Executive Intelligence Review


Nomi Prins: Fed Is Setting Up a New Financial Disaster

May 1, 2018 (EIRNS)—Writing in “TomDispatch” April 26 about her new book, banking historian Nomi Prins said the world’s major central banks have put the United States and European economies in front of another financial crash, and that President Donald Trump is making appointments to the Federal Reserve Board whose lax bank oversight practices could very soon prove disastrous. Prins’ article is entitled, “Donald Trump and the Next Crash: Making the Fed an Instrument for Disaster.” (It was reprinted in The Nation as “At the Fed, the Scene Is Being Set for Financial Disaster,” with the kicker, “A crash could prove to be Donald Trump’s worst legacy.”)

She wrote:

“What my research for my new book, Collusion: How Central Bankers Rigged the World, revealed was how central bankers and massive financial institutions have worked together to manipulate global markets for the past decade. Major central banks gave themselves a blank check with which to resurrect problematic banks; purchase government, mortgage, and corporate bonds; and in some cases—as in Japan and Switzerland—stocks, too.... [T]heir policies have inflated asset bubbles.”

By “conjuring” money for big banks and corporations to buy their own stock, central banks have both created huge corporate debt bubbles, and manipulated stock markets to heights from which they are likely to crash. In short, they have “created asset bubbles that could explode into an even greater crisis the next time around,” said Prins.

Prins wrote that

“today, we stand near—how near we don’t yet know—the edge of a dangerous financial precipice. The risks posed by the largest of the private banks still exist, only now they’re even bigger than they were in 2007-08 [some 40% bigger—ed.] and operating in an arena of even more debt.”

And, she added,

“the President is appointing members to the Fed who will only increase the danger of those risks for years to come.

“A crash could prove to be President Trump’s worst legacy. Not only is he ... not paying attention to the alarm bells ... but he’s ensured that none of his appointees will either. After campaigning hard against the ills of global finance in the 2016 election campaign and promising a modern-era Glass-Steagall Act to separate bank deposits from the more speculative activities on Wall Street, Trump’s policy reversals and appointees leave our economy more exposed than ever.”

In Collusion, released May 1, Prins calls for two policy actions against the threatened collapse:

“Instead of financing speculative bubbles at the hands of the big private banks, central banks should finance large investment and recovery programs. We should break up the banks á la Glass-Steagall so that they can’t hold people’s deposits hostage during the next crisis.”