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Sunday, April 7, 2013

B3M and the Next Revolution: How Central Bankers and Economists will Cause Political Chaos

An alternative view on the unnatural use of power.

These are the men who matter: Ben Bernanke of the US Federal Reserve, Mario Draghi of the European Central Bank, Mervyn King of the Bank of England and Mark Carney, currently the outgoing Governor of the Bank of Canada and the incoming Governor of the Bank of England.

Collectively they are B3M (Ben, Merv, Mario and Mark)
US Federal Reserve Chairman Bernanke (right)
pictured here with an American politican. (left)
The B3M central bankers have taken effective control of the economy as well as the financial and political system. This is both unnatural and unsustainable.  Unelected and unaccountable, the B3M wield more power over the lives and fortunes of people than any cabal in history.  Their machinations have either saved the Western world, or they have undermined it in a manner that not even the cynics cannot grasp. History will provide this answer – and maybe sooner than we think.
Band of Engladn Govenror King (left)
pictured here with a British politician (right)

We are told that we must trust, for they are wise men who have studied in the hallowed halls of the great academies. They are our betters – and as such we must listen, obey and follow.

They have stood on the docks of Amsterdam as the tulip bubble popped and they saw the heads role off French revolutionary guillotines  as the assignant currency failed.  They were there in 1866 when the Bank of England’s Governor stepped into the breach and they lived through the great depressions of the 1870s and the 1930s.  To them, the Shadow Chancellor is not a modern day Labour Party politician but rather the man that gave us Bagehot’s dictum.

ECB President Draghi (left) seen
walking with a German politican (right)

But I do not believe that they can integrate knowledge across boundaries – especially not the lofty walls that the academics have willingly built between politics and economy.  And by placing economics on top of politics, they have perhaps unknowingly committed unnatural acts. 

The bankers should serve the economy and the economy should serve the polity. 

Instead, the polity is used as a source of revenue to serve the economy which is now controlled by the bankers.  Natural market economics will not tolerate an inversion forever.

I am not B3M.  I don’t have a PhD in economics from Harvard or Princeton.  I am not a quant.  And no, I don’t have a Masters Degree in Economics.   I did work in the financial sector and I do understand a thing or two about risk. 
Bank of Canada Governor and
soon to be Bank of England
Governor Carney (left)
seen here with a Canadian politican. 

But risk was learned in my early days flying as an air crewman in rotary wing search and rescue aircraft in the North Atlantic. Carrying a gun in a war zone provided some insights into threats, risk and risk management.  On a single day’s travel in Bosnia alone there were as many as six different currencies required.  (There was a lesson about politics, war and money in there somewhere!)
What are the messages we need to send to the B3M as we move into an uncertain economic and  political future? These are the lessons I have learned from my betters whom I have had the honor to learn from, to follow and to lead:

1. Simple is good. Complicated can be fixed. Complexity kills.

2. No plan ever survives contact with reality or the enemy.  Plan for that.

3. If all else fails, the shortest answer is correct.

4. Occam’s razor is good.  Give folks a close shave with it now and again.

5. If you cannot explain your concept to an average kid in grade eight, you don’t understand it either.

6. It is all linked together:  Politics. The Economy. War. Nothing stands in isolation and they move together. 

And for the B3M this is the only economic and political rule that is always true:

7.That which cannot go on forever – won’t.  (ZIRP and QE)

Politics is ever the master science and economics will remain the dismal one if left in the hands of only economists.  At the end of the day, debased fiat currencies will dissolve. But power and politics will remain.  All those economic models the B3M learned at Princeton and Harvard failed dismally in 2000 and they failed again in 2008. But their so-called risk managers still do not see the train coming straight at them.  When will the B3M change their models so they can integrate knowledge across boundaries?

B3M and the Future Revolution

These men are students of the economy and finance.  They actually believe that there is a science called economics and they believe (hope?) that by changing an input variable they can control outcomes. But economics is not a closed environment and politics will forever change the value of the incoming variables.

They are not, alas students of politics, so thus we shall all suffer.

Ultimately though, it is the politicians who are at fault. Due to their idleness, corruption and dimness, they have allowed the B3M to convince them to turn over the levers of power.  The financial class now tells the politicians what to do and the masses of the polity have no one to serve them.

The politicians will eventually have to take responsibility again. Either the current group of politicians must awake and seize back their power and begin to serve the polity, or a new group of political leaders will emerge from the chaos of the upcoming economic collapse.

This is economics for the rest of us!

End of rant.

For a humourous look at how Governor Mark "Brutal Reckoning" Carney and ECB President Mario "Whatever it Takes" Draghi may meet in an All Goldman Sachs cage match fight this summer, see


1 comment:

  1. "The politicians will eventually have to take responsibility again." Again? But,'re implying that they took responsiblity in the past. And now look at the mess they made.

    And you want them to do this again? Say it ain't so. Imagine we give the idea of a polity a break for a few decades and see how it goes. No polity, no elections, no elected politicians approving new central banks. Just plain old private property rights. Sounds good, don't you think? Reference Murray Rothbard "For a New Liberty".