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September 24, 2021 | A Plan to End Banking as We Know It

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

BALTIMORE, MARYLAND – What we’ve been looking at this week is “how the world ends.”

And today, we meet a woman who intends to kill it – the exterminating angel herself – Saule Omarova.

Born in Kazakhstan, educated in Moscow, Madison, and Chicago, and now nominated by the Biden Team to head up its OCC (Office of the Comptroller of the Currency)…

…Ms. Omarova makes no effort to disguise what she is up to. She says she aims to “effectively ‘end banking’ as we know it.”

That is, she wants to replace an entire industry – one that evolved over hundreds of years, thanks to the efforts of thousands of innovating, competing bankers… who served millions of willing customers – with some monster of her own invention.

Redesigning Finance

But destroying “banking” is just the beginning of her ambitions.

She has never worked for a bank, never run a business… never satisfied a customer, started a company, or “made payroll” for one…

…and never even held a job outside of academia or the law (we’re not counting her time as “special adviser” for Regulatory Policy to the Under Secretary for Domestic Finance in 2006-2007 as a real job).

And yet, she thinks she knows what is best for you, and 330 million other Americans (and perhaps the whole world)… and intends to give it to us, whether we want it or not. She explains:

My new working paper […] advocates a comprehensive reform of the structure and systemic function of the Fed’s balance sheet as the basis for redesigning the core architecture of modern finance. It offers a blueprint for transforming the Fed’s balance sheet into what it calls the People’s Ledger: the ultimate public platform for generating, modulating, and allocating sovereign credit and money in a democratic economy.

Holy moly. She thinks modern finance was “designed”… and that she has the right to redesign it, allocating money as she sees fit.

Yes, she proposes to be the decider, not just for the government, but for the private sector, too.

In particular, she proposes setting up something similar to the Gosplan in the Soviet Union, a “National Investment Authority,” (NIA) that would be responsible for “formulating, financing, and executing a coordinated strategy of sustainable and socially inclusive economic development.”

In other words, the feds have made such wonderful investments these many years… let’s give them more money to invest!

Soviet-Era Import

But wait, there’s more…

The NIA “would act directly in financial markets as a lender, guarantor, securitizer, and venture capitalist with a broad mandate to mobilize, amplify, and direct public and private capital to where it’s needed most.”

Yes, she’s proposing a Gosbank, the Soviet Union’s central bank, too.

And why not? Central planning worked so well in the Soviet Union. How nice of Ms. Omarova to bring it with her – to America. And now, like kudzu or the spotted lanternfly, it’s taking over.

How’s that for the End of the World As We Have Known It?

Anything Goes

Of course, the world itself is not really ending. So what if inflation goes to 3% or 5%… or 10%, for that matter? So what if the feds waste a few trillion dollars more? And who cares if another moron goes to Washington?

We Diary readers are mostly older and mostly white; we have our savings, our stocks, our pensions, our insurance policies… and even Social Security to support us. And our houses are much more valuable than they used to be.

So we won’t be too hurt in the next crisis, will we?

Besides, we’ve already been through three crises so far this century… What’s another one, more or less?

And yet, here we are… on the other side of the Rubicon. The fundamental principles that guided the American Republic – the rules and institutions we grew up with – are being chucked in the river.

Now, it’s “anything goes.” And when anything goes… everything goes with it.

The next major selloff will probably give Ms. Omarova the crisis she is looking for. And it may not be far off. The Chinese are facing a 1929-style debt crisis. The U.S. is up against its own debt ceiling; if it isn’t raised, experts say the results will be “catastrophic.” There will be panic and hysteria.

Then, the OCC chief – and other elite world-improvers who created the problem – will tell us how capitalism and free markets have failed…

…and roll out their cockamamie solution.

Gates of Hell

Let’s look at how it might play out.

Inflationary increases of 3%… or 5%… won’t mean much – in themselves.

But house prices are already rising at 18% year-on-year. Producer prices are up at an annual 8% rate. And now that inflation is out of the bag, it will be impossible to stuff it back in.

In the next crisis, this inflation will add a critical new dimension to the Federal Reserve’s problems.

That is, as in the last three crises of this century, the Fed will come riding to the rescue. It will “print” more money and try to boost stock prices – just as it did in 2001, 2009, and 2020.

But in none of those cases was inflation a problem, too.

And when investors see the Fed supporting the economy with more money – as it must – it will be obvious that the Fed is trapped.

Inflate or die.

The Fed will inflate… and let the dollar (and bonds) die.

Obituaries for the bond market will appear in every financial publication. An even greater panic will take hold. Different political factions will clash in the streets. And the masses will turn their tired eyes to Washington, pleading… “Help us… Save us… Touch us… Heal us.”

And then, like Vladimir Lenin arriving in Petrograd in 1917… or Fidel Castro washing up on the shores near Niquero, Cuba, in 1956, Ms. Omarova’s hour will come around at last.

And guided by crackpots and grifters… the U.S. will step gingerly through the gates of Hell, like so many nations before it.

More to come…

Regards,

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Bill

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September 24th, 2021

Posted In: Bill Bonner's Diary

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