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The next financial crisis will get ugly Central bankers have stoked a populist revolt

NYPD scuffle with members of the Occupy Wall Street (Spencer Platt/Getty Images)

NYPD scuffle with members of the Occupy Wall Street (Spencer Platt/Getty Images)


April 12, 2023   6 mins

This year’s banking crisis was never going to be 2008 redux — more like 2008, the sequel. And while the immediate crisis initially seemed to pass, as JP Morgan CEO Jamie Dimon said in his annual letter to shareholders, the deeper turmoil “is not yet over” and “there will be repercussions from it for years to come”.

In one respect, the collapse of both Silicon Valley Bank and Credit Suisse were isolated, one-off events that have now been contained. Both were badly-run banks ripe for a fall: Credit Suisse because it had squandered investors’ faith; SVB because regulators had let problems fester for a long time. Quick and aggressive actions by both the Swiss and American authorities rapidly staved off crisis. Nevertheless, the runs on these banks are better seen as symptoms of an underlying disease that continues to fester.

Only yesterday, a spooked IMF correctly interpreted SVB and Credit Suisse’s fate as the sign of things to come: the edge of a coming economic storm whipped up by a decade of geopolitical fragmentation and cheap money. Now, the overdue attempt to reverse this course has slowed the global economy, possibly to the point of recession.

Unlike the 2008 crash, this does not follow an era of prosperity, but rather 15 years of monetary chaos. Before 2008, the West had experienced a long period that came to be called The Great Moderation. The neoliberal model, so widely adopted in the post-Cold War era, had substituted fiscal for monetary policy as the prime lever of economic management, diminishing the role of politicians in favour of central banks. Over three decades, a mix of steady growth, short and shallow recessions, rising wealth and tame inflation was lionised by economists as their profession’s triumph; the Nobel Laureate Robert Lucas declared in 2003 that “the central problem of depression-prevention has been solved”.

Yet ordinary people always saw there was something fishy in this triumphalism. The steady inflation underpinning it actually owed less to clever macroeconomic management than to the return of China and the deeper integration of developing countries into the world economy. Coinciding with this globalisation was the biggest migration in human history, as literally billions of people left their farms for the burgeoning cities of the developing world. This swelled the global labour pool by several orders of magnitude, luring a tide of investment away from the developed countries as firms sought cheap labour. In Western countries, profits boomed but the job market did not.

So when the crash happened in 2008, there was a moment when it seemed the model might come in for profound change. But cheap labour meant cheap money. With inflation kept low by repressed labour costs, central banks were free to flood the markets with money, inflating asset values and thereby creating a wealth effect that boosted demand sufficiently to bring the economy out of recession. Depression was averted, the economy was back on its feet, and the authorities celebrated their triumph.

However, a model in which the rich got richer and everyone else got by was obviously bad for social cohesion, and the decade which followed the crash produced an upsurge of protest, populism and anti-establishment politics on both Right and Left. This political revolt had its financial analogue in Bitcoin, which exploited cheap money policies to produce assets which, by having their supply fixed, could only rise in value. The grassroots financial innovation exposed the central bankers’ strategy as little more than old-fashioned currency debasement.

Not that any of this bothered central banks. For a start, political stability wasn’t in their mandates, so they looked on the wave of protests and violent rhetoric with equanimity. One would have thought that asset-price inflation might at least have come onto their radars since it was baking inflationary pressures into the economy. With the rising cost of assets falling heavily on workers who were trying to buy houses, or businesses that had to pay rising rents, anything which restored the bargaining power of labour would release that pent-up demand. But again, central bankers waved off these concerns.

Unbeknown to them, however, the depressed condition of Western workers was about to change. Around the mid-decade, with the demographic transition underway across most of the developing world, the increase in the global labour supply peaked. The first signs of rising labour costs began showing up in the data of Western countries. The picture which resulted resembled that of the early Seventies, when years of steadily building inflationary pressures were sent into overdrive by the oil shocks. Similarly now, any kind of jump in prices would release the horses of inflation.

That happened during the pandemic. When lockdowns and shipping closures choked off supplies and radically altered people’s demand patterns — suddenly we wanted more takeaways but much less air travel — the resulting imbalances sent prices haywire. Rightly, central bankers assumed that since these effects would be transitory, they would sort themselves out in time. Wrongly, they inferred that meant inflation would settle back down of its own accord, and there was no fundamental need for them to change their monetary policy.

What they had failed to understand was that the altered conditions in labour markets meant that unlike previous inflations, this time workers were in a better position to bargain for pay increases. Across the developed economies, wages shook off their decades-long funk and began rising, and to cope employers had no choice but to raise prices. That wasn’t necessarily a problem for them: workers earning more could afford to keep buying in a cycle that was virtuous for many businesses and workers. But it put a floor under the inflation rate so that even when headline inflation did start coming back down, the underlying “core” inflation held up.

Once this became apparent, central banks had no option but to change tack. Having postponed it so long, by which point inflation was nearing double digits, they were forced to slam the brakes hard, with sharp interest rates and measures to take money out of markets. Following decades of more or less handing money over to fund managers, central banks were now asking for it back. That forced asset-holders to either liquidate some of their portfolios or cut their buying, knocking down asset prices. In the age of social media, word spread fast that some banks no longer had enough assets to redeem everyone’s deposits if they all turned up at the teller’s window. So began the runs which crashed SVB and Credit Suisse.

Central banks now find themselves trapped in a stop-start course of withdrawing money with interest-rate rises, and putting it back at each sign of stress (the IMF even predicts that the West will soon return to rock-bottom interest rates). And this hair-of-the-dog treatment may soften the hangover but only prolong the addiction of the financial system to cheap money. Central bankers insist they have not changed course. The markets, currently acting as if the magic money-tree is back, don’t believe them. As a result, this tug-of-war will probably drag on, complicating both the battle on inflation and any efforts to fix the underlying problems in the economy.

There may yet be a silver lining to this tale of woe, though. Unlike in past crashes, when owners emerged largely intact and workers took the hit, this time, it looks like asset prices will remain under pressure while wages hold up. So far, the fall in real incomes has led everyone to take a plus ça change attitude. But there’s clear evidence that wages are catching up with inflation, and in some countries have already turned positive. Workers matter more now, and central banks will have to go back to the drawing board to factor this into their models. In particular, if core inflation remains sticky, they will have to keep interest rates higher for longer, which will squeeze profits and further depress asset prices. And this will force owners to do the heavy-lifting in the fight against inflation, quite a change from the last few decades.

But for now, central banks are muddling through, with Bitcoin arguably serving as the most reliable indicator of how utterly we have lost faith in them. After rising from its humble origins as a penny trade for computer nerds, at one point in the easy-money cycle it was worth over $60,000. When central banks indicated they were serious about inflation, it crashed. But lately, as they eased up in response to the mini-crisis, Bitcoin’s back on a tear, mocking the claims of central banks that they’re back in control. Where they could once wink at asset-owners and say they had their backs, throwing ever more money at them each time their assets fell in value, they’ll now have to start ghosting them. Unless and until central banks convince everyone they are more committed to bringing down inflation than to protecting asset-values, cryptocurrencies will continue to prosper.

What we’re thus witnessing is the end of a historic era as much as an economic one. If neoliberalism set loose the bankers, egged on by central banks, the coming decades will likely see them finally reined back in. And, in that moment, there is the potential to rebalance the world economy, raising workers’ wages and forcing central banks to pay more attention to social conditions, not just those of the banks.

For now, we’re all keeping a close eye on the central banks for signs of backsliding. Use Bitcoin as an index of our lost faith in the financial system. The higher it rises, the more we are giving up on those we once regarded as sages. And if central bankers ever fall back into their worst habits, things could get ugly. The recessions of the 2010s helped stoke a global populist revolt. Another political crisis will probably follow any mismanagement ahead.


John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).

jarapley

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Tony Taylor
Tony Taylor
1 year ago

The longer you postpone the crash, the greater the impact. The pressure builds and builds while you employ tricksy mechanisms to overcome momentary problems – say, borrowing to pay off borrowing – in an attempt to stave off political blow-back, but eventually an unexpected problem causes a cascading series of other problems which swamp the economy. You were probably best served by letting the first problem do its damage and wearing the political pain, instead of putting a patch on it and then patches on subsequent problems until the economy is made up of patches and becomes a banana republic.

Brendan O'Leary
Brendan O'Leary
1 year ago
Reply to  Tony Taylor

The electoral cycle is too short to allow that and there is no Thatcher on the horizon.

Withinst Withinst
Withinst Withinst
1 year ago
Reply to  Tony Taylor

nice

Graeme Laws
Graeme Laws
1 year ago
Reply to  Tony Taylor

Could not agree more. In business, if costs start to catch up and threaten to overtake revenues, there are two possible responses. The first is to fiddle about and salami slice a few budgets, trim the marketing spend, make a few people at the coal face redundant. The second is to smell the coffee and take on the cost base, cutting to well below the most likely revenue outcome. The first works for a bit, but all the people are unsettled, because they know full well that one slice will follow another. In effect, management is kicking the can down the road. The second is nasty, brutal and short, but provides a much better platform for growing from the base of the curve. And the people left are much more likely to buckle down.

Tony Taylor
Tony Taylor
1 year ago
Reply to  Graeme Laws

Speaking of can kicking, Graeme. Here in Victoria we are in debt to the tune of billions, and we have several major projects on the go which are also in the billions. The state government (who did all the spending) don’t want to count those costs in our imminent budget, so they have “put on hold” the projects to push out the costs to 12 months down the track. Not sure exactly what “put on hold” means, but I would take an educated guess that it means “kick the can down the road.” And when they catch up with the can, you can bet your bottom dollar (or someone else’s dollar since you’re talking government money) the costs will have increased. Shambles.

Tony Taylor
Tony Taylor
1 year ago
Reply to  Graeme Laws

Speaking of can kicking, Graeme. Here in Victoria we are in debt to the tune of billions, and we have several major projects on the go which are also in the billions. The state government (who did all the spending) don’t want to count those costs in our imminent budget, so they have “put on hold” the projects to push out the costs to 12 months down the track. Not sure exactly what “put on hold” means, but I would take an educated guess that it means “kick the can down the road.” And when they catch up with the can, you can bet your bottom dollar (or someone else’s dollar since you’re talking government money) the costs will have increased. Shambles.

Brendan O'Leary
Brendan O'Leary
1 year ago
Reply to  Tony Taylor

The electoral cycle is too short to allow that and there is no Thatcher on the horizon.

Withinst Withinst
Withinst Withinst
1 year ago
Reply to  Tony Taylor

nice

Graeme Laws
Graeme Laws
1 year ago
Reply to  Tony Taylor

Could not agree more. In business, if costs start to catch up and threaten to overtake revenues, there are two possible responses. The first is to fiddle about and salami slice a few budgets, trim the marketing spend, make a few people at the coal face redundant. The second is to smell the coffee and take on the cost base, cutting to well below the most likely revenue outcome. The first works for a bit, but all the people are unsettled, because they know full well that one slice will follow another. In effect, management is kicking the can down the road. The second is nasty, brutal and short, but provides a much better platform for growing from the base of the curve. And the people left are much more likely to buckle down.

Tony Taylor
Tony Taylor
1 year ago

The longer you postpone the crash, the greater the impact. The pressure builds and builds while you employ tricksy mechanisms to overcome momentary problems – say, borrowing to pay off borrowing – in an attempt to stave off political blow-back, but eventually an unexpected problem causes a cascading series of other problems which swamp the economy. You were probably best served by letting the first problem do its damage and wearing the political pain, instead of putting a patch on it and then patches on subsequent problems until the economy is made up of patches and becomes a banana republic.

Seb Dakin
Seb Dakin
1 year ago

That comment about Bitcoin, that fiat money has been being created so freely since 2008 that anything with a fixed or limited supply went up in price, is about the best summing up of the effects of QE and associated policies. Housing and land go up, of course, and if you can offshore jobs to places with a vast labour pool like China and India, wages don’t go up.
If you’re relying on wages to pay for accommodation, you’re squeezed. And squeezed.

Seb Dakin
Seb Dakin
1 year ago

That comment about Bitcoin, that fiat money has been being created so freely since 2008 that anything with a fixed or limited supply went up in price, is about the best summing up of the effects of QE and associated policies. Housing and land go up, of course, and if you can offshore jobs to places with a vast labour pool like China and India, wages don’t go up.
If you’re relying on wages to pay for accommodation, you’re squeezed. And squeezed.

Jim R
Jim R
1 year ago

Very odd to me that there’s no discussion here of the traditional understanding of inflation (as expressed by Milton Freedman) as a ‘monetary phenomenon’. Massive and unprecedented levels of government spending financed essentially by the creation of new money out of thin air has consequences. Governments narrowly define inflation by looking only at small cherry-picked basket of consumer spending – allowing them to ignore the initial impacts – house prices and the stock market. Anyone who’s shopped for a house knows that money is not worth what it used to be – not even close. Governments and the media ignore this obvious inflation and encourage people to think that they’re getting wealthier as their houses double and triple in ‘value’ – but think again – the house is the same house it was before. The money is worth less. Why are people so fixated on crypto currencies and taking such huge risks? To avoid this stealth form of taxation. Why does the rest of the world so desperately want a new reserve currency? Because the US has debased its currency at their expense.

David B
David B
1 year ago
Reply to  Jim R

“Inflation is taxation without legislation” was also Friedman, and sun’s up some of your post quite well.

Reginald Duquesnoy
Reginald Duquesnoy
1 year ago
Reply to  Jim R

loss of faith in fiat lux? wait until you see the loss of faith in fiat nox, bitcoin.

David B
David B
1 year ago
Reply to  Jim R

“Inflation is taxation without legislation” was also Friedman, and sun’s up some of your post quite well.

Reginald Duquesnoy
Reginald Duquesnoy
1 year ago
Reply to  Jim R

loss of faith in fiat lux? wait until you see the loss of faith in fiat nox, bitcoin.

Jim R
Jim R
1 year ago

Very odd to me that there’s no discussion here of the traditional understanding of inflation (as expressed by Milton Freedman) as a ‘monetary phenomenon’. Massive and unprecedented levels of government spending financed essentially by the creation of new money out of thin air has consequences. Governments narrowly define inflation by looking only at small cherry-picked basket of consumer spending – allowing them to ignore the initial impacts – house prices and the stock market. Anyone who’s shopped for a house knows that money is not worth what it used to be – not even close. Governments and the media ignore this obvious inflation and encourage people to think that they’re getting wealthier as their houses double and triple in ‘value’ – but think again – the house is the same house it was before. The money is worth less. Why are people so fixated on crypto currencies and taking such huge risks? To avoid this stealth form of taxation. Why does the rest of the world so desperately want a new reserve currency? Because the US has debased its currency at their expense.

Nik Jewell
Nik Jewell
1 year ago

Great article, but you need a few more paragraphs on CBDCs and the coming attacks on cash and crypto. A sequel maybe?

Simon Blanchard
Simon Blanchard
1 year ago
Reply to  Nik Jewell


and the potential for AI to suppress wages by destroying jobs.

Rocky Martiano
Rocky Martiano
1 year ago
Reply to  Nik Jewell

Indeed, There are suggestions that the failures of SVB and Credit Suisse were ‘engineered’ as a smoothing of the way to the introduction of CBDCs. “Look at those unscrupulous banks, how they can’t be trusted with your money. Much better to use our CBDC, it’s fully backed by the state”.
I can see the ad campaign now.

Last edited 1 year ago by Rocky Martiano
Simon Blanchard
Simon Blanchard
1 year ago
Reply to  Nik Jewell


and the potential for AI to suppress wages by destroying jobs.

Rocky Martiano
Rocky Martiano
1 year ago
Reply to  Nik Jewell

Indeed, There are suggestions that the failures of SVB and Credit Suisse were ‘engineered’ as a smoothing of the way to the introduction of CBDCs. “Look at those unscrupulous banks, how they can’t be trusted with your money. Much better to use our CBDC, it’s fully backed by the state”.
I can see the ad campaign now.

Last edited 1 year ago by Rocky Martiano
Nik Jewell
Nik Jewell
1 year ago

Great article, but you need a few more paragraphs on CBDCs and the coming attacks on cash and crypto. A sequel maybe?

Justin Clark
Justin Clark
1 year ago

Three things most people don’t know about money in bank accounts…    
#1. It’s not yours.   
#2. It’s not there.   
#3. It’s not money.

Su Mac
Su Mac
1 year ago
Reply to  Justin Clark

Love that!

True money fan..

Mr Sketerzen Bhoto
Mr Sketerzen Bhoto
1 year ago
Reply to  Justin Clark

The other two are wrong but money in deposit accounts is definitely there and definitely money. You can buy with a debit card. And that’s the definition of money – as a medium of exchange.

Kevin R
Kevin R
1 year ago

No it’s not there, at least not all of it, because the bank has used it to invest elsewhere. And then it makes you pay for giving it a free loan. Probably the best business model known to man. Until, of course, there’s a run on the bank and the emperor is seen to have no clothes.

Kevin R
Kevin R
1 year ago

No it’s not there, at least not all of it, because the bank has used it to invest elsewhere. And then it makes you pay for giving it a free loan. Probably the best business model known to man. Until, of course, there’s a run on the bank and the emperor is seen to have no clothes.

Su Mac
Su Mac
1 year ago
Reply to  Justin Clark

Love that!

True money fan..

Mr Sketerzen Bhoto
Mr Sketerzen Bhoto
1 year ago
Reply to  Justin Clark

The other two are wrong but money in deposit accounts is definitely there and definitely money. You can buy with a debit card. And that’s the definition of money – as a medium of exchange.

Justin Clark
Justin Clark
1 year ago

Three things most people don’t know about money in bank accounts…    
#1. It’s not yours.   
#2. It’s not there.   
#3. It’s not money.

Ian McKinney
Ian McKinney
1 year ago

Fascinating article, more of this please!

Ian McKinney
Ian McKinney
1 year ago

Fascinating article, more of this please!

Warren Trees
Warren Trees
1 year ago

The author, nor anyone above, seems to realize that “printing” $5 trillion to quell the public during pandemic lockdowns is the root cause of this latest bout of inflation. When the Fed shouted from the rooftops that interest rates will be raised, everyone with half a functioning brain knew that bond prices would then plummet, except, apparently, the management at SVB.
The real issue that politicians don’t want to reveal is that we are paying the interest on our debt with more debt every year, to pay for all our pet social programs and other goodies. The $31 trillion debt balloon (125% of GDP) in the U.S. will eventually pop and then everyone must look into the mirror and blame themselves for not realizing some very basic principles, such as you can’t keep spending more than you earn for ever and ever.

Peter Joy
Peter Joy
1 year ago
Reply to  Warren Trees

Yet there are so many brazenly asserting that ‘we’ can.
‘A Government is not a household,’ they claim – as if to a stupid child. Christina Kirchner and Robert Mugabe no doubt took the same view.

Mr Sketerzen Bhoto
Mr Sketerzen Bhoto
1 year ago
Reply to  Warren Trees

It’s always been the case that bonds roll over. Paying them back in full earlier rather than later would actually be more costly given that inflation eats away at the repayment over time. Sometimes the original debt is expunged only after decades.

The metric should be cost of repayments vs income tax.

Martin Johnson
Martin Johnson
1 year ago

But when bank assets are marked to market and the market is falling, that may not be viable..

Martin Johnson
Martin Johnson
1 year ago

But when bank assets are marked to market and the market is falling, that may not be viable..

Walter Schwager
Walter Schwager
1 year ago
Reply to  Warren Trees

Look at the debt situation of Japan, and they are not imploding p

Peter Joy
Peter Joy
1 year ago
Reply to  Warren Trees

Yet there are so many brazenly asserting that ‘we’ can.
‘A Government is not a household,’ they claim – as if to a stupid child. Christina Kirchner and Robert Mugabe no doubt took the same view.

Mr Sketerzen Bhoto
Mr Sketerzen Bhoto
1 year ago
Reply to  Warren Trees

It’s always been the case that bonds roll over. Paying them back in full earlier rather than later would actually be more costly given that inflation eats away at the repayment over time. Sometimes the original debt is expunged only after decades.

The metric should be cost of repayments vs income tax.

Walter Schwager
Walter Schwager
1 year ago
Reply to  Warren Trees

Look at the debt situation of Japan, and they are not imploding p

Warren Trees
Warren Trees
1 year ago

The author, nor anyone above, seems to realize that “printing” $5 trillion to quell the public during pandemic lockdowns is the root cause of this latest bout of inflation. When the Fed shouted from the rooftops that interest rates will be raised, everyone with half a functioning brain knew that bond prices would then plummet, except, apparently, the management at SVB.
The real issue that politicians don’t want to reveal is that we are paying the interest on our debt with more debt every year, to pay for all our pet social programs and other goodies. The $31 trillion debt balloon (125% of GDP) in the U.S. will eventually pop and then everyone must look into the mirror and blame themselves for not realizing some very basic principles, such as you can’t keep spending more than you earn for ever and ever.

Andy Iddon
Andy Iddon
1 year ago

We’ve got 15 years worth of mispriced bonds that were immediately impaired by both inflation and interest rate rises. These underpin the balance sheets of most of the banks and pension funds. The mispricing was created by QE with forced purchase of bonds not priced to the prevailing interest rates of the time – that ZIRP – QE combo. It was a way of inflating away the losses by transferring them to bonds. Unfortunately, all it was doing was temporally separating the theft by the very wealthy via their banks and the crystallisation of the loss when the overvaluation of these assets is realised years after the fact, and the associated bankruptcies as the bonds are marked to market and runs on the banks ensue. It’s all deliberate, it’s all been blatantly going on and regarded as “normal”. Now they have already taken all the money and the masses are left to pick up the liabilities via bail-ins or bail-outs. There will be no prosecutions or clawbacks of their ill-gotten gains.

Asset taxation now – it’s the only solution, as interest rate rises will only partly help.

Last edited 1 year ago by Andy Iddon
Andy Iddon
Andy Iddon
1 year ago

We’ve got 15 years worth of mispriced bonds that were immediately impaired by both inflation and interest rate rises. These underpin the balance sheets of most of the banks and pension funds. The mispricing was created by QE with forced purchase of bonds not priced to the prevailing interest rates of the time – that ZIRP – QE combo. It was a way of inflating away the losses by transferring them to bonds. Unfortunately, all it was doing was temporally separating the theft by the very wealthy via their banks and the crystallisation of the loss when the overvaluation of these assets is realised years after the fact, and the associated bankruptcies as the bonds are marked to market and runs on the banks ensue. It’s all deliberate, it’s all been blatantly going on and regarded as “normal”. Now they have already taken all the money and the masses are left to pick up the liabilities via bail-ins or bail-outs. There will be no prosecutions or clawbacks of their ill-gotten gains.

Asset taxation now – it’s the only solution, as interest rate rises will only partly help.

Last edited 1 year ago by Andy Iddon
Alan Thorpe
Alan Thorpe
1 year ago

it isn’t the difference in wealth that matters. It is the difference in power to bring about change. Voting has become irrelevant because the rich now control what the politicians do.

Alan Thorpe
Alan Thorpe
1 year ago

it isn’t the difference in wealth that matters. It is the difference in power to bring about change. Voting has become irrelevant because the rich now control what the politicians do.

Christopher Barclay
Christopher Barclay
1 year ago

Missing from this article is any discussion of those people who have borrowed to buy assets – most notably younger people who borrowed at near 0% to buy their own home. It is not politically acceptable to most of the electorate that these people, many who now have children, are evicted from their homes because they can’t finance a loan that they should never have been lent. This government possibly and definitely the next government will have to choose between over extended homeowners or the banks.

Daniel P
Daniel P
1 year ago

Possible.
What is going to be even more interesting I think is the effect of cases such as my own.
I’m 55 and almost have an empty nest. My home would be perfect for a young family starting out and it is likely too big for me alone or with my fiance. I would consider selling it in a few years but then I would have to walk away from a 2.8% mortgage and likely into something closer to 6%, basically doubling my monthly payment. Even renting an apartment at this point would be far higher than what I pay on my mortgage.
There are a whole lot of people like me. Our mortgages are so cheap that we do not see the upside to selling out homes, we stay put. That locks up a good piece of the housing market that should be adjusting.

Michael Coleman
Michael Coleman
1 year ago
Reply to  Daniel P

I’ll second that. I see this first hand in the housing market in eastern PA. The resales of homes have frozen up for this very reason – but i feel something is going to break soon – probably the economy

Michael Coleman
Michael Coleman
1 year ago
Reply to  Daniel P

I’ll second that. I see this first hand in the housing market in eastern PA. The resales of homes have frozen up for this very reason – but i feel something is going to break soon – probably the economy

Mr Sketerzen Bhoto
Mr Sketerzen Bhoto
1 year ago

In the US at least, mortgages are fixed.

Walter Schwager
Walter Schwager
1 year ago

Every new mortgage has a new.rate, changing from earlier ones

Wim de Vriend
Wim de Vriend
1 year ago

After the inflation and meltdown of the early 1980s, adjustable-rate mortgages became common. But the passage of time seems to have obliterated the idea.

Walter Schwager
Walter Schwager
1 year ago

Every new mortgage has a new.rate, changing from earlier ones

Wim de Vriend
Wim de Vriend
1 year ago

After the inflation and meltdown of the early 1980s, adjustable-rate mortgages became common. But the passage of time seems to have obliterated the idea.

Daniel P
Daniel P
1 year ago

Possible.
What is going to be even more interesting I think is the effect of cases such as my own.
I’m 55 and almost have an empty nest. My home would be perfect for a young family starting out and it is likely too big for me alone or with my fiance. I would consider selling it in a few years but then I would have to walk away from a 2.8% mortgage and likely into something closer to 6%, basically doubling my monthly payment. Even renting an apartment at this point would be far higher than what I pay on my mortgage.
There are a whole lot of people like me. Our mortgages are so cheap that we do not see the upside to selling out homes, we stay put. That locks up a good piece of the housing market that should be adjusting.

Mr Sketerzen Bhoto
Mr Sketerzen Bhoto
1 year ago

In the US at least, mortgages are fixed.

Christopher Barclay
Christopher Barclay
1 year ago

Missing from this article is any discussion of those people who have borrowed to buy assets – most notably younger people who borrowed at near 0% to buy their own home. It is not politically acceptable to most of the electorate that these people, many who now have children, are evicted from their homes because they can’t finance a loan that they should never have been lent. This government possibly and definitely the next government will have to choose between over extended homeowners or the banks.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

the word ” bank” is in itself misleading: there are different banks that gain revenue from different parts of the financial market places: Goldman Sachs is not Nat West, and the digital retail banks are not JP Morgan, and Rothschild is not Soc Gen., any more that The European Central Bank is not The Bank of Toytown… oops, may have got that wrong.

international equity market functionality is, as I have said before, akin to a train… no matter how modern and advanced, it still has metal wheels and runs on tracks and is 19th Century technology.

No better illustration of the dysfunctionality of equity markers is the ” value” given to non profit making tech businesses and the fact that Tesla is ‘ n times’ more ‘ valuable’ than Toyota.

These are the danger signals akin to being able to sell a $5 note to someone who will pay $50 for it, and believe in it, its value and valuation.

Equity market , and also bond, currency and commodity market volatility can and is driven by prop, hedge and vulture funds manipulating market ” certainty” weaknesses, but most significantly by the ” certainty” that there will always be counterparties who will give the raiders their certainty profit, by taking the opposite positions in order to ” defend” said equity, bond, currency and/or commodity.

long only, pension and life funds are easy victims as they have to ” defend” stability, in the latter two cases on long term actuarial bases.

Index and tracker funds merely enhance ” volatlility profit raids” by pushing downwards manipulation down and upwards up.

retail Bank accounting conventions are also outdated, for example, allowing banks to lend ” n” times assets, that are not actually theirs, but demand customers have 100% asset coverage for secured loans.

The next financial crash, however, will not be banks, but non life reinsurers and their reinsurers, as a stone age business, staffed by the people who cannot get jobs or careers anywhere else, and propped up by Warren Buffett, in global denial of the tumultuous losses building up via global disaster claims, whose volume far outstrips premium income.

Watch this space…

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago

How long have ‘we’ got?

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

Ah.. the 64k dollar question.. now valued, of course $374,000 dollars!

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

Ah.. the 64k dollar question.. now valued, of course $374,000 dollars!

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago

How long have ‘we’ got?

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

the word ” bank” is in itself misleading: there are different banks that gain revenue from different parts of the financial market places: Goldman Sachs is not Nat West, and the digital retail banks are not JP Morgan, and Rothschild is not Soc Gen., any more that The European Central Bank is not The Bank of Toytown… oops, may have got that wrong.

international equity market functionality is, as I have said before, akin to a train… no matter how modern and advanced, it still has metal wheels and runs on tracks and is 19th Century technology.

No better illustration of the dysfunctionality of equity markers is the ” value” given to non profit making tech businesses and the fact that Tesla is ‘ n times’ more ‘ valuable’ than Toyota.

These are the danger signals akin to being able to sell a $5 note to someone who will pay $50 for it, and believe in it, its value and valuation.

Equity market , and also bond, currency and commodity market volatility can and is driven by prop, hedge and vulture funds manipulating market ” certainty” weaknesses, but most significantly by the ” certainty” that there will always be counterparties who will give the raiders their certainty profit, by taking the opposite positions in order to ” defend” said equity, bond, currency and/or commodity.

long only, pension and life funds are easy victims as they have to ” defend” stability, in the latter two cases on long term actuarial bases.

Index and tracker funds merely enhance ” volatlility profit raids” by pushing downwards manipulation down and upwards up.

retail Bank accounting conventions are also outdated, for example, allowing banks to lend ” n” times assets, that are not actually theirs, but demand customers have 100% asset coverage for secured loans.

The next financial crash, however, will not be banks, but non life reinsurers and their reinsurers, as a stone age business, staffed by the people who cannot get jobs or careers anywhere else, and propped up by Warren Buffett, in global denial of the tumultuous losses building up via global disaster claims, whose volume far outstrips premium income.

Watch this space…

philip kern
philip kern
1 year ago

It’s hard to imagine that governments like in the US, where debt to GDP hit 130% in 2020, mind inflating away their troubles. It mainly hurts savers and the elderly–not anybody they care about.

Last edited 1 year ago by philip kern
philip kern
philip kern
1 year ago

It’s hard to imagine that governments like in the US, where debt to GDP hit 130% in 2020, mind inflating away their troubles. It mainly hurts savers and the elderly–not anybody they care about.

Last edited 1 year ago by philip kern
mike otter
mike otter
1 year ago

Bit hazy and simple IMO – must be a lot of these articles as i always make the same observation: world economy is north of 450 trillion in total asset values. Approx 20% of this is traded in some way or other either via stock exchanges or included in a countries GDP – the rest is working assets – ranging from London mansions to The Pioneer Chicken Stand. So any movement is going to be proportionally small with so many feedback loops. When you factor in the willingness of govts to spent others’ money to cushion the worst effects on the precariat i think the Cassandras need to look elsewhere for the coming catastrophe. The environment (not warming) a novel pathogen or good old fashioned war are far likely to get us before the bankers’ folly does.

Last edited 1 year ago by mike otter
mike otter
mike otter
1 year ago

Bit hazy and simple IMO – must be a lot of these articles as i always make the same observation: world economy is north of 450 trillion in total asset values. Approx 20% of this is traded in some way or other either via stock exchanges or included in a countries GDP – the rest is working assets – ranging from London mansions to The Pioneer Chicken Stand. So any movement is going to be proportionally small with so many feedback loops. When you factor in the willingness of govts to spent others’ money to cushion the worst effects on the precariat i think the Cassandras need to look elsewhere for the coming catastrophe. The environment (not warming) a novel pathogen or good old fashioned war are far likely to get us before the bankers’ folly does.

Last edited 1 year ago by mike otter
Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 year ago

“Over three decades, a mix of steady growth, short and shallow recessions, rising wealth and tame inflation” 
I do not remember the late 70s and 1980s as being characterized by shallow recessions and tame inflation

Linda Hutchinson
Linda Hutchinson
1 year ago

The 70s and 80s were more than three decades ago.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 year ago

His starting point was the 3 decades prior to the 2008 crash, so 1978

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 year ago

His starting point was the 3 decades prior to the 2008 crash, so 1978

Linda Hutchinson
Linda Hutchinson
1 year ago

The 70s and 80s were more than three decades ago.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 year ago

“Over three decades, a mix of steady growth, short and shallow recessions, rising wealth and tame inflation” 
I do not remember the late 70s and 1980s as being characterized by shallow recessions and tame inflation

j watson
j watson
1 year ago

Really good article. The case for a ‘rebalancing’ clear and strong, but perhaps overall stronger on diagnosis than prognosis. No mention of impact of AI growth, or more immediately potential conflict in South China Sea and how economies are already beginning to factor this into some assumptions.

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago
Reply to  j watson

Or a Heraclitus* put it so well: “War is the father of all things”.

(*535-475 BC.)

Linda Hutchinson
Linda Hutchinson
1 year ago

Perhaps, but it’s an extremely harsh father.

Linda Hutchinson
Linda Hutchinson
1 year ago

Perhaps, but it’s an extremely harsh father.

Andrew Martin
Andrew Martin
1 year ago
Reply to  j watson

Or Avian flu which is starting to claim lives around the world

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago
Reply to  j watson

Or a Heraclitus* put it so well: “War is the father of all things”.

(*535-475 BC.)

Andrew Martin
Andrew Martin
1 year ago
Reply to  j watson

Or Avian flu which is starting to claim lives around the world

j watson
j watson
1 year ago

Really good article. The case for a ‘rebalancing’ clear and strong, but perhaps overall stronger on diagnosis than prognosis. No mention of impact of AI growth, or more immediately potential conflict in South China Sea and how economies are already beginning to factor this into some assumptions.

Jon Morrow
Jon Morrow
1 year ago

Ludwig von Mises is the man to read. The Austrians will have their day.

Peter Joy
Peter Joy
1 year ago
Reply to  Jon Morrow

Yes, him and Schumpeter.
And Kipling, with his ‘Gods of the Copybook Headings’.

Peter Joy
Peter Joy
1 year ago
Reply to  Jon Morrow

Yes, him and Schumpeter.
And Kipling, with his ‘Gods of the Copybook Headings’.

Jon Morrow
Jon Morrow
1 year ago

Ludwig von Mises is the man to read. The Austrians will have their day.

Matthew Grainger
Matthew Grainger
1 year ago

An excellent article on what has led us to where we are today however why no mention of the flight to gold as a way of protecting against central bank largesse? Gold is at record highs in many currencies and everything points to it going higher given the woeful macro backdrop.

Last edited 1 year ago by Matthew Grainger
Su Mac
Su Mac
1 year ago

Indeed. And all the planning by the global south and east for the use of gold in new digital currencies and trading forums as they shake off the dollar. End of an era!

Su Mac
Su Mac
1 year ago

Indeed. And all the planning by the global south and east for the use of gold in new digital currencies and trading forums as they shake off the dollar. End of an era!

Matthew Grainger
Matthew Grainger
1 year ago

An excellent article on what has led us to where we are today however why no mention of the flight to gold as a way of protecting against central bank largesse? Gold is at record highs in many currencies and everything points to it going higher given the woeful macro backdrop.

Last edited 1 year ago by Matthew Grainger
Ray Andrews
Ray Andrews
1 year ago

We’ve got to protect the CEOs, the globalists, the rentiers, the moneyists, the stock holders and the plutocrats in general! To hell with working people.

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago
Reply to  Ray Andrews

Spoken like Harry Lime!

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago
Reply to  Ray Andrews

Spoken like Harry Lime!

Ray Andrews
Ray Andrews
1 year ago

We’ve got to protect the CEOs, the globalists, the rentiers, the moneyists, the stock holders and the plutocrats in general! To hell with working people.

Jon Hawksley
Jon Hawksley
1 year ago

Economics is the consequence of the choices made by billions of individuals and businesses driven by fear and greed. The generalisations used by economists depend upon being able to group those participants into herds that display a common behaviour. If you can identify the herds you then have to take account of the fact that its choices can flip from being driven by fear to greed and vice-versa. A far more painstaking analysis is needed to make predictions.
I am alarmed that any economist can make such comments on Bitcoins without the caution that if fear drives the price down you can get into the situation of no one putting the new money into it that is needed to pay anyone getting out of it. The investment the holders have depend entirely on the willingness of new buyers to pay them out. The money that has been spent in the past has gone into funds like Tether. At least $100 billion must be invested by them in US debt, owned by a quite small herd of perhaps 1,000 participants. Enough to destabilise finance and politics if that herd gets a voice.

Rocky Martiano
Rocky Martiano
1 year ago
Reply to  Jon Hawksley

The idea that 400 PhD economists at the Fed (most of whom have never held down a job in the real world in their lives) can fine tune the most complex economy in the world with their economic models and a single blunt instrument – short-term interest rates – is so ludicrous that it beggars belief.
As you say, an economy is “the consequence of the choices made by billions of individuals and businesses driven by fear and greed”. The central bankers in their ivory towers have to maintain the delusion that they are in control for as long as possible. But when it finally becomes clear that these emperors have no clothes, it’s game over for all of us.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago
Reply to  Rocky Martiano

Interest rates are to a very large extent driven by country’s bond markets, pricing and associated hedging positions, so central banks are way more reactive than proactive, as Governments get themselves into big problems if they attempt to ” face up against” bond markets… Truss was a good example. Most people, not least on this medium simply do not know that the old days, pre electronic trading, are no longer with us, and bear no resemblance to todays markets.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago
Reply to  Rocky Martiano

Interest rates are to a very large extent driven by country’s bond markets, pricing and associated hedging positions, so central banks are way more reactive than proactive, as Governments get themselves into big problems if they attempt to ” face up against” bond markets… Truss was a good example. Most people, not least on this medium simply do not know that the old days, pre electronic trading, are no longer with us, and bear no resemblance to todays markets.

Rocky Martiano
Rocky Martiano
1 year ago
Reply to  Jon Hawksley

The idea that 400 PhD economists at the Fed (most of whom have never held down a job in the real world in their lives) can fine tune the most complex economy in the world with their economic models and a single blunt instrument – short-term interest rates – is so ludicrous that it beggars belief.
As you say, an economy is “the consequence of the choices made by billions of individuals and businesses driven by fear and greed”. The central bankers in their ivory towers have to maintain the delusion that they are in control for as long as possible. But when it finally becomes clear that these emperors have no clothes, it’s game over for all of us.

Jon Hawksley
Jon Hawksley
1 year ago

Economics is the consequence of the choices made by billions of individuals and businesses driven by fear and greed. The generalisations used by economists depend upon being able to group those participants into herds that display a common behaviour. If you can identify the herds you then have to take account of the fact that its choices can flip from being driven by fear to greed and vice-versa. A far more painstaking analysis is needed to make predictions.
I am alarmed that any economist can make such comments on Bitcoins without the caution that if fear drives the price down you can get into the situation of no one putting the new money into it that is needed to pay anyone getting out of it. The investment the holders have depend entirely on the willingness of new buyers to pay them out. The money that has been spent in the past has gone into funds like Tether. At least $100 billion must be invested by them in US debt, owned by a quite small herd of perhaps 1,000 participants. Enough to destabilise finance and politics if that herd gets a voice.

Will Will
Will Will
1 year ago

A lot of us never did trust the central bankers. I started my career in the 80s with the Plaza Accord, Black Monday and the crazy if instructive rise and fall of Japanese property and share prices.

Will Will
Will Will
1 year ago

A lot of us never did trust the central bankers. I started my career in the 80s with the Plaza Accord, Black Monday and the crazy if instructive rise and fall of Japanese property and share prices.

Stephen Quilley
Stephen Quilley
1 year ago

Tim Morgan has a very comprehensive take on what is to come https://surplusenergyeconomics.wordpress.com/2023/04/12/253-how-has-it-come-to-this/

Ian McKinney
Ian McKinney
1 year ago

Thanks for sharing that – very well written post.

Ian McKinney
Ian McKinney
1 year ago

Thanks for sharing that – very well written post.

Stephen Quilley
Stephen Quilley
1 year ago

Tim Morgan has a very comprehensive take on what is to come https://surplusenergyeconomics.wordpress.com/2023/04/12/253-how-has-it-come-to-this/

Ralph Hanke
Ralph Hanke
1 year ago

A point I think this article misses, is that asset valuation has a powerful subjective component to it. The house is a great example. I have a house in Pennsylvania and another in Colorado. They are essentially the same and although nice, neither is particularly fancy.
The one in Colorado is “worth” three times as much as the one in Pennsylvania. And the answer is simple, Colorado is more beautiful and breathtaking.
Now wether or not asset evaluation should have such a strong subjective element is a great philosophical question. But whether or not it should or shouldn’t, it does.
And predicting such subjective valuations is tricky—especially over time—as von Mises pointed out a long time ago. A friend had a cell phone in the eighties ‘cause he needed it for his contracting company. It cost him $600/month for the service. And very few people were willing to place that value on a cell phone line at the time. Now had they been $25/month I imagine a few more of us would have had one back then.
And in Colorado during the eighties, my house would have been worth half what my Pennsylvania house was worth. And yet Colorado was probably even more beautiful and breathtaking back then as there were fewer tourists around. And certainly fewer home owners like me.
My point is: expecting government, or some team of experts (Davos anyone?), to manage the economy is asking too much. And that cuts both ways. To suppose that macro-economic tinkering is either making or breaking our economic conditions is supposing too much.

Ralph Hanke
Ralph Hanke
1 year ago

A point I think this article misses, is that asset valuation has a powerful subjective component to it. The house is a great example. I have a house in Pennsylvania and another in Colorado. They are essentially the same and although nice, neither is particularly fancy.
The one in Colorado is “worth” three times as much as the one in Pennsylvania. And the answer is simple, Colorado is more beautiful and breathtaking.
Now wether or not asset evaluation should have such a strong subjective element is a great philosophical question. But whether or not it should or shouldn’t, it does.
And predicting such subjective valuations is tricky—especially over time—as von Mises pointed out a long time ago. A friend had a cell phone in the eighties ‘cause he needed it for his contracting company. It cost him $600/month for the service. And very few people were willing to place that value on a cell phone line at the time. Now had they been $25/month I imagine a few more of us would have had one back then.
And in Colorado during the eighties, my house would have been worth half what my Pennsylvania house was worth. And yet Colorado was probably even more beautiful and breathtaking back then as there were fewer tourists around. And certainly fewer home owners like me.
My point is: expecting government, or some team of experts (Davos anyone?), to manage the economy is asking too much. And that cuts both ways. To suppose that macro-economic tinkering is either making or breaking our economic conditions is supposing too much.

James Kirk
James Kirk
1 year ago

Spinning plates. Those that spin the plates are less clever these days. Lazy too. If one crashes to the ground in pieces they erect another one. I think of WWII. Depression years in the 30s. Austerity. All of a sudden the world builds thousands of fighters and bombers, hundreds of ships, munitions. We’ve got CBDC now really. Promises to pay bits of paper. Worth nothing if the promises are broken. Even the rich can’t spend a billion worthless bank notes. Can’t eat gold. When will food become a currency?

James Kirk
James Kirk
1 year ago

Spinning plates. Those that spin the plates are less clever these days. Lazy too. If one crashes to the ground in pieces they erect another one. I think of WWII. Depression years in the 30s. Austerity. All of a sudden the world builds thousands of fighters and bombers, hundreds of ships, munitions. We’ve got CBDC now really. Promises to pay bits of paper. Worth nothing if the promises are broken. Even the rich can’t spend a billion worthless bank notes. Can’t eat gold. When will food become a currency?

Michael F
Michael F
1 year ago

Thank you – a thought-provoking article. I am relatively new to Unherd, so I don’t know if this is asking for something that already exists, but it seems to me that Brexit was an earlier expression of extreme dissatisfaction for the same reasons, voiced by a generation who don’t ‘get’ crypto. I would be delighted to hear your views, even if expressed here previously.

Michael F
Michael F
1 year ago

Thank you – a thought-provoking article. I am relatively new to Unherd, so I don’t know if this is asking for something that already exists, but it seems to me that Brexit was an earlier expression of extreme dissatisfaction for the same reasons, voiced by a generation who don’t ‘get’ crypto. I would be delighted to hear your views, even if expressed here previously.

Daniel P
Daniel P
1 year ago

Kinda makes you understand why the governments and the central bankers are so determined to control or eliminate crypto.
I agree too that the next crisis, which may well be coming at us like a freight train, and how the pols handle it will make a huge difference to any kind of political stability moving forward.
There were already rumblings about the bailout of SVB and protecting the very very well off depositors. I think the only thing that kept it from becoming a political firestorm was the linkage to paying people’s salaries and to startups. Had it all been just VC money there would have been a major backlash I think.

Daniel P
Daniel P
1 year ago

Kinda makes you understand why the governments and the central bankers are so determined to control or eliminate crypto.
I agree too that the next crisis, which may well be coming at us like a freight train, and how the pols handle it will make a huge difference to any kind of political stability moving forward.
There were already rumblings about the bailout of SVB and protecting the very very well off depositors. I think the only thing that kept it from becoming a political firestorm was the linkage to paying people’s salaries and to startups. Had it all been just VC money there would have been a major backlash I think.

B Emery
B Emery
1 year ago

‘For a start, political stability wasn’t in their mandates, so they looked on the wave of protests and violent rhetoric with equanimity’

I’m sorry. But our central bank is the bank of England is it not? It does not have the stability OF ENGLAND in its mandate? Just wtf. Why the f*ck not?

Why is this guy saying watch bitcoin? It’s origins are dubious, it’s useless if there is no power, it’s volatile to many, many things itself. I watch the gold price as a doom indicator, not bitcoin. I’m not sure about the bitcoin part. I’m probably wrong.

Rick Frazier
Rick Frazier
1 year ago
Reply to  B Emery

Using bitcoin as an alternative form of custody for cash makes sense when current custodial options start looking less sensible. Critics typically focus on bitcoin’s shortfalls as another form of currency or payment system. The developed world doesn’t need another payment system
we have plenty. Central banks are threatened by bitcoin’s attractiveness as an alternative form of custody for cash. This is probably why they’re trying to get ahead of it by issuing their own digital currency.

Bitcoin is also like a decentralized central bank. It possesses similar characteristics to central banks, e.g., custody, issuance, committee rule, to name a few. This is another good reason to try to eliminate Bitcoin before people start envisioning a much bigger role for it in the financial landscape. Unfortunately, I think governments and central banks will ultimately prevail in their quest to kill Bitcoin. Ethereum might survive due to its blockchain applicability, which few central bankers or government officials even understand.

B Emery
B Emery
1 year ago
Reply to  Rick Frazier

Still nobody knows where it comes from, if the banks wanted it dead it would be gone by now surely, saying that government and bankers don’t understand block chain is rather stupid, they can hire the smartest people as they like, a currency that allows capital flight in such a way is never good. Especially at the moment with the dollar facing problems.

Last edited 1 year ago by B Emery
B Emery
B Emery
1 year ago
Reply to  Rick Frazier

Also, on reflection, RF. Seen those initials before. Are you Mr foghs sock puppet? How many you got?

B Emery
B Emery
1 year ago
Reply to  Rick Frazier

Still nobody knows where it comes from, if the banks wanted it dead it would be gone by now surely, saying that government and bankers don’t understand block chain is rather stupid, they can hire the smartest people as they like, a currency that allows capital flight in such a way is never good. Especially at the moment with the dollar facing problems.

Last edited 1 year ago by B Emery
B Emery
B Emery
1 year ago
Reply to  Rick Frazier

Also, on reflection, RF. Seen those initials before. Are you Mr foghs sock puppet? How many you got?

Rick Frazier
Rick Frazier
1 year ago
Reply to  B Emery

Using bitcoin as an alternative form of custody for cash makes sense when current custodial options start looking less sensible. Critics typically focus on bitcoin’s shortfalls as another form of currency or payment system. The developed world doesn’t need another payment system
we have plenty. Central banks are threatened by bitcoin’s attractiveness as an alternative form of custody for cash. This is probably why they’re trying to get ahead of it by issuing their own digital currency.

Bitcoin is also like a decentralized central bank. It possesses similar characteristics to central banks, e.g., custody, issuance, committee rule, to name a few. This is another good reason to try to eliminate Bitcoin before people start envisioning a much bigger role for it in the financial landscape. Unfortunately, I think governments and central banks will ultimately prevail in their quest to kill Bitcoin. Ethereum might survive due to its blockchain applicability, which few central bankers or government officials even understand.

B Emery
B Emery
1 year ago

‘For a start, political stability wasn’t in their mandates, so they looked on the wave of protests and violent rhetoric with equanimity’

I’m sorry. But our central bank is the bank of England is it not? It does not have the stability OF ENGLAND in its mandate? Just wtf. Why the f*ck not?

Why is this guy saying watch bitcoin? It’s origins are dubious, it’s useless if there is no power, it’s volatile to many, many things itself. I watch the gold price as a doom indicator, not bitcoin. I’m not sure about the bitcoin part. I’m probably wrong.

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago

NAT WEST NEXT?

E Wyatt
E Wyatt
1 year ago

Why Nat West, just out of interest? It’s almost half state-owned, so why would it go under?

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago
Reply to  E Wyatt

Perhaps a malicious rumour from the “horse’s mouth” because as you correctly say HMG owns 43% of it.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

Marshall Wace have taken a.64% short position…

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago

Otherwise known as “The Kiss of Death”?

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago

Otherwise known as “The Kiss of Death”?

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

Marshall Wace have taken a.64% short position…

B Emery
B Emery
1 year ago
Reply to  E Wyatt

Yeah, the whole us bank index looks ropey as hell, I’m intrigued as to why nat west. There’s a lot of rumours about at the moment as to how this will pan out and what might crash next, I’ve come across anywhere else saying Nat West yet.

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago
Reply to  E Wyatt

Perhaps a malicious rumour from the “horse’s mouth” because as you correctly say HMG owns 43% of it.

B Emery
B Emery
1 year ago
Reply to  E Wyatt

Yeah, the whole us bank index looks ropey as hell, I’m intrigued as to why nat west. There’s a lot of rumours about at the moment as to how this will pan out and what might crash next, I’ve come across anywhere else saying Nat West yet.

Andrew Martin
Andrew Martin
1 year ago

Didn’t the Viz comic used to call it Knat West.?

E Wyatt
E Wyatt
1 year ago

Why Nat West, just out of interest? It’s almost half state-owned, so why would it go under?

Andrew Martin
Andrew Martin
1 year ago

Didn’t the Viz comic used to call it Knat West.?

CHARLES STANHOPE
CHARLES STANHOPE
1 year ago

NAT WEST NEXT?

David Brightly
David Brightly
1 year ago

‘This swelled the global labour pool by several orders of magnitude’. To me this means multiplied it by at least 100, maybe 1000, maybe more. Rapley can’t mean that, surely?

Peter Joy
Peter Joy
1 year ago
Reply to  David Brightly

He might, in the pure sense of freely available surplus labour.

Linda Hutchinson
Linda Hutchinson
1 year ago
Reply to  David Brightly

Yes. I wondered how many orders og magnitude he was talking about. Perhaps, by “orders of magnitude”, he just means “a lot”

David Brightly
David Brightly
1 year ago
Reply to  David Brightly

It leaves me wondering what credence to give the article, I’m afraid.

Peter Joy
Peter Joy
1 year ago
Reply to  David Brightly

He might, in the pure sense of freely available surplus labour.

Linda Hutchinson
Linda Hutchinson
1 year ago
Reply to  David Brightly

Yes. I wondered how many orders og magnitude he was talking about. Perhaps, by “orders of magnitude”, he just means “a lot”

David Brightly
David Brightly
1 year ago
Reply to  David Brightly

It leaves me wondering what credence to give the article, I’m afraid.

David Brightly
David Brightly
1 year ago

‘This swelled the global labour pool by several orders of magnitude’. To me this means multiplied it by at least 100, maybe 1000, maybe more. Rapley can’t mean that, surely?

LCarey Rowland
LCarey Rowland
1 year ago

Methinks this is exactly what the Bitcoiners and other cryptos had in mind when they came out of the woodwork after ’08. Jolly good: a real-world counterbalance to the banker powers-that-be. . . now apparently a functional element of counterbalance in the real world, instead of a mere gleam in quasimoto’s eye.

LCarey Rowland
LCarey Rowland
1 year ago

Methinks this is exactly what the Bitcoiners and other cryptos had in mind when they came out of the woodwork after ’08. Jolly good: a real-world counterbalance to the banker powers-that-be. . . now apparently a functional element of counterbalance in the real world, instead of a mere gleam in quasimoto’s eye.

Andy Iddon
Andy Iddon
1 year ago

The only workable solution to fix this is a move from primarily taxing income to primarily taxing net worth – asset taxation now!

B Emery
B Emery
1 year ago
Reply to  Andy Iddon

I think you underestimate the scope of the problems.

B Emery
B Emery
1 year ago
Reply to  Andy Iddon

I think you underestimate the scope of the problems.

Andy Iddon
Andy Iddon
1 year ago

The only workable solution to fix this is a move from primarily taxing income to primarily taxing net worth – asset taxation now!

Christopher Elletson
Christopher Elletson
1 year ago

“Unless and until central banks convince everyone they are more committed to bringing down inflation than to protecting asset-values, cryptocurrencies will continue to prosper.”
It isn’t cryptocurrencies as a class that ‘will continue to prosper’ but bitcoin which has a finite number of coins written in to its program and a near impossibility to increase that amount. My understanding is that for all the rest an infinite number coins can be created in the crypto currency world with little or no de facto ability of current holders to do much about it. The distinction between bitcoin and the rest is both necessary and critical: bitcoin can reflect the continuing money printing of central bankers by going up in price; other crypto currencies have the ability simply to ape central bank policies and print to infinity. Not understanding the distinction could mean the loss of your shirt. (And there are those who say governments will find a way to snuff out bitcoin but put that to one side.)

B Emery
B Emery
1 year ago

Bitcoin halves every six years? I think it is, so it doesn’t inflate, but it only has so many times it can do that I believe. I can’t remember the count we are on now, I haven’t done the bitcoin rabbit hole for a while. That is an opinion, I’d have to go read it about again to check. But it’s all about the halving, I’m sure its not built into it though to be like an infinite system you can keep using. I’m sure it has so many cycles then nobody knows.

B Emery
B Emery
1 year ago

Bitcoin halves every six years? I think it is, so it doesn’t inflate, but it only has so many times it can do that I believe. I can’t remember the count we are on now, I haven’t done the bitcoin rabbit hole for a while. That is an opinion, I’d have to go read it about again to check. But it’s all about the halving, I’m sure its not built into it though to be like an infinite system you can keep using. I’m sure it has so many cycles then nobody knows.

Christopher Elletson
Christopher Elletson
1 year ago

“Unless and until central banks convince everyone they are more committed to bringing down inflation than to protecting asset-values, cryptocurrencies will continue to prosper.”
It isn’t cryptocurrencies as a class that ‘will continue to prosper’ but bitcoin which has a finite number of coins written in to its program and a near impossibility to increase that amount. My understanding is that for all the rest an infinite number coins can be created in the crypto currency world with little or no de facto ability of current holders to do much about it. The distinction between bitcoin and the rest is both necessary and critical: bitcoin can reflect the continuing money printing of central bankers by going up in price; other crypto currencies have the ability simply to ape central bank policies and print to infinity. Not understanding the distinction could mean the loss of your shirt. (And there are those who say governments will find a way to snuff out bitcoin but put that to one side.)

Malcolm Webb
Malcolm Webb
1 year ago

Sadly, the mismanagement is almost assured.

Malcolm Webb
Malcolm Webb
1 year ago

Sadly, the mismanagement is almost assured.

Walter Schwager
Walter Schwager
1 year ago

This article probably couldn’t go into the details of MBSs in 2008 or mark-to-market long bonds in the case of SVB, but I find the analysis overly general. As a Canadian I am just grateful for a tightly regulated banking oligopoly that avoided 2008, where the central bank has stopped raising interest rates, where there is full employment even with a population increase last year of a net million.

mfx v
mfx v
1 year ago

The cycle of debasement of government money will never end, it’s baked into the thesis of government money, history proves this beyond all doubt.
Bitcoin is the off-ramp.

mfx v
mfx v
1 year ago
Reply to  mfx v

“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.

Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
-John Maynard Keynes, The Economic Consequences of the Peace