Yellen and Draghi tell Trump and markets not to expedite the next crisis

Janet L. Yellen takes the oath as US Federal Reserve System Chair, administered by Governor Daniel K. Tarullo, at her ceremonial swearing-in. The event took place at the Federal Reserve Board in Washington, D.C., on March 5, 2014. (US Government work).

The disappointment of financial markets with the lack of hints about monetary policy from the Jackson Hole gathering of central bankers is understandable. Both Janet Yellen, US Federal Reserve System Chair and Mario Draghi, the European Central Bank President while keeping their policy guidelines unchanged, choose to forcibly attack the demands of bankers – supported by neoliberal politicians – for deregulation and risky reforms in the financial markets. Ten years after the financial meltdown of 2007-2008 and the ‘lenders’ again seem ready to resume their treacherous practices.

Even the limited controls and checks introduced by the Dodd-Frank legislation in the US to strengthen the resilience of the financial system, and the banking Leviathans want to regain full free hand on other people’s money and drive the world to a new crisis. The slightest reform of the financial rules in force will automatically make the bankers richer and the rest of the economy more insecure. The Trump administration and many American politicians appear ready, on the one hand to satisfy the bankers and on the other to question the rules, which during the past few years kept the global economy regaining strength from the last Armageddon.

What the bankers want

The New York banks have reconciled with the fact that since last November they have to pay a symbolic interest rate for the money the Fed was giving them for free. It’s questionable though if the banks will accept the reduction of the Fed ‘gift’ of $4.5 trillion. The lenders want Trump and the Republicans to take special care of them, by again completely deregulating the financial system and thus boost up their profits, but at the same time increase the risks and bring a new crisis nearer.

The Washington political elites, the Democrats included, are not negative about supporting the lenders’ demands. It seems then, central bankers, by opposing this eventuality, care more for society as a whole than the politicians. The head of Fed clarified it, by informing the US President about her decisiveness to resist deregulation, in case he decides to reappoint her.

Yellen warns Trump

Yellen at Jackson Hole, while defending last weekend the current legislation, which has strengthen the financial system, said loudly that “Moreover, I expect that the evolution of the financial system in response to global economic forces, technology, and, yes, regulation will result sooner or later in the all-too-familiar risks of excessive optimism, leverage, and maturity transformation reemerging in new ways that require policy responses. We relearned this lesson through the pain inflicted by the crisis. We can never be sure that new crises will not occur, but if we keep this lesson fresh in our memories–along with the painful cost that was exacted by the recent crisis–and act accordingly, we have reason to hope that the financial system and economy will experience fewer crises and recover from any future crisis more quickly, sparing households and businesses some of the pain they endured during the crisis that struck a decade ago”.

The next crisis is visible

What the head of Fed says here is more or less an announcement of the next financial crisis. This is because the ‘system’ is bound to “result sooner or later in the all-too-familiar risks of excessive optimism, leverage, and maturity transformation”. In other words, if the bankers are left again loose, Yellen believes, they will once more lead our world to a new crisis rather sooner than later.

Never in the past, the American central banker has so clearly predicted the next financial Armageddon. Not to forget that the previous two Fed chairs, Ben Bernanke and Alan Greenspan either ‘prepared’ or refused to recognize the financial meltdown of 2007-2008, while in the making. Both of them did what they could, to let the bankers free to exploit the entire real economy.

Draghi’s turn

Last weekend at Jackson Hole, the ECB head Mario Draghi joined the loud warnings of central bankers. Draghi has repeatedly asked the European politicians to do their bit, in order the economy to definitively overcome the extremely low inflation conjuncture it’s in, by backing for example the demands for higher wages. This time he chose to attack the Trump administration about the ‘promises’ for trade protectionism and more deregulation of financial markets. He said, “Thus a turn towards protectionism would pose a serious risk for continued productivity growth and potential growth in the global economy. And this risk is particularly acute in the light of the structural challenges facing advanced economies”.

No need to think hard who is the recipient of this warning. Draghi had more to say though. He also stressed “By contrast, the stronger regulatory regime that we have now, has enabled economies to endure a long period of low interest rates without any significant side-effects on financial stability, which has been crucial for stabilizing demand and inflation worldwide. With monetary policy globally very expansionary, regulators should be wary of rekindling the incentives that led to the (last) crisis”. This is a direct accusation that the New York bankers, the Trump administration and some parts of the American political elites vie to relinquish once more the necessary minimum of checks and controls in the financial universe, not minding about increasing the risks of a new and worse crisis.

God save the central bankers?

One may hate the central bankers for helping the financial monsters survive, but one has also to accept that ten years ago the alternative was ‘Blood, Toil, Tears and Sweat”. Now Yellen and Draghi press the politicians to avoid creating the same conditions, which led to the last meltdown. Unlike their predecessors in the Fed and the ECB, they both warn about the coming next crisis and propose ways to make it less destructive and more controllable.

 

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Celebrate love, strengthen partnerships to end AIDS epidemic by 2030 says UN agency

Sweden’s forests have doubled in size over the last 100 years

Chile ups foreign bribery enforcement but flawed case resolutions are insufficient to ensure transparency and accountability

More people now plan to get a COVID-19 vaccine than in December

This Latin American country is keeping COVID-19 firmly under control. How?

Wednesday’s Daily Brief: Sudan, Libya, Yemen updates, solutions for e-waste, flood response in Iran, online security for children

Main results of EU-Japan summit: Tokyo, 17/07/2018

3 reasons why responsibly-deployed technology is key to the COVID recovery

LGBTQ+ inclusion on the other side of the screen

Can we prevent a surge in pandemic-related homelessness?

EU reconfirms support for Afghanistan at 2020 Geneva Conference

Timor-Leste Foreign Minister highlights value of UN in resolving conflicts

Fostering defence innovation through the European Defence Fund

China is a renewable energy champion. But it’s time for a new approach

Financial inclusion in India is soaring. Here’s what must happen next

Horn of Africa: UN chief welcomes Djibouti agreement between Eritrea, Ethiopia and Somalia

A clean energy future with hydrogen could be closer than we think

Draghi cuts the Gordian knot of the Banking Union

This Canadian start-up turns millions of chopsticks into sustainable furniture

COVID-19 is challenging the way we think of chemical industry trends. This is how

Across the world, women outlive men. This is why

These 3 countries are global offshore wind powerhouses

Brexit talks: 2nd round fails to bring the EU and the UK closer on key issues

The EU invites the US and Russia to partition Ukraine

What happens when the Eurogroup decides to help Greece

EU announces record €550 million contribution to save 16 million lives from AIDS, tuberculosis and malaria

European Banking Union: no one is perfect

European Defence Fund on track with €525 million for Eurodrone and other joint research and industrial projects

Africa’s future is innovation rather than industrialization

Violence will not deter Somali people in their pursuit of peace, says UN chief, in wake of lethal attacks

EU Budget 2019 to focus on young people

Armed groups kill Ebola health workers in eastern DR Congo

Economic policy priorities for a post-pandemic recovery

What brands get wrong about China – and how to put it right

China, forever new adventures

New rules to help consumers join forces to seek compensation

4 ways to build businesses that work for good, right now

‘Catastrophic’ healthcare costs put mothers and newborns at risk

Mobile 360 Series – Russia & CIS: Empowering the Digital Economy

These tech start-ups are changing what it means to farm

Insecurity and violence turn Nigeria into a ‘pressure cooker’ that must be addressed, says UN rights expert

UN relief official in Yemen condemns ‘horrific’ attack on passenger buses

How Cameron unwillingly helped Eurozone reunite; the long-term repercussions of two European Council decisions

European Commission authorises third safe and effective vaccine against COVID-19

European Youth Forum on Summit on Jobs and Growth

Escalation in Syria fighting cause for ‘great concern’ says UN chief, dozens more civilians dead or injured

Taxes on polluting fuels are too low to encourage a shift to low-carbon alternatives

AI-assisted recruitment is biased. Here’s how to make it more fair

Measles claims more than twice as many lives than Ebola in DR Congo

Technology can hinder good mental health at work. Here’s how it can help

Facebook: MEPs demand a full audit by EU bodies to assess data protection

More women than ever are working in Hollywood, but men still dominate key roles

Japanese law professor elected new judge at the International Court of Justice

G7: A serious setback hardly avoided in iconic Biarritz

German elections: Is Merkel losing ground or Shultz is winning?

EU-UK relations: MEPs approve rules to ensure Eurotunnel safety and cooperation

Facebook/Cambridge Analytica: MEPs pursue personal data breaches probe

Commission extends transparency and authorisation mechanism for exports of COVID-19 vaccines

Hostages to a rampant banking system

CHALLENGING THE ZEITGEIST OF DIGITAL – Change making projects innovate mobile support for refugees, inclusive environments, early breast cancer detection and more

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s