Too Big for Fed: Have Central Banks Lost Control?

“Give me control of a nation’s money and I care not who makes its laws” is a quote financial historians attribute to Mayer Amschel Bauer Rothschild.

Years later, albeit through highly questionable methods, the Rothschilds and other bankers ended up precisely with such control.

The problem for us all right now is that, by their own wrongdoings, they’ve lost it.

Money Makes the World Go Round

Decades ago central bankers decided that Money would no longer store any value in and of itself.

Thus, today’s non “money” of sorts was invented.

Now, with no effective Money in the economy (I kid you not) the world finds itself navigating unchartered waters with fully blindfolded skippers and with deadly coral reefs all around it.

This unique financial experiment does not bode well.

The problem is that what regular people, governments and banks still insist in calling “Money”… is not.

It’s just non “money“… or rather fiat “legal tender currency” (LTC) designed for settling financial obligations in a highly unpredictable and dangerous manner within the world economy.

Legal tender currencies do not extinguish debt.

Today, when someone pays, debt is transferred to the fiat LTC holder under unfavorable (hidden) conditions explained below.

This means that humongous DEBT is alive, kicking and multiplying obscenly all around us as we speak.

And the more fiat “legal tender currency” LTC that is printed (read many trillions of QE) the larger the DEBT that is floated onto the economy.

Today’s non “money” of sorts (funny money ?) or legal tender currencies LTCs are mere units of account + means of payment with no store of (intrinsic) value.

They are strictly “fiat” of course, meaning that they are government imposed.

Furthermore, oblivious to most people and as explained below, today’s non “money” or fiat legal tender currencies by their very nature have limited shelf life.

Yes, they are definetly a perishable product life expectancy of which depends upon how well they are managed.

Today’s fiat LTCs have been very poorly managed, be it Euros, Dollars, Yens, Pounds, etc…. or Renminbi.

Enter 2008

After the 2008 financial meltdown, the only “results” that central bankers produced was discretionary favoring of fellow bankers with today’s taxpayers and future generations footing the bill.

The billions of Main Streets of the world were sacrificed to feed a few voracious Wall Streets.

The central bank balance sheet expansion of non “money” undertaken by these opaque individuals –often sporting expensive grey flannel suits– has been wreckless.

Now they find themselves running desperately behind events, something which no additional forward guidance of theirs (read ‘lip service’ ) can solve or help to solve.

Central banks have become a one-trick pony: they only know how to print fiat LTCs (or “reserves” which later grow into garden variety fiat LTCs) in order to protect the 1% at the expense of the remaining 99.

Money or Non “Money”?

For all intents and purposes, Money does not exist today as fiat legal tender currencies (LTCs) are no more than dicey IOUs (eventually IOU nothing ?) with un-foreseeable debt settlement capacity.

Leaving aside ZIRP, NIRP and probable bank bail-ins (you’ve been warned) the accumulation of LTCs is also a very strange and dangerous form of saving.

To clear any doubt, just ask Brazilians why is it that their Reais are worth only 50% of the US dollars they used to be worth only a year or so ago.

Or ask the Swiss why their own fiat LTC recently suffered a 20% modification in relation to the Euro from one day to the other.

Or why the Euro has also undergone such curious variations of its debt settlement capacity.

Since the beginning of this century, again and again and again the central bankers have failed miserably with nothing to show besides 14th.century printing-press technology… massive unemployment, massive defaults both public and private, massive emmigration flows …and many wars with more to come.

Artificially created stock market booms systematically fizzle sometime after fiat LTC printing stops.

The many trillions of fiat legal tender currencies LTCs already printed mean that, for example, the US Federal Reserve pretty much has 0 (zero) reserves to back up its US dollar assets (obligations).

Addiction to fiat LTCs is what we are currently living through… and no addict likes to undergo cold turkey.

Leverage is the name of the game.

Markets Anyone?

So the world is finally and painfully learning all about these unaccountable technocrats in charge of what mainstream journalism deceitfully still calls “market economies”.

But from Argentina to China, from the US to Viet Nam, from India to the EU… Saudi Arabia, Brazil, the UK…  “there are no markets anymore, just central bank interventions” (*).

Market failure (read ‘market rigging’) is the practical outcome or “externality” at hand.

By the way, no oversight either: just raw monetary and financial power for central bankers despite failure to achieve even the most modest goals for the world economies set by themselves all along.

The destructive financialization of the fiat non “money” LTC world has overgrown the underlying economy by several multiples.

The debt-deflation trap is here to stay… and growing… and growing…and growing… until it implodes as per the ever-present Exter pyramid of financial value.

Dead on Arrival

Part of the US Congress has tried to challenge central banking opacity through its “Fed Oversight Reform and Modernization Act” (FORM Act) which would require the Fed to define precise, known rules for the formation of monetary policy. Please see the New York Sun’s editorial mentioned as reference (**)

But the White House has already announced that President Obama, right on cue, stands ready to veto the FORM Act if it were ever passed by the Senate.

So it’s not central bank independence… it’s rather outright impunity.

Is it Possible to Outrun Reality?  (How About Tigers?)

Prof. Michael Hudson clearly defines today’s non “money” problem in his latest book “Killing The Host“:

 …”… the mathematics of compound interest leads economies inevitably into a debt crash, because the financial system expands faster than the underlying economy, overburdening it with debt so that crises grow increasingly severe. Economies are torn apart by breaks in the chain of payments…”…

So beware that uber-super-abundant fiat LTCs are just plain old (arithmetically un-payable) debt, courtesy of central bankers.

Spending IOUs makes sense, but why would anyone want to save them for too long ?

Money and IOUs may look alike but they are two very different animals.

When tigers (Money) feel hungry, they eat cats up (IOUs)… even the smart ones.

Too Big For Fed

But the time might have arrived just now as the proverbial man behind the curtain is exposed by its sheer own-failure: financial meltdown could be triggered off via central banker’s own implosion of fiat legal tender currency instruments.

“Too Big For Fed” would be a brief way to define the mechanism by which central banks’ weapons of financial mass destruction would reset the global economy in a flash crash, no questions asked.

Jim Rickards’ “Currency Wars” would suddenly end not with a bang but with a whimper.

” The sums in play are so staggering (an estimated $11 trillion in emerging market debts denominated in other currencies) that even the Fed won’t be able to stop the meltdown…”… says Charles Hugh Smith at

Which brings us back to the problem at hand: central banks have now lost control.

Oceans of debt and not a drop of Money

If the above were not enough, then take a quick look at the $ 200 Trillion US fiscal gap and/or the $ 200 Trillion world debt only taking into account a part of politically-explosive unfunded liabilities.

Please see

Mind you, for comparison purposes and with all the nasty accounting gimmicks included, US GDP is $ 18 Trillion while world GDP is only $ 85 Trillion.

Also note that, as the IMF has painfully acknowledged, corporate debt in emerging markets has already surpassed $ 18 Trillion (…equal to the US GDP…) sheer size of which means that neither ZIRP or NIRP or more QE won’t help any under the current deflationary environment that central bankers have developed for us.

So they’ve painted themselves –and dragged us into– a far away corner with no effective tools left nor space or time to manouver.

Derivatives could sum up a notional sum exceeding $ 1 Quadrillion.

A Brave New World

That’s why the ‘War on Cash’ is so active nowadays as part of the global central banks “financial repression” strategy upon us mortals.

Well, actually “cash” as we used to know it has already been (almost) banned worldwide also for very good central banking reasons.

Limited withdrawals are an everyday reality.

Please see and visit the brave new world of “civil forfeiture”…

Never heard of it ?

Please do, fast.

Fake non “money” defined

So our current fake non “money” is just molecular magnetic fields on a computer memory which through digital representation of bits and bytes projected upon a CRT Cathode Ray tube screen most people today take for Money, which it obviously isn’t. It’s only fiat (digital) legal tender currencies LTCs of sorts recorded on a digital ledger.

Central bankers –directly or indirectly– are still able to define the world’s price and quantity of fiat non “money” and even the world’s LTC price of gold, although they can’t control the quantity of physical (tangible) gold because they can’t print it.

So they’ve settled for ‘paper gold’ as a substitute managed through derivatives in the Future & Options chapter of central bank shenanigans.

Money or Credit?

But as J.P. Morgan brilliantly left on record a hundred years ago, the problem is that “Money is gold bullion, the rest is credit”… fiat non “money” included.

Billions of humans in their own life-times have already lived through more than one fiat legal tender currency in their own native nation-state.

For example, Argentina experienced 5 (five) different fiat LTCs in the past 50 years.

There were some few winners and –definetly– millions and millions of losers.

In the 20th. century, many European countries have undergone similar experiences, or far worse…

Fiat legal tender currency LTCs don’t last for long, including Federal Reserve Notes which have already suffered two major devaluations in the last 80 years (1933 and 1971).

Plain DEBT

So today’s fiat legal tender currencies LTCs have become just plain old (arithmetically unpayable) debt, including Federal Reserve Notes a.k.a. US Dollars which are considered to be the world’s reserve “currency” meaning fiat unit of account and means of payment for goods and services under un-defined wide open price dynamics.

If you wonder what “un-defined wide open price dynamics” means, just think OPEC vis-á-vis the current price of oil, possibly soon grasping the $ 20 dollar handle after fetching $ 140 per barrel not that long ago.

The end of the road for fiat non “money” (LTC) is now in sight.

The can can’t be kicked any further or any farther.

Central bankers know it.

God’s Work Revisited

Flat-footed as they now are, central bankers can thus ackwardly run around sideways or in circles, but they can’t effectively hide.

It has now become obvious to everyone that these unelected private bureaucrats don’t have a clue on how the world economies function.

They are still kings allright (…hold your breath and keep your fingers crossed…) but kings that wear no clothes.

And so we have negative long lasting effects of ZIRP, NIRP, unbelievably massive QE, bail-outs, bail-ins, debt-deflation, market rigging, unpayable massive student loans – car loans – credit card loans – corporate loans, and muni bonds debacle, housing mortage debacle, Social Security, Medicare and Obamacare debacle, persistently high ‘official’ unemployment, unbelievably high unreported unemployment, unmitigated terrorism, faraway wars, homeland wars, wars on terror, massive emmigration, sovereign debt defaults, private debt defaults, stock buy-backs for artificial everything-is-fine effect, tremendous wealth inequality, sales slump, inventories pile up, competitive devaluations worldwide, us-them mentality, shooting wars, currency wars…. Welcome to the wreckless world of central banking.


(*) (Chris Powell)







Jorge Vilches is a financial op-ed columnist based in Buenos Aires, Argentina. He can be reached at: