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.

 

Advertising

the sting Milestone

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

‘Act fast and do whatever it takes’ to fight the COVID-19 crisis, say leading economists

WHO launches COVID-19 health alert service with Facebook and WhatsApp – Updates from Friday’s WHO briefing

Italy solves the enigma of growth with fiscal consolidation: The Banking Union

Drought in Europe: Member States agree on support measures proposed by the Commission

Insurer CEOs Reveal Marketing Strategies that Communicate the True Value of Insurance Products & Services to the Customer

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

How COVID-19 could open the door for driverless deliveries

Will satellites destroy our view of space?

Energy security: The synchronisation of the Baltic States’ electricity networks – European solidarity in action

Why are so few women buying into Bitcoin?

Here’s how we can tackle the growing cybersecurity skills gap

President Michel’s MFF proposal not acceptable for Parliament

More women than ever before are running for political office in the US

New Mozambique storm rips off roofs, brings lashing rain as aid response kicks in

Migration: Commission steps up emergency assistance to Spain and Greece

Syria: A bloody tracer of Trump – Putin rapprochement

Pharmaceuticals spend millions to push TTIP while consumer groups spend peanuts

EU shapes its ambitious strategy on India

Libya: ‘Substantial civilian casualties’ in Derna, UN humanitarian chief ‘deeply concerned’

He died so I could live: UN peacekeeper pays tribute to fallen colleague

North Korean families facing deep ‘hunger crisis’ after worst harvest in 10 years, UN food assessment shows

Why France, Italy and the US press Germany to accept a cheaper euro and pay for Greece

Harmonised Unemployment Rates (HURs), OECD – Updated: February 2020

This is the first ever photo of a black hole

Is Europe misjudging its abilities to endure more austerity and unemployment?

Real EU unemployment rate at 10.2%+4.1%+4.7%: Eurostat Update

It’s not summer holidays what lead to the bad August of the German economy

This is why Dutch teenagers are among the happiest in the world

Draghi’s 2018 compromise: enough money printing to revive inflation and check euro ascent

The creative technology and its advancements

EU Copyright Directive: Will US tech giants comply or ditch the EU market?

The future of manufacturing is smart, secure and stable

We all have a ‘hierarchy of needs’. But is technology meeting them?

Ending the era of dirty textiles

Sweden has invented a word to encourage people not to fly. And it’s working

‘InvestEU’ programme: big boost for jobs, growth and investment

This is the critical number that shows when housing breaks down

Afghanistan probe: ‘at least 60 civilians’ killed after US military airstrikes on alleged drug labs

A Sting Exclusive: “The EU Cybersecurity Act for a more secure and cyber-resilient European Digital Single Market”, by EU Commissioner Gabriel

Endocrine disruptors: A strategy for the future that protects EU citizens and the environment

Why CFOs need to rethink what it means to create value

Commission celebrates the 30th anniversary of the Jean Monnet Activities promoting European studies worldwide

Brazilian healthcare and the Global Compact for safe orderly and regular migration

These are the world’s least – and most – corrupt countries

EU Commission accuses Germany of obstructing growth and the banking union

MWC 2016 Live: Mobile ad industry still waiting for “revolution”

OECD employment rate increases to 68.2% in the first quarter of 2018

Why capital markets have no more reservetions about Eurozone

New UN rights chief pledges to push back on ‘centuries of prejudice and discrimination’

“Only through energy policy we can trigger competitiveness”. The Sting live from #EBS2015: Energy Union – When will it happen?

The COP22 is under full deployment while Donald Trump threatens openly to withdraw the US from the Paris agreement

‘Education transforms lives’ says UN chief on first-ever International Day

This house is made entirely out of recycled rubbish

Niger population’s suffering ‘increasing with each passing month’: UN Refugee Agency

UN health experts warn ‘dramatic resurgence’ of measles continues to threaten the European region

The EU responds to US challenges by fining Apple with €13 billion

Improve collection of data on disasters, Secretary-General Guterres urges

Malta: investigation risks being compromised while Prime Minister is in office

Resettlement needs set to rise to 1.4 million people in 2019, UN refugee agency reports

This is why obesity is classified as a type of malnutrition

More Stings?

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