The neoliberal policies of central banks are creating fertile ground for social unrest and political extremism, writes Tarric Brooker.
ON THE MORNING AFTER the 2016 U.S. Presidential Election, American filmmaker and political commentator Michael Moore appeared on MSNBC’s Morning Joe. During the discussion that followed between Moore, hosts Joe Scarborough and Mika Brzezinski, and the assembled panel, no ad breaks were taken for over 40 minutes, due to the importance of the conversation.
In that discussion, Moore diagnosed the problems of Middle America, of entire demographics left behind by what he saw as a coastal elite, of Americans who felt abandoned to the issues eating away at their communities and their quality of life — in short, a fertile ground for the promises of Donald Trump.
Now amidst a once-in-a-century pandemic, the United States has record-high stock prices while 54 million Americans are at times going hungry. Perhaps not even King Louis XVI and Marie Antoinette of Revolutionary-era France could be so blind as not to see the enormous social issues the response of policymakers and central bankers are creating before our very eyes.
In the same way that the U.S. political elite was seemingly blind to the issues faced by Middle America and the appeal of the promises of Donald Trump; central bankers are seemingly unaware of the fertile ground they are providing for social unrest and political extremism.
In a statement made near the height of the financial market upheaval in April last year, Federal Reserve Chairman Jerome Powell said:
"We need to make them whole...We should be doing that, as a society. They didn't cause this. Their business isn't closed because of anything they did wrong. They didn't lose their job because of anything they did wrong."
Through the enormous power and near-limitless resources of the U.S. Federal Reserve, Powell’s policies did just that.
Even the investors who took a hit gambling on risky investments like junk bonds or companies with poor earnings prospects were rewarded, as trillions of dollars in Federal Reserve digitally printed money flowed through the financial system.
Not only did the vast majority get “made whole” and not lose any money, they instead collectively made trillions of dollars as markets marched ever higher under the banner of “Don’t Fight The Fed”. Translated into plain English this basically means, don’t bet against the market, because Jerome Powell and the rest of the Federal Reserve officials will continue to prop up the market, driving asset prices higher.
This new investing mantra isn’t something cooked up by a group of infamous Redditors, it’s quite literally stated as fact by some of the most influential people in the world of finance.
Meanwhile, in the real world away from the trillions of dollars the Federal Reserve has injected into the financial system, tens of millions of Americans are suffering through no fault of their own, with:
- nearly 15 million have lost access to healthcare due to them or their family losing a job;
- 30-40 million are at threat of being evicted from their home;
- 20.4 million remain unemployed; and
- 54 million Americans are going hungry.
These statistics read like the beginning of a novel based in a dystopian future, in which the political and economic elite have completely detached from the reality experienced by everyday people.
And in many ways that is exactly what has happened.
Unlike previous recessions such as the Global Financial Crisis, the wealthy are feeling almost none of the pain. In the United States, the number of high-income jobs has actually grown since the beginning of the global pandemic. Yet for low-income workers, well over 20% are still unemployed almost nine months since total job losses peaked.
While tens of millions of Americans routinely find themselves in modern-day bread lines at food banks across the country, for the wealthy, things have arguably never been better.
The value of their real estate and financial assets is soaring on the back of digital money printing from central banks. In their world, the economy is booming as they compete for contractors to renovate their newly purchased "pandemic safe" homes, in the outer suburbs or rural areas.
This is perhaps the most concerning thread of all and could begin to slowly unravel the fabric of our society. Without the realisation by central bankers that their actions are undermining the cohesion of our societies, the issues their actions breed and nurture will only continue to grow.
When the man or woman in the street doesn’t feel heard and their issues are largely ignored, they turn to anyone who will listen, who will promise to make their voice count and address the nation’s problems.
In the modern era, this was exemplified by Greece, switching from party to party at election after election, until the left-wing party Syriza was finally elected and it was proven that not even the “radical left” could break free of the grip of EU-mandated austerity.
But looking back there is a well-known example almost everyone is familiar with — the rise of the Nazi Party in early 1930s Germany.
In 1928, Germany was a prosperous and deeply integrated nation, boasting one of the highest rates of intermarriage between Jews and non-Jews in Europe. It was a relatively tolerant and stable republic, enjoying the last years of the roaring ’20s.
Unsurprisingly in the 1928 German Federal Election, Hitler’s Nazi party won just 2.6% of the vote, placing 9th in the long list of party’s contesting the election.
But as the Depression started to bite and unemployment skyrocketed to one of the highest levels in modern European history, the Nazi Party’s share of the vote began to rise. Until, in the 1933 German Federal Election, the Nazis won a sufficient majority and Hitler was elected chancellor.
Despite being one of the most tolerant, prosperous and integrated nations in the world, through the horrible hardship and sky-high unemployment of the Great Depression, the Nazis had used this event to rise from a largely insignificant party to become the rulers of Germany.
While we are still worlds apart from the 33% unemployment rate of early 1930’s Germany, back then, no one was foolish enough to pursue a series of policies that enriched the wealthy during the most severe economic downturn in more than 80 years.
That is perhaps the key point in all of this.
There are around 20 million average Joes and Janes in America sitting in front of their televisions watching news stories about stocks at all-time highs, while many of them worry themselves to sleep about a lack of healthcare or how they will find a way to feed their families.
And it’s not just America.
Around the world, including Australia, central banks are pursuing policies that have been shown to enrich the wealthy at a time when many everyday people are struggling to meet their basic needs.
Where it all goes from here is truly anyone’s guess but one thing is clear, the actions of central bankers are creating fertile ground for the rise of social unrest and growth in the ranks of political extremists.
Tarric Brooker is an IA columnist, freelance journalist and political commentator. You can follow Tarric on Twitter @AvidCommentator.
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