Adam Tooze: Central bankers' hands were forced in 2010, the poor dears, they aren't the lords of easy money, no, they're its slaves, just like us

 Here, for The New York Times:

If you are worried about wealth inequality in the United States, then the solution is not to tighten monetary policy but to make structural changes to the country’s financial system, starting with the undergrowth of shadow banking. Serious taxation of wealth and capital gains would also push in the right direction.

It would no doubt help if onetime central bankers, rather than cycling in and out of private finance, spoke out seriously in favor of reform. They would be doing the public a service if they spelled out the way that their hands were forced by the current incestuous intertwining of public debt markets with hedge funds and the like. Ultimately, however, it is politics that must grasp the nettle of change.

In the current dispensation, it may be flattering for central bankers to be cast as maestros, but in practice they are less the lords of easy money than its functionaries.     

 

 

Central bankers cycle in and out of private finance raking in millions, Adam.

 

If anyone were serious about restructuring the country's financial system, the place to start would be by restoring the key missing feature of capitalism without which it doesn't really exist. It's called bankruptcy. 

Adam Tooze's maternal grandparents were both commies, and the grandfather Arthur Wynn wasn't exposed as a Soviet spy until 2009, eight years after his death

Assiduously avoided here in "The Cult of Adam Tooze":

Another model Tooze said he looks to in his role as public intellectual is that of his maternal grandparents. “Leading synthesizers of global data on childhood nutrition,” Peggy and Arthur Wynn published research on poverty and family policy and together wrote a pseudonymous book attacking Tory business connections called England’s Money Lords. (Arthur was also, for a time, a Soviet-spy recruiter at Oxford.) They continued their work into their 90s. Arthur died over his word processor one night after Peggy had gone to bed; he was making a list of things to do.

 

The continuing crisis of housing bubble-itis

Housing prices in 2017 are overvalued north of 40%. The index commensurate with the pre-1993 period should be about 142 but is instead 203.

Adam Tooze notes US house prices relative to the rest of the world are low but still run ahead of Italy and Germany.

What would happen if 44 million German Americans and 17 million Italian Americans went back home looking for a bargain? 

David Dayen thinks Tim Geithner's disobedience of Obama's orders fed the anger at government Trump parlayed into the presidency

Of course, this begs the question whether Obama knew what he was doing, or even wanted to know.

Here in The New Republic:

Every action fit Geithner’s worldview: The financial system must be stabilized at all costs, as the only way to heal the economy so real people benefit. “We do not need to imagine that he was in the pocket of any one bank,” Adam Tooze wrote in the new book Crashed. “It was his commitment to the system that dictated that Citigroup should not be broken up.” ...

Today, some may welcome the internal dissension in the Trump administration. But Geithner’s actions to protect banks from the president he served, and the anger it bred at a “rigged” system, diminished the public’s faith in government intervention and helped install Trump in the White House.

Ken Rogoff calls Adam Tooze's new book CRASHED an ambitious but flawed work

Rogoff takes Tooze to task for certain inaccuracies and omissions, including about Rogoff's own published work.

It's a longish read, but well worth it, here. And don't miss the second part, which reviews Sebastian Edwards' AMERICAN DEFAULT.

Martin Wolf for The Financial Times likes business historian Adam Tooze's important new book CRASHED: HOW A DECADE OF FINANCIAL CRISES CHANGED THE WORLD

See Martin Wolf, What really went wrong in the 2008 financial crisis?

Tooze has been making the rounds at places like Bloomberg (and especially here) and CNBC promoting the theses of the new book, and was notably interviewed yesterday on Bob Brinker's radio program "Money Talk" (the dismissive summary of the interview provided here is notably blind to Tooze's importance, weakly observing how Tooze maintains that "money has no tangible underpinning", which is about all that grabs the attention of libertarian fundamentalists).

Those more popular presentations give only a tantalizing hint of the narrative power this trained historian brings to the story of the 2008 panic.

To see that in action there is an important lecture available here which Tooze gave at the American Academy in Berlin earlier this year, on March 13th.

"Conservatives" will doubtlessly recoil at Tooze's characterizations of the role played by them during the financial crisis. That those conservatives are really the GOP's libertarians is a distinction the significance of which seems lost on Tooze.

That said, the value of Tooze's perspective goes far beyond the subject of the warring factions of libertarian fundamentalism and neoliberalism, however important those are for understanding our times.

For one thing, Tooze is almost unique in describing in such vivid detail the dominating role now played by the "dollar" in the global economy (American analyst Jeffrey Snider being the notable but obscure exception). It takes an historian. This is, of course, the eurodollar, the proper understanding of which permits Tooze to show how the financial crisis in the United States centered in the mortgage market was globalized via international banking through London and Frankfurt independently of the wishes of the state actors. It also reveals to him that the most important global economic relationship has not been the US with China but the US with London.

Same as it ever was. The king and his colonies still rule the world, with a little help from the Bank of England.

For another, Tooze's work shows the degree to which the global economy has been captured by the bankers in providing these eurodollars, who acted unilaterally behind the scenes, first in the US (Ben Bernanke) and regrettably only later in Europe (Mario "whatever it takes" Draghi), to provide liquidity swaps in the trillions of dollars during the financial crisis while politicians argued about how states should deploy mere billions.

One inescapable conclusion ten years after the financial crisis is that citizens of states are in larger measure no longer masters of their own destinies, and haven't been for a very long time. They are today really ruled by technocrats in charge of central banks who work now more, now less in concert with their host governments to manage economic flows. The danger of this global state capitalism is that it might one day slip back into the outright fascism it so closely resembles.

To the millions of unemployed who were not bailed out in the crisis and who lost their homes and their hope in the United States and in the PIIGS, or to the hundreds of thousands of Muslims now in Chinese reeducation camps, it already has.

The crisis for neoliberalism does not come from capitalist fundamentalism. It comes from its growing list of victims.