Collusion: How Central Bankers Rigged the World

The word “collusion” has come to be associated with Russia, Trump and the U.S. election.

But my new book, Collusion: How Central Bankers Rigged the World,is about something entirely different and much more global:

The collusion (or coordination) that the U.S. central bank (the Federal Reserve) forged with other major central banks to fabricate money in the wake of the 2008 financial crisis.

That money went to support the U.S. financial system at first, and it later spread to markets worldwide.

Collusion is about these powerful institutions’ relationships with each other.

The book dives into how central banks rigged markets and ultimately created more inequality and instability as a result.

They did all of this in order to subsidize private banks at the expense of everyday people everywhere.

The book reveals the people in charge of these strategies, their elite gatherings and public and private communications. It uncovers how their policies rerouted economies, geopolitics, trade wars and elections.

The great American novelist F. Scott Fitzgerald actually gets credit for my new book…

A decade after I left my final Wall Street post — as a managing director at Goldman Sachs — it was The Great Gatsby that carried me back in time and forward in geography.

Here’s how it went down.

After I’d written the book It Takes a Pillage about the 2008 financial crisis, I was exhausted. Not from writing, but from the sheer ignorance that the global elite had, and still have, of the banking, economic and financial conditions that led to disaster.

In 2004, my book Other People’s Money warned exactly how the 2008 financial crisis would unfold. Sadly, I was right. In the wake of the chaos, I needed a break.

Attempting to unplug, I wandered into my local library to just spend an afternoon perusing. Right there in the front, I saw something that caught my eye. A poster for “Great Gatsby month” activities around in the neighborhood including 1920s music, readings, specialty drinks in local bars and a discussion of the book at a senior citizens’ community club.

By returning to the glitz and drama of the 1920s, it hit me. The same banks that had perpetuated the crash of 1929 had perpetuated the crash of 2008!

The same families and their confidantes over decades had consistently set the stage for expansion and crisis — always to their benefit.

By researching the Big Six banks and their leaders that protected their interests at the expense of the rest of the population, I constructed the foundation of my nonfiction book, All the Presidents’ Bankers.

I traveled the U.S. from New York to California, from Kansas to Texas, digging into the presidential libraries for documents relegated to the coffins of history until I uncovered them.

They revealed key findings — that for the past century of American history, the same banks and their bankers exuded influence over presidents from both parties.

Then came a life-changing moment.

A year after the book came out, I got an email. It was from the Federal Reserve. Every year, the Federal Reserve, the IMF and the World Bank have an annual internal conference.

It’s where the most elite central bankers from around the globe gather. The Fed invited me to talk at the opening session. The session would take place in the very room in which the Fed convenes to set interest rates.

I was in shock.

To say the least, I hadn’t written very nice things about the Fed’s policies since the financial crisis. In very public channels, I had criticized their cheap-money and quantitative-easing policies as subsidies to the private banks that had crashed the system.

I had labeled their policies as rigging the markets and unhelpful to ordinary citizens and the Main Street economy.

I thought that the invitation might be a mistake. I was assured they knew exactly who I was. In fact, they wanted me to address the topic of why Wall Street banks weren’t helping Main Street and looked forward to hearing my views.

A few months later, I was sitting in the front of a room with central bankers from around the world, listening to Fed Chair Janet Yellen proclaim that the worst of the crisis and its causes were behind us.

The gloves were off. The first thing I asked the distinguished crowd was, “Do you want to know why big Wall Street banks aren’t helping Main Street as much as they could?” The room was silent.

I paused before answering for everyone, “Because you never required them to.”

When a bank is offered a pile of cheap money in bailouts and loans for dangerous behavior with no major consequences, and no stipulation that they engage the real economy, then why should they? What would you expect?

Something more interesting happened after my talk, some of the people at the Fed — not at the top, but in the ranks, told me it made sense. Many thanked me. Central banks’ leadership, from Lebanon to Thailand, thanked me for making it clear that the entire monetary system was controlled more than ever by the major central banks, with the Fed leading the way.

I realized right then and there, that the zero interest rate policies prevailing in the U.S., Europe, and Japan were part of a coordinated effort. They were trying to render the cost of money cheap everywhere so that banks and other financial players could thrive.

The move could also harm smaller, emerging market countries. The side effects would lead to asset bubbles that could pop and cause an even greater crisis the next time around.

I had to get back on the road. This time, it wasn’t to traverse the U.S., it was a global affair. My next expedition took me from Mexico to Brazil, China to Japan, Europe and the United Kingdom and back across the United States.

I spoke with central bankers that gave me intel about how this collusion happened in practice and behind the scenes. That information was verified multiple times over.

What might surprise you is that after confirming these findings with both off-the-record and public sources — from different languages to local sources — is that very few had put it all together.

No matter what happens from a geopolitical perspective, monetary policy strategy is often more collusive than government leaders might present on the surface.

When I met with a key central banker in Brazil, he left me shocked after revealing his analytic findings. He presented me with reams of information about just how far the collusion went. The central banker’s analysis showed the high correlation between the level of markets and major central bank quantitative easing.

The major central banks work together to reinforce their doctrine of cheap money, called quantitative easing. Sometimes it happens behind the scenes in the financial markets and often goes on in plain sight.

The result of my research into this collusion revealed exactly how central bankers were rigging the world over the past decade. The major central bankers have worked together since the financial crisis to rig the markets, inflate asset bubbles, and coddle private banks under the guise of helping the real economy.

In every country, the same problems were found. The upshot is this…

Central banks were given a blank check, by themselves, to resurrect the banks, without having to tell the public where the money the funds were going, and why.

It is true that we must demand accountability from these unelected central bank leaders. But in the meantime, you should be keenly aware of the risks associated with this collusion.

We remain at a dangerous financial precipice, the risks posed by the banking systems still exist, only now the banks are even bigger. Ten years after the financial crisis, their assets are even larger than before.

Central banks conjured $21 trillion worth of money that went into debt assets, stocks and corporate bonds around the world. If they pulled that plug, if they were to remove any meaningful portion of that $21 trillion, it would create a major rupture in the financial system.  The market would plummet quickly.

This is why I say the central banks are the market. Without them, the markets would be nowhere near these highs.

Global debt is between two and a half to three times global GDP, which is an historical high.  Debt-to-GDP throughout the developed world is higher than it has ever been, and it continues to grow.

Meanwhile, all that central bank money went to the large banks and corporations. It hasn’t washed down to the rest of the economy. This is why most people feel this anxiety about another potential financial crisis. So, the problem is worse than it was a decade ago.

We will see a crash at some point because, despite the cheap money, entire sectors of the economy just can’t make enough money to service very cheap debt.

It will start with debt defaults.

Cheap money has kept zombie companies afloat. But they won’t be able to service their debt as interest rates rise. And consumers, whose debt is at all-time debt highs, lack the ability to continue servicing their debt.

When companies and consumers fall behind in their payments, delinquencies and defaults will skyrocket. They’ll take money out of the stock markets to try and plug the gap, which will bring the stock market down.

Credit will begin to seize up and the lack of confidence will spread throughout the economy. When the cracks begin to form, they will rapidly expand and that’s when we’ll have a crash.

And the coming crash will be larger than the previous one because we will be falling from a much higher level. All that central bank money has created larger bubbles than we have had before.

It’s as if the Titanic will be sinking instead of a rowboat. All the artificial conjured money that inflated the system will come leaking out.

The Bank of International Settlements (BIS), or central bank of global central banks, confirmed the danger of collusion just last week. It reported, “The global financial crisis and its spillovers led to greater use of macroprudential policies and capital flow management. But to ensure global financial stability, those policies need international coordination.”

Ultimately, what this means is that the Fed retains the right to adopt cheap money policies as it sees fit. There is currently no limit or question what it can do. That same story plays out across the world.

Government leaders, turning a blind eye, view their central banks as a way to keep the level of markets up and bailout options available. But by understanding that central bank collusion has rigged the markets, you can operate strategically with your assets, investments and how you save.

To start, I recommend you extract an allocated amount of cash from the system because when a financial crisis happens, banks close their doors to depositors. I recommend you take some of that cash and put it into hard assets like silver and gold. Just make sure you keep an allocation of your money out of the banking system.

And be sure to decrease your debt levels — the more the better.


Nomi Prins
for The Daily Reckoning

The Daily Reckoning