Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means? — Dr. Michael Hudson, Counterpunch, October 2010
When the US Federal Reserve bought an 80% stake in American International Group (AIG) in September 2008, the unprecedented $85 billion outlay was justified as necessary to bail out the world’s largest insurance company. Today, however, central banks are on a global corporate buying spree not to bail out bankrupt corporations but simply as an investment, to compensate for the loss of bond income due to record-low interest rates. Indeed, central banks have become some of the world’s largest stock investors.
Central banks have the power to create national currencies with accounting entries, and they are traditionally very secretive. We are not allowed to peer into their books. It took a major lawsuit by Reuters and a congressional investigation to get the Fed to reveal the $16-plus trillion in loans it made to bail out giant banks and corporations after 2008.
What is to stop a foreign bank from simply printing its own currency and trading it on the currency market for dollars, to be invested in the US stock market or US real estate market? What is to stop central banks from printing up money competitively, in a mad rush to own the world’s largest companies?
Apparently not much. Central banks are for the most part unregulated, even by their own governments. As the Federal Reserve observes on its website:
[The Fed] is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.
As former Federal Reserve Chairman Alan Greenspan quipped, “Quite frankly it does not matter who is president as far as the Fed is concerned. There are no other agencies that can overrule the action we take.”
The Central Bank Buying Spree
That is how “independent” central banks operate, but it evidently not the US central bank that is gambling in the stock market. After extensive quantitative easing, the Fed has a $4.5 trillion balance sheet; but this sum is accounted for as being invested conservatively in Treasuries and agency debt (although QE may have allowed Wall Street banks to invest the proceeds in the stock market by devious means).
Which central banks, then, are investing in stocks? The biggest player turns out to be the People’s Bank of China (PBoC), the Chinese central bank.
According to a June 15th article in USA Today:
Evidence of equity-buying by central banks and other public sector investors has emerged from a large-scale survey compiled by Official Monetary and Financial Institutions Forum (OMFIF), a global research and advisory group. The OMFIF research publication Global Public Investor (GPI) 2014, launched on June 17 is the first comprehensive survey of $29.1 trillion worth of investments held by 400 public sector institutions in 162 countries. The report focuses on investments by 157 central banks, 156 public pension funds and 87 sovereign funds, underlines growing similarities among different categories of public entities owning assets equivalent to 40% of world output.
The assets of these 400 Global Public Investors comprise $13.2 trillion (including gold) at central banks, $9.4 trillion at public pension funds and $6.5 trillion at sovereign wealth funds.
Public pension funds and sovereign wealth funds are well known to be large holders of shares on international stock markets. But it seems they now have rivals from unexpected sources:
One is China’s State Administration of Foreign Exchange (SAFE), part of the People’s Bank of China, the biggest overall public sector investor, with $3.9 trillion under management, well ahead of the Bank of Japan and Japan’s Government Pension Investment Fund (GPIF), each with $1.3 trillion.
SAFE’s investments include significant holdings in Europe. The PBoC itself has been directly buying minority equity stakes in important European companies.
Another large public sector equity owner is Swiss National Bank, with $480 billion under management. The Swiss central bank had 15% of its foreign exchange assets – or $72 billion – in equities at the end of 2013.
Public pension funds and sovereign wealth funds invest their pension contributions and exchange reserves earned in foreign trade, which is fair enough. The justification for central banks to be playing the stock market is less obvious. Their stock purchases are justified as compensating for lost revenue caused by sharp drops in interest rates. But those drops were driven by central banks themselves; and the broad powers delegated to central banks were supposed to be for conducting “monetary policy,” not for generating investment returns. According to the OMFIF, central banks collectively now have $13.2 trillion in assets (including gold). That is nearly 20% of the value of all of the stock markets in the world, which comes to $62 trillion.
From Monetary Policy to Asset Grabs
Central banks are allowed to create money out of nothing in order to conduct the monetary policies necessary to “regulate the value of the currency” and “maintain price stability.” Traditionally, this has been done with “open market operations,” in which money was either created by the central bank and used to buy federal securities (thereby adding money to the money supply) or federal securities were sold in exchange for currency (shrinking the money supply).
“Quantitative easing” is open market operations on steroids, to the tune of trillions of dollars. But the purpose is allegedly the same—to augment a money supply that shrank by trillions of dollars when the shadow banking system collapsed after 2008. The purpose is not supposed to be to earn an income for the central bank itself. Indeed, the U.S. central bank is required to return the interest earned on federal securities to the federal government, which paid the interest in the first place.
Further, as noted earlier, it is not the US Federal Reserve that has been massively investing in the stock market. It is the PBoC, which arguably is in a different position than the US Fed. It cannot print dollars or Euros. Rather, it acquires them from local merchants who have earned them legitimately in foreign trade.
However, the PBoC has done nothing to earn these dollars or Euros beyond printing yuan. It trades the yuan for the dollars earned by Chinese sellers, who need local currency to pay their workers and suppliers. The money involved in these transactions has thus doubled. The merchants have been paid in yuan and the central bank has an equivalent sum in dollars or Euros. That means the Chinese central bank’s holdings are created out of thin air no less than the Federal Reserve’s dollars are.
Battle of the Central Banks?
Western central banks have generally worked this scheme discreetly. Not so much the Chinese, whose blatant gaming of the system points up its flaws for all to see.
Georgetown University historian Professor Carroll Quigley styled himself the librarian of the international bankers. In his 1966 book Tragedy and Hope, he wrote that their aim was “nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.” This system was to be controlled “in a feudalist fashion by the central banks of the world acting in concert by secret agreements,” central banks that “were themselves private corporations.”
It may be the Chinese, not acting in concert, who break up this cartel. The PBoC is no more transparent than the US Fed, but it is not an “independent” central bank. It is a government agency accountable to the Chinese government and acting on its behalf.
The Chinese have evidently figured out the game of the “independent” central bankers, and to be using it to their own advantage. If the Fed can do quantitative easing, so can the Chinese – and buy up our assets with the proceeds. Owning our corporations rather than our Treasuries helps the Chinese break up US dollar hegemony.
Whatever power plays are going on behind the scenes, it is increasingly clear that they are not serving we-the-people. Banks should not be the exclusive creators of money. We the people, through our representative governments, need to be issuing the national money supply directly, as was done in America under President Abraham Lincoln and in colonial times.
_______________________________
Ellen Brown is an attorney, founder of the Public Banking Institute and the author of twelve books, including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally.
Filed under: Ellen Brown Articles/Commentary |
WEB OF DEBT BLOG 
Reblogged this on Spartan of Truth.
The solutions become clear, urgent, and brutal once you understand these are RICO law enforcement issues, not monetary ones.
ernesthuber: I do agree – the 2008 “financial crisis” should have been the top priority of the Justice Department using the RICO laws in investigating and prosecuting the Wall Street swindlers and shysters for conspiring in the greatest financial theft in human history, instead of giving them a “taxpayer bailout.”
Duh? … None of my elected representatives asked me if I was willing to fork over my tax dollars to enrich the banksters even more. Had my Congressman and US Senators asked for my opinion, I would have told them to procure enough sets of handcuffs for arresting the “rip-off” artists on Wall Street.
[…] By Ellen Brown Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary […] …read more […]
Fight on Ellen! You have my support! Government & regulators are all in it together!
Amen, Ellen Brown. Should we go back to Bretton Woods without the gold standard?
Ellen, now that you have produced this commentary with your own knowledge, you now know why I spoke to you about the old 1889 book “The Great Red Dragon” at the AMI meeting in Chicago a few years back.
This is a quote from that old 1889 book’s Introduction:
“The Imperialism of Capital, in our time, stretches the arms of its power over the whole earth: it alone sways the nations with pre-eminent rule. It buys all of the products of the earth: it fixes all prices of all commodities without regard to the law of supply and demand, by its own arbitrary will. It is Imperial over industry and trade, and none can resist it. It is rapidly progressing toward its ultimate aim, of possessing itself of all the world’s wealth and all the world’s property. If things remain as they are, these Money Kings will, at no distant day, have achieved their aim, and will own the earth in fee simple.”
Money is not evil; it’s simply sociopaths using it to finance sociopaths.
Good quote! Who wrote the book?
Perhaps, maybe this quote tells all. From “The Role Of Money” by Frederick Soddy written in 1926, 1934.
Frederick Soddy writings, namely “The Role Of Money”
(Entire book as a free download… http://archive.org/details/roleofmoney032861mbp
PREFACE
This book attempts to clear up the mystery of money in its social aspect. With the monetary
system of the whole world in chaos, this mystery has never been so carefully fostered as it is to-day.
And this is all the more curious inasmuch as there is not the slightest reason for this mystery.
This book will show what money now is, what it does, and what it should do. From this will
emerge the recognition of what has always been the true role of money. The standpoint from
which most books on modern money are written has been reversed. In this book the subject is not
treated from the point of view of the bankers as those are called who create by far the greater
proportion of money but from that of the PUBLIC, who at present have to give up valuable
goods and services to the bankers in return for the money that they have so cleverly created
and create. This, surely, is what the public really wants to know about money.
It was recognized in Athens and Sparta ten centuries before the birth of Christ that one
of the most vital prerogatives of the State was the sole right to issue money. How curious that
the unique quality of this prerogative is only now being re-discovered. The” money-power ” which
has been able to overshadow ostensibly responsible government, is not the power of the merely ultrarich, but is nothing more nor less than a new technique designed to create and destroy money
by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of
the community or the real role that money ought to perform therein.
The more profound students of money and, more recently, a very few historians have realized
the enormous significance of this money power or technique, and its key position in shaping the
course of world events through the ages. In this book the mode of approach and the philosophy
of money is expounded in the light of a group of new doctrines, to which the name ergosophy is
collectively given, which regard economics, sociology, and history with the eye of the engineer
rather than with that of the humanist. It is concerned less with the details of particular schemes
of monetary reform that have been advocated than with the general principles to which, in the
author’s opinion, every monetary system must at long last conform, if it is to fulfil its proper role
as the distributive mechanism of society. To allow it to become a source of revenue to private issuers is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough ultimately to overthrow all other forms of government.
L. B. Woolfolk [1889]. At my site, there’s a link to download a free version scanned by the University of California.
I’ve come to believe that Capitalism, in it’s purist form, equals feudalism, to the extent of which laws prevent it otherwise.
Seeing how a true capitalist hates competition because it dilutes profits, the ultimate goal of a capitalist is to seek rentier income streams in one form or another. The only differentiator among them being rate of return of the investment vehicle and the risk level.
[…] Buying up the planet: out-of-control central banks on a corporate buying spree […]
[…] For more go to Web of Debt […]
Ellen, this post perfectly highlights the problem of the enormous trade imbalance we have with China. The right way this should work is we buy from them, they buy stuff back from us. We buy way too much from them and they don’t buy enough back from us.
So, instead of buying back goods and service from usa, they buy assets of usa. This becomes a long term danger to our national sovereignty, as ownership of assets give legal rights to those assets owned. There is a real possibility China can become a huge asset owner of USA companies (stock, intellectual property, natural resources, patents and technology) and properties (rentiers).
Our officials need to adopt international trade policies that ensure we don’t become indentured servants to China. Limits on foreign asset ownership must be put in place, by doing so, it would forces countries like China to buy goods and services back from USA with all those dollars they are collecting.
We need reciprocal laws, that match China’s limit of foreign ownership of Chinese assets..
Right on, Jack. A penetrating analysis of this is to be found in the outstanding book Free Trade Doesn’t Work by Ian Fletcher. Present American trade policy–and things like the TPP and globalism in general–are for the internationalist capitalist pigs and are instruments of the destruction of America. Plato said in The Republic that his ideal state wouldn’t engage in foreign trade because it is a form of warfare. I wouldn’t go so far as to ban it, but it needs to be conducted with the advantage and defense of our nation in the forefront. Having a big trade imbalance with China, with whom we have a skewed one-way “free trade” relationship, is very bad for America.
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The Grim Reaper will unleash his scythe upon the criminal class of state predators, including central bankers, soon enough. When that happens he will likely destroy central banks. And that means both banking systems and central banking money are at risk of extinction.
This is the last hurrah for a system of systemic, inbred corruption and tyranny.
[…] Buying up the planet: out-of-control central banks on a corporate buying spree […]
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[…] This piece first appeared at Web of Debt. […]
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So, instead of buying back goods and service from usa, they buy assets of usa. This becomes a long term danger to the any national sovereignty,
[…] https://ellenbrown.com/2014/06/20/buying-up-the-planet-out-of-control-central-banks-on-a-corporate-bu… […]
[…] Public pension funds and sovereign wealth funds invest their pension contributions and exchange reserves earned in foreign trade, which is fair enough. The justification for central banks to be playing the stock market is less obvious. Their stock purchases are justified as compensating for lost revenue caused by sharp drops in interest rates. But those drops were driven by central banks themselves; and the broad powers delegated to central banks were supposed to be for conducting “monetary policy,” not for generating investment returns. According to the OMFIF, central banks collectively now have $13.2 trillion in assets (including gold). That is nearly 20% of the value of all of the stock markets in the world, which comes to $62 trillion. From Monetary Policy to Asset Grabs Central banks are allowed to create money out of nothing in order to conduct the monetary policies necessary to “regulate the value of the currency” and “maintain price stability.” Traditionally, this has been done with “open market operations,” in which money was either created by the central bank and used to buy federal securities (thereby adding money to the money supply) or federal securities were sold in exchange for currency (shrinking the money supply). “Quantitative easing” is open market operations on steroids, to the tune of trillions of dollars. But the purpose is allegedly the same—to augment a money supply that shrank by trillions of dollars when the shadow banking system collapsed after 2008. The purpose is not supposed to be to earn an income for the central bank itself. Indeed, the U.S. central bank is required to return the interest earned on federal securities to the federal government, which paid the interest in the first place. Further, as noted earlier, it is not the US Federal Reserve that has been massively investing in the stock market. It is the PBoC, which arguably is in a different position than the US Fed. It cannot print dollars or Euros. Rather, it acquires them from local merchants who have earned them legitimately in foreign trade. However, the PBoC has done nothing to earn these dollars or Euros beyond printing yuan. It trades the yuan for the dollars earned by Chinese sellers, who need local currency to pay their workers and suppliers. The money involved in these transactions has thus doubled. The merchants have been paid in yuan and the central bank has an equivalent sum in dollars or Euros. That means the Chinese central bank’s holdings are created out of thin air no less than the Federal Reserve’s dollars are. Battle of the Central Banks? Western central banks have generally worked this scheme discreetly. Not so much the Chinese, whose blatant gaming of the system points up its flaws for all to see. Georgetown University historian Professor Carroll Quigley styled himself the librarian of the international bankers. In his 1966 book Tragedy and Hope, he wrote that their aim was “nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.” This system was to be controlled “in a feudalist fashion by the central banks of the world acting in concert by secret agreements,” central banks that “were themselves private corporations.” It may be the Chinese, not acting in concert, who break up this cartel. The PBoC is no more transparent than the US Fed, but it is not an “independent” central bank. It is a government agency accountable to the Chinese government and acting on its behalf. The Chinese have evidently figured out the game of the “independent” central bankers, and to be using it to their own advantage. If the Fed can do quantitative easing, so can the Chinese – and buy up our assets with the proceeds. Owning our corporations rather than our Treasuries helps the Chinese break up US dollar hegemony. Whatever power plays are going on behind the scenes, it is increasingly clear that they are not serving we-the-people. The global central banking scheme is systemically flawed and needs to be radically overhauled. https://ellenbrown.com/2014/06/20/buying-up-the-planet-out-of-control-central-banks-on-a-corporate-bu… […]
[…] https://ellenbrown.com/2014/06/20/buying-up-the-planet-out-of-control-central-banks-on-a-corporate-bu… […]
[…] LINK HERE to the essay […]