Topic: If you still don't think the system is rigged... - page 2. (Read 1088 times)

The central bank came into being after the political and financial elites realized they could profit more by working together than against each other.

The last time the relationship was adversarial was during the first modern global empire, Spain.  Bankers enticed royals and nobles to borrow to the hilt, and when the debts became clearly unpayable, the political elite solved its financial problem by using the Spanish Inquisition against the bankers.  (We may see our own version of this saga, if the US fails to pass its hegemony to India quickly enough, and to get India to help support US financial claims in the same way the US helped Britain -- already politicians like Sanders and Elizabeth Warren are sharpening the knives.)

From the Dutch empire on (the next dominant global empire,) the central bank became the guarantor of the co-operation between the two elites, by having the power to make sure neither side endangers the entire system by taking too much too quickly.  If the government incurs too much debt, the central bank can refuse to print more money to buy and stabilize the value of the debt.  If a bank takes too much risk, the central bank can refuse to rescue it when it crashes.

From that time on, the extraction of wealth was directed solely at the rest of society.

I don't believe that real change will ever be initiated by those in charge of the system. Even knowing the bad outcome, the personal risk is far too huge for anybody inside the system to endorse change. Rather change will be forced upon the system by the external circumstances that it helped to create. The transformation to something better will not happen in an orderly fashion. It will be accompanied by disorder and misery.

Bitcoin can be a factor that will accelerate the transformation process. Hopefully a new financial system will evolve that relies on free market economics, where mistakes and scams are really accounted for by those in charge. With Bitcoin, banks might become obsolete which is clearly a leap forward in that regard.

ya.ya.yo!

Financial institutions evolve.
The Central Bank itself is a recent phenomenon, set up to support banks and prevent bank failures from disturbing the overall system.
Yes, everybody is complicit in maintaining the status quo of the financial sector.

Stanford endowed professor Anat R.Admati makes her detailed indictment:

It Takes A Village To Maintain A Dangerous Financial System

I am tempted to provide my highlights of the highlights:

On finance:

"...banks effectively compete to endanger."

"...the financial system distorts basic notions of responsibility and liability. Financial crises affect employment and the economic well-being of many segments of society, but those who benefit most from this system and who enable it tend to suffer the least harm."

On financial regulation:

"Revolving doors contribute to excessive complexity of regulation, because complexity provides and advantage -- and creates job opportunities -- to those familiar with the details of the rules and the regulatory process.  Complexity also opens more ways to obscure the flaws of the regulations from the public and create the pretense of action even if the regulations are ineffective."

On economists and academics:

"Economists and other experts become apologists for the status quo and enablers of ineffective policies when they fail to point out problems or, worse, when they provide 'scientific' support that contributes to and obscures or justifies flawed rules."

"Even... academic economists, are not immune to the forces of capture (Zingales 2013, 2015).  Their incentives may be colored by the desire for job or consulting opportunities, positions on advisory or corporate or policy boards..."

"Someone with sufficient background to understand the academic literature, who has been employed by major financial institutions, quipped recently when discussing some statements by academic economists: 'with such friends, who needs lobbyists?'"

On central banks:

"By providing excessive supports, central banks enable weak, even insolvent 'zombie' institutions that are dysfunctional and do not help the economy, to persist for extended periods of time."

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The reality is actually more sinister still.

We'd like to think that the rot is confined to politicians, bankers, regulators, the corporate media, the money managers, and economists.  It likely afflicts almost everyone reading these words.

Modern Western economies have taken a totally different path, as compared to the truly free-market path, due to monetary and financial distortions at their core.  Do we really need so many finance professionals, computer programmers, florists, and indeed sales clerks?  The entire set of demand is distorted.  If the system is reformed in any significant way (say, by making banking safer,) and financial asset values change, all the forces of contagion, built into the system by the elites for their benefit, will work to make everyone miserable.  A healthy economy needs a totally different set of skills from what are available today.

So every one of us is addicted to the system.  But the status quo is also unsustainable.  In the short term, financial and political instability may force some significant changes.  In the much longer run, only after we understand the system, and are happy to endure the pain of reform, will things really change.