitful. Because, by having a large supply of artificial, money that, has no limitation, in terms of when and how it can be fabricated. As, it has Devon been the last 10 years it that, distortion, thing does, create a level of deceit so one of the things that happened since the financial crisis. About it drawing but I'm just gonna this is 2008. And, this is now and, I. Have. This on my. Twitter this. This particular, graph but I thought it was cool because it was three lines one. Was the Federal Reserve and how much money when it dumped it into the system one, is the Central Bank of Japan and one is the European, Central Bank because the idea this collusion, is that the major country, central banks have also, adopted a cheap money policy, and a quantitative, easing or buying securities, policy.
Buying Bonds buying. ETFs. Or buying stocks if you're in Japan by corporate, bonds if you're in Europe where they've been able to fabricate, money and and decide. Where. Effectively, they want to invest it but they'd go through a financial system and that has an impact on the market so the Fed kind, of started this in 2008. And and. And sort of they did. Some, sort of a taper in terms of this this line represents. The amount of money they conjured, since. The 2008, period, to buy in. The case of the United States Treasury bonds government bonds, and, mortgage bonds from from the banking system and. So this is kind of 2015. And. Though. They have it this isn't really only that's a tiny line down though. They haven't continued. Here, they. Did they, have a pretty high value four. And a half trillion dollars of. What. I consider to be subsidies, for the. Banking system in the market because they're really coming out of the. Sort of the electronic. Activities. Of the Fed so, this is the Fed line. Colors. Don't mean anything by the way I'm just random. Picking. Colors. Then the European, Central Bank, kind. Of came in and did something similar. Except. That they were kind of here and. Then. They kind, of did that. Right. So this is the European, Central Bank. This, is kind of 2012. Where. My. Bad, geometrics, is such that they kind of accelerated. Their process. Of being involved in quantitative, easing. By. A lot when there was a credit, crisis, in Europe so the minute there wasn't enough money in Europe they thought they had recovered they really hadn't they were still adopting, the policy of colluding with the Fed to produce, money in the system they. They, kind of accelerated, and in this period of time where the the Fed sort of stopped putting. As much in they've, accelerated. Even further so now they're around. That. Five. And a half trillion, and, then. The Bank of Japan which was the bank had actually created, quantitative. Easing to begin with they came up in 2001. Of this idea that if they produced, money into the system because, their banks were basically, undergoing. A collapse in the beginning of the 2000s, that they would have, a way to help them and they they did produce money, they did engage in quantitative, easing but it's really really tiny so, I talked, about in my Japan chapter, how Ben Bernanke who was the chair of the Fed when all this kind of started. Goes. In front of Congress and talks about how what we're doing is not what the Japanese, are doing it's really different we're, doing it for other purposes but the reality, is that the mechanisms the same they're producing. Money. In order, to increase the money supply in, order to then decide where it goes into. The banking system into corporations, who then borrow it which then goes into the stock market or, other other, financial, assets so so the Bank of Japan was kind of also. Here. And, then, in about 2013. They. Did that, right. They. Did that, so. They're around it like 5 trillion right now. And. Basically. The reason they sort of had an acceleration. In about 2013. 2014. Is, because. From. An economic, perspective, having watched all of this happen, the, Prime Minister of the. The the head of Japan Shinzo Abe a decided, that we should be doing the same thing or being doing more so of that in Japan and so, the, head of the central bank now in Japan. Kuroda. This is Mario. Draghi. Currently. This now at the Fed and, through different periods as Jerome Powell but there's been three different Fed. Heads two different Japanese heads, and and two different European, heads over this time period they've, all kind of engaged in the same process and as, a result, there's about. You. Know this is 15 trillion but, when you when you aggregate all of these numbers and you aggregate all this graph the level of money that's continuing, to be conjured. And dumped into the system is going, up so, when you hear in the news that the Fed is tapering, that, they're doing, this and this somehow is a reflection, of, their. Experiments. And quantitative, easing and cheap money succeeding. You. Have to understand and this is that the collusive, efforts. Involved it that collectively, the. World is increasing. Their, amount of quantitative, easing it's just happening in different countries for different reasons and in the European Central Bank realm.
It's Being, dumped into corporates. For the most part in Japan, it's a combination of government bonds and stocks and in. The u.s. it's kind of stopped it was a combination of government bonds and mortgage bonds so it was always going into the place that needed, the most help but. But the say. Corporations, in the in in Europe that needed that help we're, receiving it basically without giving very much in return the European Central Bank would, decide well we're going to give money to this particular company in Germany versus these, particular, companies in Greece and that was a that was in. A lot of ways a political, decision but the monetary, elements, of that, enabled. Certain, countries and certain companies, and certain stocks to go higher simply. Because there was an outside artificial, source to. Push things higher and so, when I started going around the world and sort of examining, what, what. The real, actors, were doing throughout this period this is just kind of the summary in yes, and looks like this. Right. From like a half a trillion. You, know there's. A picture that starts to be developed, and that's that the the ones, that had the ability to produce money did, their markets have written more substantially. There has been more sort of speculation, outside, of those markets, because once they go up where else do you go capital flows out it goes to Mexico school. And so forth but in those kinds, of countries there's less of an ability and they didn't choose necessarily. To get involved in quantitative, easing so, there was an entire sort of political, ramification. That, doesn't really get discussed, behind just the value money and the amount of quantitative, easing that these major central banks are doing that, actually has changed, kind of the shape of the world so. The first country. I go, to in, collusion. Is actually Mexico. And. And the reason I did that so that I spent a lot of time working. With companies. In Mexico and stuff but. That basically, the. Mexican, government and the individuals, who are really involved in the period from the 2008, to 2018. That were running the central bank in Mexico had really strong opinions, about what the Fed was doing and a lot of countries had strong opinions about the Fed was doing because to an extent is just not fair it's it's not really capitalism. It's not really free markets it's kind of like you. Know a subsidy, for the financial, system that then has major, ramifications of, creating an artificial system and that can go terribly wrong very, quickly if. It, gets taken away which is why it's not being taken away and there's ramifications to that so what Mexico decided in 2008, and their economy, is actually doing fine. The, crisis, happens north of the border in the, beginning they say well it doesn't really affect us, it's a financial crisis, it's contained in the banks that's taking care of it but then it starts to become apparent very very quickly that, that's not the case that if there's a recession in the stage so if there's a depression in the state so if the financing, closes, up and there's no credit going. Throughout the system it impacts everyone, so, the, head of the central bank of Mexico guy named GUI Emeril Ortiz he. Went, to Washington his, part of the establishment he sort of you, know floated. In the sort of economic ideas, of the Fed governors. And so forth he goes up to Washington. - ben bernanke look we've we've seen this movie we know how it ends it doesn't end well we have a tequila crisis, in 94, we restructured, our banking system smaller. Banks, got eaten up people, got thrown out of jobs companies closed, it took us a really long time to recover and and, more than just the economic, problems, of recovery, our, people, lost confidence in the system and, there that that manifested, in lots of crowds in the streets but the point was if.
You Simply, create money to simply, help the financial system, to help the banks it's, it's not. Really, stable capital, it's not really, ultimately going, to work there, will be bubbles, there will be problems, and Ben, Bernanke says. Thanks. Doesn't. Cover Ortiz, and his memoirs, at all even. Though this meeting was covered by The Wall Street Journal it was public, and, he basically goes about and sort of manufacturing. This this. Emergency. Quantitative, easing amount and then has the whole world join, in why, does the whole world join in or, why do the major countries, join in to any quantitative, easing movement. Because. If you have capital in the US and money. Is made very cheap so it's it's more liquid to the financial, system so they can sort, out the stuff they did and. Rates, are higher elsewhere, in particular, in the main countries in which there's with which there's trade or with which the banks have relationships. Then the money is going to leave and so, the only way to sort of keep the dollar strong enough and keep the money in the u.s. is to have the export, the same, method. To the countries that have the the largest relationships. So something like Mexico, has, to also deal with its own economy so, if it reduces rates, by too much that. Will cause, inflation. In the economy because it's it, has a more direct impact on, actual people and on actual, prices, because it's a smaller economy, to begin with and. It's reliant, on other economies, for its trade by buy more so so. Our. Kids didn't want to reduce rates like the Fed was doing very quickly and they couldn't produce money. Electronically. To buy securities, in Mexico, they didn't have the same, cassadee and, so they didn't so he didn't he went about criticizing, the, US as a result he sort of lost his job or, even get reappointed to. Be the head of the central bank of Mexico and the subsequent, appointee, a man named Agustin Karstens who also. Sort. Of was in the same group. As, the people running the Fed Treasury Department and so forth came, in and he at first said okay I'll do what the feds gonna do I'll reduce rates, I'll keep it sort of stable, between the border of Mexico and the u.s. I'll follow, along he used to go public about the fact that this easing was, going to help the real economy ultimately will trickle out of the banking system and out of the markets and it'll help sort, of real growth and long-term growth and wages and everything else and.
That's What he said originally, that's kind of how he he, got that job and had that job for a while in this period but but the reality, was they. Didn't do that and he, started. Feeling. The political, pressure in Mexico, of the fact that Mexico. Wasn't really, getting. Any of this money into their economy, and it was very very obvious and. So he started criticizing the. Fed and everything else and he ultimately resigned. Before. The end of his term last, year and he's, now the head of the, Bank of International Settlements. Which is the central bank of central, banks that does reporting, on all of these activities and, always, used to support the Fed the. IMF, the World Bank the ECB when, it came into being as doing. The right thing by their economies, by employment, versus inflation, which is one of their mandates by helping their system and it. Was created, basically as a sort of unified. Us. Europe kind of entity to begin with it's starting, to have real critiques, and the fact that it is now run by someone who bought. Then kind of sold the policy, of the United States and is now at the head of that institution, really throws a shift in general. In the world in terms of how it looks at what the end game of this could be how, risky, it could be for the rest of the world and. It's, just simply questioning, how long this can go on so. That's been one shift another shift it's a longer story I won't get into it is, in Brazil, because. That has it so many of its own sort. Of pieces. Of corruption, and scandals, and government overthrows and so forth but, one, of the people who is currently running for the, presidency, of Brazil, as, a man named Enrique Morales I, pronounced. It Mariah's because for some reason my. Portuguese, is very bad I was I was corrected last night actually in Berkeley about my pronunciation of, his name but. He, was someone who was head of the Central Bank of Brazil when this all started when the crisis all started happening and. He and the president of Brazil at the time, Lula, who's now in jail was. At. First thing Brazil's not going to be impacted, by the crisis, same way Mexico, said it wasn't going to be until they were very shortly thereafter and. He wanted, to do what the US want was doing, the. Party, and power who became, in power the. Workers Party headed. By a woman named Dilma Rousseff said no we want to maintain help, for Brazil he. Says we want to do with the u.s. that he loses he doesn't get real he doesn't get appointed, to be the central bank leader he goes back into the private sector he winds up being the Minister of Finance. When. Her government was overthrown and, so he's basically gone from being a central, banker, to. Private sector to being. A, Minister, of Finance and now he's running for president, in the meantime Brazil. During, that period and this is just where politics, meets monetary, policy, has. Basically. Reduced its rates from this. Is a completely, separate, graph this doesn't count on that graph they reduce. Their rates from 14.5, percent to 6 and a half percent, in. A very short period of time Mexico, has raised its rates from three and a half percent. To. Seven and half percent in. The last few years as well so they've gone independent. Of the Fed they've gone sort, of dependent, on the Fed and. And and that really manifests, into political relationships, if you're an investor it actually also manifests, into figuring out why this, has happened because it's very unique that actually Mexico has higher rates. Than, than Brazil so. So so there's a lot of shakeout as well from a monetary, policy perspective. Where, government, bonds are trading where stocks are trading and and, who's shifting, in the sort of power relationships. Of central, banks and also the. Government's now central banks are supposed to be independent of, governments. That's how they are. Mandated, so supposedly. The Federal Reserve is in two pendant of whatever.
The US government, wants to do the Bank of Japan is is independent, and, there's a lot of I went, through a lot of documentation, I have this team of researchers, around the world who knew languages, that I didn't know and so we were looking at real sort of media. Publications. At the time real documents, and research information that's coming from these central banks themselves and, and and and it was interesting to a lot of them both. Criticism, of what was happening on the outside and trying to figure out if they should adopt it on the inside which. Is part of where. Where. There's a lot of tension and still tension in the world. But. China. Which. Is the middle of the book is. A. Place that has, grown. In, its super power neck. Anomic perspective, and also its relationships. With other countries and one, of the reasons that doesn't get talked about is. That. It. Chose, to criticize. Very vocally, the. Monetary, policy of the United States. Because. Of this this whole creation of money policy. Now it has created money as well but, it chooses to do it outside of sort of the main g7, groups and. It does it for different purposes and you probably know this here I mean it does it for building infrastructure, for paying, for technology, and R&D and. Individuals, and also for trade alliances, with, other countries in that region with. Mexico, with Brazil, in order to establish itself, as sort, of more. Both. From a trade perspective, and a monetary perspective. Superpower. The reason. That all started to happen in. 2008-2009. Is because they had a central, the central bank in China that the People's Bank of China, got. Very public, with his criticism, of the Fed ultimately. The Chinese currency the, rent was accepted, into the, IMF, Special. Drawing rights basket, which is the sort of representation. Of the main currencies, that had always been the dollar and the euro which. Had before that been the German mark and the French franc, and. The Japanese yen and the British Pound and in. In this period of time the. Chinese, currency the, renting became part, of this basket, because even the IMF, that had been established to. Really, work, on the, reserve currencies, of the dollar in the euro mainly, was, beginning to criticize, whether all this money being dumped in the system when it is retracted, or when rates rise or when something goes wrong with all the debt that's been created on the back of it causes. Problems throughout the, developing, world causes. Problems within, the US so they've been very critical. Of late as well but, China has been able to utilize, that in. Order to really become and, create, more trade, agreements and more currency arrangements, and, also develop, their their alliances, and their own companies. Within China that's what they've been doing with that money we really haven't, been we've been just, just as a sort of superpower. This. Money is predominantly, gone into financial, speculation into, the markets it hasn't been dedicated. To instead. Of building a railway or, building. A canal or or, or anything like that or lending, to other countries, in order for them to be able to do that because they're partners, and that strengthens. Them therefore the the trade, relationship we've. Really gone sort of off the rails relative, to that that's not to say China doesn't have problems it's just to say that in. This, period of time money's. Been created, here, and. In Europe and in Japan for and, to a lesser extent in, the UK. For. A different reason and, and. And that reason has been more of a financial reason and not so much as a long-term, economic. Stability, reason. As it has in Asia I talked, a little bit about Europe and I'm I was, sort of the last chapter, of the book but one of the manic one of the things that's come out of the ECB's, policy, aside. From the fact that there is criticism, from certain countries like Germany, against the ECB, because they're like our country is fine we have savers, we're developing, we don't need this whole.
Easing Thing we don't want to be concerned about bubbles, bursting, is. That, the sort of southern part of Europe Greece, Italy Spain and so forth happen to have the benefits, of the. Same amount of money being put in so when there's a lot of money that's put in in one part of. The. Market, and. It's not. Sort. Of divided, or or even selected, or true to be put in other parts of the market it creates inequalities, and volatility, and instability so, what we've seen in the last few, months in in. Even our stock market is is a sort of beginning, of. More. Volatility coming, into the market more sort, of defaults, and delinquency, is coming into some of the corporate bonds, that were issued. Because. Money was so cheap and therefore repaying, the debt was so low but. Debt payments will get higher and. Also money coming out of stock market to make debt payments, and then separately buybacks, which which keep the level of the market up so you have these two sort of competing, forces of capital, that. Are creating more volatility, now you have cheap money still, available. You have a lot of buybacks, some some from companies that have cash and some from companies, that have received cash but. Nonetheless and, you also have cracks, in the system from, both the rumors that. Are in the market as to whether or not this can stop, anytime. Any of these central bank leaders talk about the possibility. Of it stopping the markets tend to get really really upset and then the next meeting there's like oh we didn't really mean it there isn't really inflation, there isn't really growth we're gonna stop, which. Is what he does a lot I mean they all do it but it's. Interesting because even even the Japanese. Last. Week had a meeting the Bank of Japan and they came out and they said well we're gonna probably have to keep doing this like forever I'm they, used the term unlimited, Mario. Draghi said the same thing, the. Week and a half ago when the European Central Bank came out and said yes we're keeping rates at negative and. We're also going to continue our quantitative, easing program so these lines up the, Fed is kind of yes.
Question. Though I mean is there really an alternative to. Printing all this money because if you look at the rate of debt creation, over the past 30, almost 40 years no, debt growth has exceeded GDP growth almost, at the entire time there, are projections that, so, many public pensions, will be insolvent that there's no like mathematical, way to make that possible so is is, unlimited. Money printing just the easiest, way to kind of like softly, default on that rather than causing. Some catastrophic collapse, well, you know we're all pushing or having to worry about a solution to it I mean yeah staff has increased, over the last 30 40 years relative to GDP but, it's it's accelerated. By, a lot it's increased, because it's, how the sort of plaster over so if the financial system which kind of started this, this. In. In 2008, was on the brink of what, it said to be collapse there are different ways that that could have been addressed one way would have been to let one or two extra banks collapse and. That, really. Sounded harsh at the time, but. Yeah, throughout Wall Street banks have collapsed, I mean it's it's not like that that hadn't happened and the problem, was there was so much attention focused on whether that was going to create. A massive depression going forward that there was no conversation or. Very limited conversation. In Washington, as to doing something else you're. I'm, sure very Matthew, that the reality, I'll just go back for like one little, explanation. Of how I saw that was. At the time of the 2008, financial, crisis. There. Was there was a which was predicated on mortgage, bonds and all the derivatives associated. With them and all the credit. That and insurance, that was traded between banks, and all that, there. Was only like a half a trillion dollars worth of upset, subprime, mortgages, in the market at the time half a trillion right there, was 14 trillion dollars worth of toxic, assets of assets, that, were reliant, on those, subprime, mortgages, paying, their interest, and if they didn't get paid would, start to, deteriorate. And value. Banks. Lent, to. Investors. Around the world including, pension. Funds include. Helped, pension, funds including you know municipalities. Corporations. Other, financial, entities. Ten. Times that so 140 trillion dollars effectively was. On offer going, after a half a trillion dollars of. Subprime. Related, assets so. That problem, is. What caused an acceleration. Of the. Production, of artificial. Capital. In. Order to solve what was really a major. Financial. Crisis. It was, but what could have been done is you could have just paid off a half a trillion dollars worth of subprime mortgages, and and, forget whether that's an ideology. Of you're paying people who didn't deserve it or banks it doesn't matter that the economics. Of it would, have been far far cheaper. Instead. The. Decision, was made to plaster, over that and to, start this creation of 0% money so that banks would have the liquidity to start to read whoever was still left standing to, repay each other so that companies could repay some. Of the money they had borrowed that we're still left standing that, were involved in this and as. A result. It. Has created, an, extra. Level of capital in the system that makes. Debt. Accelerate, and also, makes stock, levels, go up artificially, so. That the next time there's a crisis, you're falling, from a much, higher height so absolutely, they want that not to happen which. Is why every single time a Fed, chair. Says, there, is growth there's inflation this is like you can trade this I mean if you're just even looking at this from investment, perspective. It's. Going to be followed, by some. Major hiccup, in the market and then some other central, bank or maybe the same one or someone, in their country, saying, well no we didn't mean it and. That's exactly what the European Central Bank was talking about growth a minute ago so was the the Bank of England they, were gonna be raising rates all these rumors in the market it put the pound up and you know Breck's it's fine it's all it's all going to be worked out the, central, bank is gonna raise rates it's a sign of strength it's going to help our currency, into negotiations, with Europe there's all these sort. Of discussions, and media. Narratives, and politics. Going on back and forth reality. Is they don't have the growth in the central bank had last week said by the way things. Aren't so great they. Did not well they, can raise rates on Thursday they're not going to I think.
Because. Actually, the numbers don't bear them out and also it hurt, the market and so. Yes. You are right long answer to your question but the reality is they they want to keep this going they found a method to do it and that just means that when, things crack they crack from a much higher height than they would have or even did, during. 2008. So. Now we have four point five trillion in the market as money supply and. One extra. Exactly, it was only how come inflation hasn't happened, because all this money are in the bags it's, such a good question and and. Different. People ask that in different settings for I think different reasons, and, it I, think. That. Inflation, has not risen on the sort of average generic. Way that inflation, is considered, and calculated, because. This money has, inflated. Markets. It. This. Is inflation, the. The level well, a, third. Graph would well this and and sort of the stock market. So. It's kind of dipped a little bit but it's sort of like that and, you have QE one, you. Know qe2. Qe3. You. Know Europe, Japan, and. So. Forth. That. That ultimately this, fifteen trillion and twenty one trillion if you add and all the other banks that are involved and the, market level, it's. Pretty much the same so there has been a tremendous, amount of inflation there's been inflation, the money supply that has gone into inflation of financial assets it's gone into lining. New debt it's, gone into inflating, the value of stock because it's been a artificial. Source of money that's been used. Not, just for stock buybacks, because that's kind of a one-to-one relationship but. But all along the way it's been there as a sort of security blanket for. Banks to be able to leverage. More companies, or leveraging more right now actually they're on average. Companies. In in the SP are leveraged more than they were before the financial crisis, so there's inflation, but. It's not inflation, of real prices where, it had been for, awhile for, example in Mexico where they were reducing, rates it was inflating, real prices because the relationship. Of that, central, bank and that monetary, policy was, more closely connected to the real economy and the. Fact that we don't have inflation, in in, these countries, because we don't, officially. But. We have inflation in financial, assets is is a sign of how, just sort. Of off the rails this has, gone. And. My second question quickly, but. Also we, used to have the gold standard which would basically be something we could pay right the, actual value, of a dollar to today. We don't have that we also have petrol dollars which, are representing, kind of an asset or resource that can be traded is that, also why the. Dollar is still strong and we haven't lost the, value dollar in the market or is that completely unrelated, to.
It's, Not entirely alright the concept, of the gold standard. Was. Something, or has been something not returning, to it exactly, as it was pre 71, but but but returning, to some sort of, component. Of gold say in the, Special Drawing rights basket, so you have your five currencies, and you have gold and they're sort of an average so you have something that's a real asset or or some sort of manner bringing back a version. Of the gold Sandra gets discussed, but for example when the Chinese, Chinese. Central bank was was criticizing, this. Fed policy of just sort of inflating, a, sort. Of currency. But but not having anything real behind, it to back it, Ben. Bernanke actually, went on the defensive, and, I. Have, this in different, parts of the book throughout the years and start talking about how we don't want a gold standard like it wasn't even brought up as a topic when he started defending it and one of the reason it, away as a potential, and one of the reasons for that is you can't create gold, this. Is not to say that that we should be on a full gold standard, or that it's it's it's actually a, practical. Development but having gold is a portion, of a currency basket makes some sense because it's it's just an anchor it's. It's just something that's actually physically. There and it's physically, it. Doesn't retain the same kind of value the more there's other currencies, and there's more speculation, in the market that it might have everything. Was going off of real trade and real hard asset, but. But it had that had, an anchor level. To it and and the fact that it isn't a part of the, main system but it is something that gets bought up by some of the countries the emerging countries that are trying to trade with each other their own currencies, as, well as to try to have more of a portion of gold reserves in the, potential. That. They create, some sort of standard amongst themselves or something outside of the dollar outside, of the euro, it's. Certainly something that. Has. Kind of been reinitiated. In in this whole process like, where that goes and how long it takes to get there, I don't. Know I mean there's there's people out there so the dollars gonna deflate tomorrow and I'm gold it's gonna like go sky-high I mean I think there's, a trend to. Gold. Being considered. As something that should incur. This, but and other countries, using, their. Currencies, and trading, with each other like China and Russia like. Europe and Japan there's, a lot of trade agreements that have been developed in and I have a lot of them in in collusion but that had been developed in these years amongst countries, to. Try and offset some of the potential, risk of really, this policy, not, simply the dollar geopolitically. But really the. Policy of sort, of bolstering, a system that's not really restructured, and, that has the potential, to bring, down. An. Economy, or multiple, economies, again. One. Alternative, that comes, up in questions is crypto, currencies. And. Ford. For similar, reasons and and, what's interesting is that though there's a lot of volatility, in Bitcoin and other currencies, and, and, there's a lot of risk in being involved in them there's they're speculating, in them which has, its own risk attached but there's actually if, you're going to use them on a regular basis. That, kind of volatility could you know ruin, anyone's, business on any given day or pop it up and that's not the kind of volatility in the real economy that most people can. Can. Or, should handle but. The idea of having alternatives. Any alternatives. To this system is. Very much an accelerated. Concept, because of how, it's been handled because nothing has really been reformed. Or fixed it's just been plastered. Over by bytes through this artificial, part. Of the the system so. The. Head of the IMF Christine, Lagarde, who again, IMF, the International Monetary. Fund very, much a part of the system very much involved in the whole dollar, European. Currency, system, from when it was created in the wake of World War two and it was created to basically subsidize, countries, that were allies of the US and Europe and this is kind of part of the point, she. Currently has, been, on multiple. Public. Arenas, talking about alternative, currencies, and how cryptocurrency, is is something, that is happening and it's it's expanding, and they, need to be aware of it there, are full SWAT.
Teams That the fail reserve now that that are doing that sort of under. The. Radar and there's. Also you, know you can get jobs at the european central branch right now the listed, to be involved in developing. Technology. Related to cryptocurrency. Analysis. And so forth right now so they're. Definitely all involved, from a different perspective but, the, idea of it sort of. Yeah. Who actually ultimately gets the sort of regulation, of it versus, the use of it I think is still up for grabs because. If. You. Had kryptos created, by the same central banks that are creating, this, currency. Then, you don't necessarily, gain. Sort. Of autonomy, from this system by doing that but if but if there are kryptos that are regulated, by a portion of this so that they're not as sort of volatile, for end-users then they actually might have. Might. Spread that, much more quickly. Question. That I've kind of just. As a dabbler in cryptocurrency, you know people always ask but. What is it based on and the, answer is well not not much but it does have a fixed supply I think I'm just the original Bitcoin, like 21 million coins, well, gold is a fixed supply so. When, I look at those I think. One. Of the arguments is, well. Sure you, know Bitcoin is volatile but if nobody's on the gold standard it doesn't matter either it's. Kind of an odd magical, thing to me of how people decide to buy into a, green. To, stick. With a fixed supply of anything, when, it comes to I guess, I would say a game this big, what. Would be the the. Motive would it just be looking. For something stable and and what. Would what, would bring would, bring this air balloon back down I guess you. Know I think the idea and. It's slightly different I mean the the language, for, crypto. Is similar to the language for for, gold and that's that's not an accident and the idea of having a fixed, supply as part. Of what sort of pegs it to some form of, anchor. Right, is it is not an accident either with respect to gold it doesn't mean that you can't have speculation, and gold and it if you had a gold standard or a similar thing to go see on you could still speculation, you, could still have. Stockpiles. Of gold you can still sort of squeeze the market etc but but the idea of anything. Outside of this is that it is, fixed, and it does have a limitation, and this process has been particularly. Unlimited, I mean. It, it, it's. Still going up and. So even though the Fed can say talk about tapering, or stopping to buy it this particular moment, or creating money of creating dollars to basically continue this process the reality, is if things, go south there's. There's no limitation. On let's. Just create another few trillion there was no limitation on literally, any of the process, and so, talking, about assets. Hard assets or crypto currencies. As a way to. You. Know just just infuse. A, limitation. To the system, should. In theory be able to, reduce the volatility, of the system now on any given day there's you. Know markets moving for different reasons you know geopolitics, wars trading, for trade wars whatever but, but in terms of the overall backdrop. Of the system if you have something that's real that's. That's there as a peg or even a proportional. A portion. Of all the currency activity, in the world the, idea is, that it should reduce the risk it's like any ports. Like portfolio, finance. It's like if you have more, ideas. If you're diversified, you reduce, the risk now in practice you have to watch what's going on, but. If you have a standard, of some sort outside of the system that's. Limited. That. Should reduce the volatility, ultimately. Of the, system, and it should act as a sort of counterbalance. To the unlimitedness. Of. What these people are doing because, not only are they not limited in terms of how much money or currency can be created, they're, not limited in terms of what they have to show in terms of where it went or what.
Happens If it comes away or what happens if, anything. Gets really negative, there's no real auditing, going on there's there's no real checks, and balances, to any, of this, where. As an outside hard asset could be a check of balance. Currencies. That the, was, the IMF uses, what. Does. Does that have that same kind of effect of sort of stabilizing, volatility. And what. Effect does that have for China like is it a good thing for them or is it like problematic, if a bunch of their currency gets created, to deal with some financial crisis right, it's a good question it hasn't had, yet. The. Kind of a term, in terms of the percentage, of trade that. Is done in. Chinese. Currency at this particular, moment relative, to the the percentage they have of the basket, is still low so, they basically came into this basket between. The, UK pound the Japanese yen and then sort of the year on the dollar so they kind, of came in between third and fourth place so. Japan and China kind, of have a. You. Know sort of jelly on the mix, and mash like what place they're in in terms of third and four but they kind of came in pretty high. But. The actual trade that goes on internationally. And. The Chinese run still remains pretty low just. Because it, takes, time to catch up so they came in high because of the size of their economy but, in terms of the actual tray that's going on they're still that. Number is still small but going up and the reason for that is they, are very active in creating trade. Partnerships, and currency relationships. That. Involve. The rent and in fact the US banks, have opened, just, in the last few months some of the major banks like JPMorgan Chase and stuff have have opened. Clearing. Banks or banks that can actually take, Chinese. Currency, for the purpose of getting involved in the Chinese. Market so I think that's going to grow I, don't the second part of your question again. Yeah. Right. It. Gives them a political, seat at the table too and one of the reasons that they and, geopolitical. Steede at the table one of the reasons they wanted to match. Their. Status, in, the. Sort of latter of the. World and and so the entities, that run things, from. A monetary standpoint is because it helps their economic, superpower, status it, helps their relationships, with other countries in their region in.
Throughout. The world and. So that's one of the reasons it's beneficial to them it's sort of like look if this is if this is the basket that's representing. The world and, we're. Actually bigger than several, these economies, then why shouldn't we be in it because once we are in it then we can utilize that to to develop, our sort of presence elsewhere and what they've done with some the money that they've been, fabricating. As well is. They've used it specifically, for that purpose of, having like better relationships, and alliances with country saying like you, know you you give us your workers and we'll build this bridge and we'll finance it and, so a lot of the money that they've created is actually gone outside of China but for, development. Projects, and, that's their way that's their strategy of developing, a long-term. Economic. Presence. And, a superpower presence, by having, you. Know like what like the beginning, video there I mean I'm in Colombo Sri Lanka. In. A in the. First scene of that video and. And in the middle of Colombo there's there's a huge Tower and it's it's reminiscent, of the Shanghai Tower which, is like the second tallest. Building. In the world and and, it. Looked it was like a mini version and, you, know when, we go right even when you're studying this you're not you're not following. Every like real estate development. In the world and so I'm in the middle of Colombo like I go that looks that looks a lot like the Shanghai Tower that's kind of cool and of course it turns out that the Chinese funded it they. Had and their engineers come over and do it it was a joint effort also with people in Sri Lanka but they're basically. That's. How the presence. Develops. It's like the, boots on the ground military. It's like it's like you know, structure. Is that like that. So. I guess. I'm still trying to wrap my head around around. All this right and and so trying to better understand, that the check and balance so. So so minor sayings when we're looking at this right like the the reason why we haven't seen any crash or fall is because all, of. The, the players are recognizing, each other's currencies, right like they're they're recognizing, that they're printing they're playing along and. And is is this, crash so you know could possibly happen is does that happen when someone says no we, don't you know recognize, that the money that you've been printing or the, money you know that, you've been trading back and forth is is not you. Know admissible, anymore we're not going to take in is that when you. Know everything crashes because otherwise it's. Just based on the strength of an economy yeah right and what stops and that's kind of the odd thing that's been happening over the last 10 years all of this started out as an emergency policy, ten, years ago and. And obviously the fact that it still exists, is an indication that whatever caused that emergency hasn't, really fixed if you pull the plug yes it'll be a problem so whether you pull, the plug on I'm working with someone else's currency which these banks can't really do man they only age they trade in each other's currency they own each other's currency, they they hold bonds in each other's currency, particularly.
The, Holding of the dollar because, we have the most amount of debt relative to the rest of. Their. Their nations and so the problem is if. You if they stop that, that's one, way the. System could collapse if they stopped because they don't trust each other it's because this happens again it's because you all of a sudden have a bunch of banks going under part or having. A real. Crisis. Of some sort that's you know related to a derivative. It's related to, derivatives. That are now partly. Created. From corporate bonds it used to be mortgage bonds and those corporate bonds start to default so those derivatives, start to go under in the whole chain starts to happen again and like well wait, a minute we really need to accelerate our sort of move away from these currencies, or from each other that is that is how these crises happen it's not like this definitive, statement like Europe can't say we're never gonna use the dollar like that just she's not gonna happen but. What they can do is they can develop sort, of relationships, outside of the, dollar so that if something like this happens again and the chances, are it will start in the United States again too, because. We have lent, a lot of money to a lot of countries we've done all the complex, structures we have sort of more at risk and. More codependent. In general, related related to the world in other countries are then. Then you could have that that false start to happen so it's not like a decision, we're. Not gonna trust your currency it's more like we're not going to trust, the way you deal with your system. And. What what happened, in in what, the developed being countries, in, in the wake of the financial crisis. Is there's and, I talked about this in the book there's a lot more meanings there's a lot more conferences, amongst, themselves, there's, a lot more growth and trade agreements outside of the US and like not necessarily using Japan and there's ones where Japan's using Europe there's just a lot of realignments. Going on and that's, a way to say, not so much you won't use the dollar we don't use your currency but, we are cognizant. That like, this. Is still on kind of shaky ground and so. The next time there is a financial, crisis. Hopefully. We have a little bit more protection, all sort of alternatives, which, may or may not it depends what happens it depends how big that is I mean no one really expected the market to be cut by like 45 percent in 2008, from where it was the year before I mean it wasn't an expectation, and. Even now when I say this stuff like that the markets gonna potentially. Crash you know we're up with these like heady heights most people, don't. Feel the same way, but. It could still happen, maybe. This, question but. Then couldn't couldn't, everyone, just hit the reset button and then build each other back up again well one, of the solutions. There. Were a. Possible. Paths that I talked about in the, last chapter, is. This sort of idea of cancelling out each other it's debt. And. Doing. It in such a way that that. The countries, that are most that would be most burdened, by a collapse, that, are most burdened, by a collapse, that they did not cause in, 2008. Could, be in a more stable situation. What's happened with all of this is that the countries that were sort of most at the center of the. Last financial crisis, doesn't have the ability to do more harm financially. Are the ones that got the most subsidies. And so. That just created, you know sort of more inherent, risk and again I could go on freedom this can go on for a long time but it created more on Harris so, that's.
One Of the things that, could also. So. The word collusion to me anyway, has kind of a negative connotation, would. You is it fair to characterize this, collusion, in your view as something sinister or, do, these people responsible, for these systems think, they're acting sort. Of in a very. Honourable. Way by saving. The economy or whatever well. It's weird because I mean I think I think most of them believe that what, they're doing is is. Ultimately. Going to help the economy even. Though the. Evidence is, that. It hasn't the evidence, is that wage growth hasn't, really increased stock, growth has increased so certain bonuses, have increased but but the evidence is that the, economies. That supposedly were fix are really, sputtering, and. The economies that didn't receive so, much quantitative, easing or rather doing better or they're they're still sort of caught up and what might be the impact of aid. Of, what happens here. It's it's um it's. It's. Hard to say, but. I. Think. What what ultimately will will happen though is is that at some point these people, they shift, like. Some of them move out and something I knew people come in. Mario, Draghi at some point has to leave and. Probably. Or. Possibly, but probably the whoever, takes, this place will come say from Germany or from a country that actually is against this policy and actually would prefer, that. That less artificial, money is in the system and. They have political reasons for that their economy is doing better than some of the other economies, in Europe so this is this goes this has other ramifications and, so shifting, and the actual individuals, at. The top of these institutions. Could create a shift in the policy but. Also there's a way to unwind this or. At least to start on line that actually is, using. This. Kind. Of off the rails. Solution. And in a good way like for example the Fed could take, a. Trillion. Or two trillion or whatever their four and a half trillion worth of money they created and assets, they received in return for doing that and. Create an infrastructure, Bank or create a Development, Bank or do something that's actually really. Financing. The the real economy and also sort of moving forward when, I was in China I took the high-speed, rail from, from. Beijing to Shanghai. And. It's it's just, I. Mean, it's it's it's just just I mean when you talk high it's really, fast like you cannot see the countryside like it is just yours, and it's and it's quiet, and it's, I mean it's it's excellent technology I mean obviously it costs what it costs but I mean that's the kind of development that's the kind of infrastructure, building you, know developing the technology, in conjunction was the sort of real. Real. Parts. Of the economy that real people actually work on it that's folk that's more forward stabilizing, so you can actually take a lot of the money that's been created and rather than have a go into debt and have it go into stock actually have it diverted.
Nobody's. Gonna be happy about that it might cause a correction, but ultimately, it's the question of long-term versus, short-term. Ya. Know thank you thank you guys. You.