posted July 6, 2017
Central Bankers at the End of Their Ropes?–Monetary Policy & the Next Depression’

My most recent book will be published this month, entitled “Central Bankers at the End of Their Ropes?: Monetary Policy & the Next Depression".

Here’s the TABLE OF CONTENTS, MAIN THEMES, and SYNOPSIS of the book with an expanded description of table of contents. Check out this blog and my website for ordering information this coming weekend. For more information in the meantime, check out the publisher, Clarity Press, website at:


Chapter 1: Problems & Contradictions of Central Banking
Chapter 2: A Brief History of Central Banking
Chapter 3: The US Federal Reserve Bank: Origins & Toxic Legacies
Chapter 4: Greenspan’s Bank: The ‘Typhon’ Monster Released
Chapter 5: Bernanke’s Bank: Greenspan’s ‘Put’ On Steroids
Chapter 6: The Bank of Japan: Harbinger of Things That Came
Chapter 7: The European Central Bank under German Hegemony
Chapter 8: The Bank of England’s Last Hurrah: From QE to Brexit
Chapter 9: The People’s Bank of China Chases Its Shadows
Chapter 10: Yellen’s Bank: From Taper Tantrums to Trump Trade
Chapter 11: Why Central Banks Fail
Conclusion: Revolutionizing Central Banking in the Public Interest:
Embedding Change via Constitutional Amendment

Theme #1: Central banks of the advanced economies—despite having been assigned by their respective economic and political elites the role of primary economic policy institution—have failed since 2008 to achieve their major objectives of long run stabilization of their banking systems or the restoration of pre-2008 economic growth.

Theme #2: The decades of central liquidity injections since the 1970s, that produced the 2008-09 crisis in the first place, then became the central banks’ solution to that crisis; that same liquidity solution, 2009-2016, has become the cause of the next crisis, as tens of trillions of dollars of even more liquidity-enabled debt has since 2008 been piled on the original trillions before 2008.

Theme #3: Central banks’ function of lender of last resort, in the past designed to provide excess liquidity in instances of banking crises, has in the 21st century been transformed into a new function: the subsidization of the private banking system by means of constant central bank excess liquidity. The private banking system today has become addicted to, and increasingly dependent upon, significant continuing infusions of liquidity by central banks.

Theme #4: Central banks have failed to evolve apace with the rapid transformations of the global private capitalist banking system. Structural change in the global financial system, the continuing fragility of banking systems, and excess levels of debt and leveraging mean that interest rates post-2016 cannot be raised very much, and central banks’ balance sheets cannot be reduced to any significant extent, without provoking a widespread credit crisis throughout the private banking system.

Theme #5: Central banks must undergo fundamental restructuring and change. That restructuring must include the democratization of decision making and a redirecting of central banks toward a greater direct service in the public interest. New functions, new targets and new tools will be required.

SYNOPSIS with Expanded Chapters Descriptions:

Central banks emerged from the 2007-09 crisis as the primary economic policy institutions in the advanced economies. Tasked not only with stabilizing the banking system during the worst financial crisis since the great depression, central banks were given the additional task as well of restoring economic growth to pre-crisis historical levels. Fiscal policy as government spending and public investment was relegated to a minor role at best; at worst, and more frequently than not, recast as fiscal austerity rolling back government spending and investment.

The banking systems in the advanced economies—and indeed throughout the global economy—were temporarily stabilized after 2009 but only to a degree, and at a cost of tens of trillions of dollars, euros, pounds, yen and other currencies. Cumulative QEs alone amounted to nearly $15 trillion central bank investor and bank bailouts. Nevertheless, deep pockets of banking weakness and fragility still remain a decade after the 2008-09. Non-Performing bank loans in the advanced economies still exceed $10 trillion. Pre-2008 private and corporate debt has been only transferred to central banks’ balance sheets, not eliminated. Post 2008 private business debt has again been allowed to accelerate by tens of trillions in dollars and other major currencies. Meanwhile, household and government debt levels have continued to climb, while the ability to service that debt with wage income growth and tax revenue has stagnated or declined.

With their massive liquidity injections, the central banks have been the original enablers of the unprecedented past—and continuing—debt escalation, and are thus ultimately responsible for its consequences. Nor have central they fared any better with regard to their other mission of restoring real economic growth to pre-crisis levels. Rates of growth in GDP have lagged significantly from pre-crisis levels, and in some regions—like Europe and Japan—have stagnated or worse over the long term. Global real investment, productivity and even trade have meanwhile all slowed under the hegemony of global central bank policy regimes since 2008.

The central banks’ decades-long, chronic injections of liquidity into the global private banking system since the 1970s enabled the record levels of debt and leveraged borrowing in the ensuing decades, culminating in the financial crash of 2008-09. The same central banks provided even greater magnitudes liquidity to bailout their banking systems—initially the US and UK in 2008-09, then Europe after 2010, and more recently Japan and China. The bailout and liquidity continued for nine years.
The book then considers the question: why central banks of the advanced economies have been fueling the massive liquidity binge since the 1970s while failing to restore real economic growth since 2008? It concludes the following combination of forces and developments have been responsible:

• The collapse of the Bretton Woods International Monetary System in 1973 and central role assigned to central banks to stabilize currencies and economies
• The ascent of Neoliberal policies in the US-UK after 1978 and their adopted by others
• Deregulation of international money capital flows in the 1980s and accompanying domestic financial deregulation
• Rapid and radical restructuring of global financial institutions, markets, and products
• Rise and growing political influence of a new global finance capital elite
• Economic elites’ shift to fiscal austerity and elevation of monetary policy as primary
• Unprecedented rapid technological changes transforming the very nature of money and credit and its effects on liquidity, debt, and financial markets’ contagion
• Growing frequency and magnitudes of financial instability events globally and consequent more frequent recessions and slower growth
• Increasing demands on central banks to expand their lender of last resort function, and the bailout of banks and financial systems, while assuming primary responsibility for generating real economic growth


In Chapter One the point is raised that these new forces have led to growing contradictions between the central banks and the broader global capitalist banking system. Several of the more fundamental contradictions are listed and briefly described in the chapter, to be returned to for further consideration later at the end of the book under the subject of why central banks have been failing to achieve their broad objectives as well as their basic functions and targets.

Chapter Two describes the evolution of central banking over the past two centuries, as well as evolution of central banks’ functions, targets and monetary policy tools. The point is made that the evolution of central banking since the late 20th century has increasingly failed to keep up with the more rapid restructuring and change in the global private banking system. Falling further behind the curve of global capitalist change, central banks’ consequently have been further failing to adequately perform their primary functions of money supply management, bank supervision, and lender of last resort; have failed to attain their price level and other targets; and their monetary tools have deteriorated in terms of effectiveness in performing those functions and attaining those targets.

In the core chapters Three through Ten of the book describe the evolution of monetary policies of each of the advanced economy central banks in turn—and to what extent each central bank performed its primary functions, attained its declared targets, and how effective have been its tools—whether traditional or the more recently experimental like quantitative easing (QE), zero bound rates (ZIRP), negative rates (NIRP), forward guidance and other innovations.

In chapters Three to Five special consideration is given to the US central bank, the Federal Reserve, from its origins in 1913 to the present. Chapter Three describes how the Fed was created and run by the private banks directly from 1913 to 1935, enabling the financial asset bubbles of the 1920s that burst in the great depression that followed; how the Fed failed miserably to manage the money supply, adequately supervise the banks, and failed to function as lender of last resort during the first four years of the depression, 1929-1933.

Chapter Four describes how the Roosevelt reforms of 1933-35 were insufficient to prevent indirect private banker interests hegemony over the Fed over the long run; how those interests came to dominate the Fed once again during the period 1951 to 1986; and how the Fed under its chair, Alan Greenspan, 1986-2006, came progressively to elevate central bank monetary policy over government fiscal spending. Chapter Four describes how US central bank policy of massive liquidity injections became a norm under Greenspan’s 20 year tenure, and how Greenspan’s liquidity ‘put’ in turn accelerated debt and levering, thus contributing to a series of US and global asset bubbles from the late 1980s to 2006 that culminated in the housing and derivatives great credit bubble and crash of 2007-09.

Chapter Five addresses the Fed under chair, Ben Bernanke, and describes how his policies were a continuation of Greenspan’s until the 2008 crash, at which time Bernanke’s Bank became Greenspan ‘on steroids’ so far as central bank liquidity and interest rate policies are concerned. The chapter debunks Greenspan notions of ‘conundrums’ and Bernanke’s ‘global savings gluts’ that were proposed to explain away the failure of Fed policies, and explains why Fed policy has been to always assiduously avoid interceding to prevent financial asset price bubbles. The chapter concludes with an analysis of the Bernanke Fed, 2006-2014, as to what extent it achieved or not its primary functions and targets. Detailed considered is given to the Bernanke bank’s innovations in new monetary policy tools like QE and ZIRP, which are then critiqued for their effectiveness and unanticipated consequences.

Chapters Six through Nine consider in turn the evolution and performance of the other major central banks, including the Bank of Japan (BOJ), European Central Bank (ECB), Bank of England (BOE), and the People’s Bank of China (PBOC), respectively. Addressing the period from roughly 1990 to the present, the chapters describe the evolution of central banking functions of money supply management, bank supervision, and lender of last resort for each of the central banks, as well as evolution in terms of the targets and the monetary tools they employed. Special attention is given to QE, ZIRP and NIRP programs and tools in Japan and Europe and why price targeting has failed so miserably in both nonetheless, despite trillions of euros and yen liquidity injections by their central banks. Why fiscal austerity has been the most extreme in both, and in the UK, and why growth rates have stagnated or slipped in and out of recession. Chapter Thirteen on China considers the unique case of the PBOC and China’s equally unique banking structure, as well as its contrary policies of fiscal stimulus as government spending and investment. Nevertheless, it is argued China and its PBOC have after 2011 increasingly resorted to massive liquidity injections accompanying that fiscal stimulus, with the result of business and household debt exploding by 210% and more than $20 trillion since 2007.

Chapter Ten returns to the US central bank, the Fed, under the chair of Janet Yellen since 2014. Yellen Fed policies through 2016 are described as the extension of the Bernanke Fed in terms of functions, targets and tools. How the Yellen Fed has performed in those terms is examined. Special challenges faced by the Yellen Fed are discussed, including raising interest rates from near zero, the effects of sell off of the Fed’s balance sheet, how to supervise the banks in an environment of renewed financial regulation rollbacks, how to maintain central bank monetary policy hegemony amongst growing calls for fiscal infrastructure government spending, and how to prepare new tools for the next financial crisis and bank bailouts.

Chapter Eleven returns to broader themes associated with the failings and challenges confronting central banking in the 21st century. The chapter revisits and summarizes the reasons why central banks have been failing with regard to functions, targets and tools effectiveness. Official excuses for that failure are critiqued and rejected. Alternative reasons are offered, including the declining effects of interest rates on investment, the relative shift to financial asset investing at the expense of real investment, failure of central banks to intervene and prevent financial asset bubbles, the purposeful fragmentation of bank supervision across regulatory institutions, mismanagement of the money supply, monetary tools ineffectiveness and contradictions, and central bankers’ continuing adherence to ideological notions of the mid-20th century that no longer hold true in the 21st—like the Taylor Rule, Phillips curves, and, in the case of ZIRP and NIRP, the idea that the cost of borrowing is what first and foremost determines investment.

The Concluding Chapter raises the question: what reforms and restructuring of central banks’ decision making processes, tools, targets, functions, as well as their very mission and objectives, are necessary if central banks are to become useful institutions for society in general? Central banks, as currently structured, have failed to keep pace with the more rapid restructuring and change in the private capitalist banking system. Contradictions have arisen in the gap that unbalanced evolution has created. Failure of performance in turn has been the consequence of failure to restructure and to evolve in tandem with the private banking system.

A Constitutional Amendment is therefore proposed, along with 20 articles of Enabling Legislation, to restructure the US Fed by democratizing its decision making and redirecting it to serve in the broader public interest, and not just the interests of the private banking system. The amendment and legislation defines a new mission and general goals for the Fed—as well as new targets, tools and new functions—to create a new kind of public interest Federal Reserve for the 21st century.

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