By Ellen Brown* – Truthdig(+)
Central bankers are out of ammunition. Mark Carney, the soon-to-be-retiring head of the Bank of England, admitted as much in a speech at the annual meeting of central bankers in Jackson Hole, Wyo., in August. “In the longer-term,” he said, “we need to change the game.” The same point was made by Philipp Hildebrand, former head of the Swiss National Bank, in a recent interview with Bloomberg. “Really, there is little if any ammunition left,” he said. “More of the same in terms of monetary policy is unlikely to be an appropriate response if we get into a recession or sharp downturn.”
“More of the same” means further lowering interest rates, the central bankers’ stock tool for maintaining their targeted inflation rate in a downturn. Bargain-basement interest rates are supposed to stimulate the economy by encouraging borrowers to borrow (since rates are so low) and savers to spend (since they aren’t making any interest on their deposits and may have to pay to store them). At the moment, over $15 trillion in bonds are trading globally at negative interest rates, yet this radical maneuver has not been shown to measurably improve economic performance. In fact, new research shows that negative interest rates from central banks, rather than increasing spending, stopping deflation and stimulating the economy as they were expected to do, may be having the opposite effects. They are being blamed for squeezing banks, punishing savers, keeping dying companies on life support and fueling a potentially unsustainable surge in asset prices.
So what is a central banker to do? Hildebrand’s proposed solution was presented in a paper he wrote with three of his colleagues at BlackRock, the world’s largest asset manager, where he is now vice chairman. Released in August to coincide with the annual Jackson Hole meeting, the paper was co-authored by Stanley Fischer, former governor of the Bank of Israel and former vice chairman of the U.S. Federal Reserve; Jean Boivin, former deputy governor of the Bank of Canada; and BlackRock economist Elga Bartsch. Their proposal calls for “more explicit coordination between central banks and governments when economies are in a recession so that monetary and fiscal policy can better work in synergy.” The goal, according to Hildebrand, is to go “direct with money to consumers and companies in order to enliven consumption,” putting spending money directly into consumers’ pockets.
It sounds a lot like “helicopter money,” but he was not actually talking about raining money down on the people. The central bank would maintain a “standing emergency fiscal facility” that would be activated when interest rate manipulation was no longer working and deflation had set in. The central bank would determine the size of the facility based on its estimates of what was needed to get the price level back on target. It sounds good until you get to the part about who would disburse the funds: “Independent experts would decide how best to deploy the funds to both maximize impact and meet strategic investment objectives set by the government.”
“Independent experts” is another term for “technocrats”—bureaucrats chosen for their technical skill rather than by popular vote. They might be using sophisticated data, algorithms and economic formulae to determine “how best to deploy the funds,” but the question is, “best for whom?” It was central bank technocrats who plunged the economies of Greece and Italy into austerity after 2011, and unelected technocrats who put Detroit into bankruptcy in 2013.
Hildebrand and his co-authors are not talking about central banks giving up their ivory tower independence to work with legislators in coordinating fiscal and monetary policy. Rather, central bankers would be acquiring even more power, by giving themselves a new pot of free money that they could deploy as they saw fit in the service of “government objectives.”
Carney’s New Game
The tendency to overreach was also evident in Carney’s Jackson Hole speech when he said, “we need to change the game.” The game-changer he proposed was to break the power of the U.S. dollar as global reserve currency. This would be done through the issuance of an international digital currency backed by multiple national currencies, on the model of Facebook’s “Libra.”
Multiple reserve currencies are not a bad idea, but if we’re following the Libra model, we’re talking about a new, single reserve currency that is merely “backed” by a basket of other currencies. The questions then are who would issue this global currency, and who would set the rules for obtaining the reserves.
Carney suggested that the new currency might be “best provided by the public sector, perhaps through a network of central bank digital currencies.” This raises further questions. Are central banks really “public”? And who would be the issuer—the banker-controlled Bank for International Settlements, the bank of central banks in Switzerland? Or perhaps the International Monetary Fund, which Carney happens to be in line to head?
The IMF already issues Special Drawing Rights to supplement global currency reserves, but they are merely “units of account” which must be exchanged for national currencies. Allowing the IMF to issue the global reserve currency outright would give unelected technocrats unprecedented power over nations and their money. The effect would be similar to the surrender by European Union governments of control over their own currencies, making their central banks dependent on the European Central Bank for liquidity, with its disastrous consequences.
Time to End the “Independent” Fed?
A media event that provoked even more outrage against central bankers in August was an op-ed in Bloomberg by William Dudley, former president of the New York Federal Reserve and a former partner at Goldman Sachs. Titled “The Fed Shouldn’t Enable Donald Trump,” it concluded:
There’s even an argument that the [presidential] election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.
The Fed is so independent that, according to former Fed chair Alan Greenspan, it is answerable to no one. A chief argument for retaining the Fed’s independence is that it needs to remain a neutral arbiter, beyond politics and political influence; and Dudley’s op-ed clearly breached that rule. Critics called it an attempt to overthrow a sitting president, a treasonous would-be coup that justified ending the Fed altogether.
Perhaps, but central banks actually serve some useful functions. Better would be to nationalize the Fed, turning it into a true public utility, mandated to serve the interests of the economy and the voting public. Having the central bank and the federal government work together to coordinate fiscal and monetary policy is actually a good idea, so long as the process is transparent and public representatives have control over where the money is deployed. It’s our money, and we should be able to decide where it goes.
Among many recent troubling headlines was this one: “Families Go Deep in Debt to Stay in the Middle Class.” That story came on the heels of a report that consumer debt in the United States hit $14 trillion in the first quarter of the year, a level not seen since just before the financial crash of 2008.
To understand how we got here, it’s important to note another finding we feel has been perhaps most damaging to America’s middle class: since 1990, health care costs have risen 276 percent as wages, when adjusting for inflation, have barely grown at all.
“Health care is gobbling up your wages,” Axios recently reported, highlighting the fact that as of 2017, nearly one-third of income in the average American household is consumed by spending on health insurance. That’s more than double what insurance cost families in 1999.
Our employer-based health insurance system has created a vicious cycle for working American families and the businesses that employ them. With the cost of prescription drugs and treatment at hospitals rising, insurance companies have not pushed back to lower costs. They have instead passed cost increases onto companies that provide health insurance to their workers. That has forced companies to freeze and even lower employee wages to continue providing health insurance.
Workers, in turn, have not had their wages grow fast enough to keep up with higher costs for housing, transportation, education and yes, out-of-pocket health care costs. That has forced middle-class families to take out record amounts of high-interest credit card debt and unsecured personal loans to pay the bills.
Think of it this way: The cost to attend college, buy a car, take out a mortgage and get needed medical care are all much higher today than 30 years ago. But because tens of millions of Americans receive health insurance through their employer, high health care costs have prevented millions of American families from seeing larger paychecks. That is not true for any other major expense. The money employers otherwise would have given their workers in raises is going instead to health insurance companies.
That positions America’s health insurance companies as a unique threat to the financial well-being of the middle class. As CEOs, we see this exploitation of the American middle class and businesses up close.
In Easton, Pennsylvania, MCS Industries employs more than 150 workers as it generates hundreds of millions of dollars in revenue and leads North America in the supply of mirrors, picture frames and wall decor. We used to make those products in the United States, but we were forced to move those manufacturing jobs to China and Mexico. Ever-rising health insurance costs are a reason we have to move jobs overseas. And those uniquely American costs are preventing us from bringing jobs back to Pennsylvania. In 2000, health insurance costs were 7 percent of payroll at MCS. They are now 22 percent of payroll. If we could eliminate the profit margin and administrative waste of health insurers, we could bring jobs back to this country and increase workers’ pay.
In California, entrepreneurs are constantly pitching investors on the company they believe will be the next Google or Uber. But health insurance is often a hurdle for innovators. It’s difficult to leave a job with health insurance to launch a new company when you could go months or years without health benefits. And for established start-ups, providing health insurance to employees is at the center of a fight between gig companies like Lyft and Uber and the state of California. Drivers are finding health insurance increasingly unaffordable, while gig economy companies are struggling to provide insurance to employees who come and go and work between a few hours a month and 40-plus hours a week. The United States is unique among rich countries in tethering access to health care to the workplace. If we could follow the lead of those other countries, these problems would go away.
At the center of this problem are America’s health insurance companies. Until we decouple health insurance from employment, employers and workers will continue to bear the undue burden of outrageously high health care costs. And skyrocketing insurer profits will continue to force middle-class families to run up credit card debt to survive as employers struggle to increase wages.
We need a single, national health care payment system to offer relief to American businesses and workers. By taxing companies and workers fairly, and removing the waste and profiteering from health insurance companies, we can unshackle the middle class and American companies from a cycle of stagnant wage growth and growing debt that threatens our economy.
Joe Biden’s recent efforts to deny his record of support for invading Iraq are marvels of evasion, with falsehoods that have been refuted by one well-documented appraisal after another after another. This month, Biden claimed that his vote for war on the Senate floor was somehow not a vote for war. Ironically, while he was spinning anew to deny the undeniable, theaters nationwide began screening a movie that exposes the deceptive approach to the Iraq war that Biden exemplifies.
Historically factual, “Official Secrets” is concerned with truth — and the human consequences of evading or telling it. Katharine Gun, portrayed by actress Keira Knightley, was a worker at the British intelligence agency GCHQ. Risking years in prison, she did everything she could to prevent the Iraq war, and took responsibility for doing so.
Biden did everything he could to enable the Iraq war, and — still — takes no responsibility for doing so.
More than 16 years ago, Biden and Gun were at cross purposes as the Iraq invasion neared. Subterfuge vs. candor. Misinformation vs. information. War vs. peace. Today, their public voices contrast just as sharply.
Gun recalls that both President George W. Bush and especially British Prime Minister Tony Blair were “desperate to get U.N. cover” for the impending invasion of Iraq in early 2003. On the last day of January of that year, Gun saw a memo from the U.S. National Security Agency that showed the two governments were working together to wiretap and otherwise surveil diplomats from countries on the U.N. Security Council — for purposes such as blackmail — to win a vote to authorize an invasion.
Gun became a whistleblower by providing the memo to the Observer newspaper in London. As she said in a recent interview with Salon, “My intention was to prevent the war. . . . I felt there was this information that was absolutely crucial, it had the potential to derail the rush to war, and I felt people had the right to know.”
Biden — who played a pivotal role in the rush to war as chair of the Senate Foreign Relations Committee — proceeded as though people had no right to know. He excluded critical voices and key information from the committee’s high-profile hearings in mid-summer 2002, deceptively serving as the most important lawmaker ushering the war resolution to the Senate floor, where he voted for it in mid-October. The war began five months later. It has never ended.
But now, on the campaign trail, Biden is eager to scramble and rewrite history. He’s displaying the kind of disregard for facts that paved the way for the invasion of Iraq in the first place.
A basic flaw in Biden’s latest Iraq doubletalk has to do with his inversion of actual timing. Either he can’t remember when the Iraqi government agreed to allow U.N. weapons inspectors back into Iraq—or he’s so desperate to keep lying about his actual record on the Iraq war that he can’t bring himself to be truthful.
Biden is claiming that he voted for the war resolution so it would be possible to get U.N. weapons inspectors into Iraq. During the ABC debate last week, Biden said that he voted for the Iraq invasion authorization “to allow inspectors to go in to determine whether or not anything was being done with chemical weapons or nuclear weapons.” But his claim has the timing backwards.
The Iraqi government announced on September 16, 2002 — with a letter hand-delivered to U.N. Secretary General Kofi Annan — that it would allow the U.N. weapons inspectors back in “without conditions.” The New York Times reported the big news under the headline “U.N. Inspectors Can Return Unconditionally, Iraq Says.” That was a full 25 days before Biden voted with virtually every Republican and most Democratic senators to approve the Iraq war resolution.
How could that resolution he voted for on October 11 be viewed as a tool for leverage so the Iraqi government would (in Biden’s words) “allow inspectors to go in” — when the Iraqi government had already agreed to allow inspectors several weeks earlier?
I have a vivid memory of when the news of that agreement broke. I was in Baghdad near the end of a trip with an independent delegation organized and sponsored by the Institute for Public Accuracy (where I’m executive director) that included then-Congressman Nick Rahall and former Senator James Abourezk. We had just met with Iraq’s number two official, Tariq Aziz. In its coverage, the Washington Post reported on September 16: “Iraq maintains that all its weapons of mass destruction have been destroyed. The deputy prime minister, Tariq Aziz, insisted . . . that even if his government readmitted the weapons inspectors, the United States and Britain would proceed with military action. ‘It’s doomed if you do, doomed if you don’t,’ he said.”
Hours later, when the news came that Iraq would allow U.N. weapons inspectors without restrictions, it removed the get-the-inspectors-into-Iraq excuse for the war resolution that was then making its way through Congress. But it’s an excuse that Biden has now dusted off and pressed into service, twisting the timeline of actual events.
The congressional resolution that Biden spoke for and voted for on the Senate floor was clear, stating: “The President is authorized to use the Armed Forces of the United States as he determines to be necessary and appropriate in order to (1) defend the national security of the United States against the continuing threat posed by Iraq; and (2) enforce all relevant United Nations Security Council resolutions regarding Iraq.”
Four months later, in February 2003, at a time when Katharine Gun was anxiously waiting to see whether the NSA document that she had leaked to a British news outlet would actually be revealed to the public, Biden was proclaiming his support for the imminent invasion. He told a Chamber of Commerce meeting in Delaware: “I supported the resolution to go to war. I am not opposed to war to remove weapons of mass destruction from Iraq.”
After the invasion, Biden continued to support the war. At the end of July 2003, four months after the war began, he said in a speech at the Brookings Institution: “Nine months ago, I voted with my colleagues to give the president of the United States of America the authority to use force, and I would vote that way again today. It was the right vote then and it would be a correct vote today.”
After another year had gone by, Biden wrote a magazine article that tactically criticized how the war was being waged while still defending his role in helping to launch it: “A year and a half ago, I voted to give President Bush the authority to use force in Iraq. I still believe my vote was just — but the president’s use of that authority was unwise in ways I never imagined.”
As the Washington Post recently noted, “Not until November 2005 did Biden acknowledge that his vote was a mistake.” Even then, on NBC’s “Meet the Press,” Biden tried to shift the blame onto President Bush for turning out to be unworthy of his trust. “In hindsight,” the interviewer asked, “knowing everything you know now about the absence of weapons of mass destruction, was your vote a mistake?” Biden replied: “It was a mistake. It was a mistake to assume the president would use the authority we gave him properly.”
Only one of Biden’s opponents for the 2020 Democratic presidential nomination was in Congress at the time of the Iraq war resolution. Bernie Sanders (who I’m actively supporting) voted no.
This summer, Biden has spun out with new mendacity about the Iraq invasion. On the debate stage at the end of July, he upped the dishonest ante by claiming: “From the moment ‘shock and awe’ started, from that moment, I was opposed to the effort, and I was outspoken as much as anyone at all in the Congress.” The historical record shows that claim to be preposterous.
And backwards timing is not the only major flaw in Biden’s claim that he voted for the war resolution to increase the prospects for U.N. weapons inspectors to get into Iraq. An underlying problem with his current narrative is the reality that going to the United Nations Security Council for authorization to launch a war on Iraq was always a quest for a fig leaf to cover U.S. plans for naked aggression.
New York Times pundit Thomas Friedman was unusually candid when, on November 13, 2002 — one month after Biden had voted to approve the war resolution — he wrote in a column: “The Bush team discovered that the best way to legitimize its overwhelming might — in a war of choice — was not by simply imposing it, but by channeling it through the U.N.”
It was this bogus push to supposedly legitimize the pending invasion that Katharine Gun took such a huge personal risk to expose, informing the world about the intense surveillance underway to gain illicit leverage over U.N. Security Council delegations.
“Gun’s revelation showed that the U.S. and British governments were not only lying to get to invade Iraq, they were engaging in outright violations of international law to blackmail whole countries to get in line,” Institute for Public Accuracy senior analyst Sam Husseini wrote. He told me: “The insidiousness of Biden is that he’s effectively saying that Bush should have manipulated the U.N. better.”
Overall, as he pursues the presidency, Joe Biden is persisting with dismal innovations to falsify his record on the Iraq war. In the process, he’s operating completely at odds with what the “Official Secrets” film and Katharine Gun are all about.
(+) Truthdig, founded in 2005 by Publisher Zuade Kaufman and Editor in Chief Robert Scheer, is dedicated to reporting on current issues that are insufficiently covered by mainstream media. The website’s mission is to dig beneath the headlines, provide expert reporting and commentary from a progressive point of view and offer an outlet for original work by exceptional journalists.
*Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of thirteen books including her latest, “Banking on the People: Democratizing Money in the Digital Age.”