A former Goldman Sachs managing director who exited the investment bank to expose what goes on inside the industry warns that a financial crisis “more vicious” than the 2008 collapse is building.
“We’re headed for another epic fall” that will “devastate the global economy,” Nomi Prins, author of “Collusion: How Central Bankers Rigged the World” (Simon & Schuster May 2018), tells ThinkAdvisor in an interview.
It’s the central banks — for the U.S., that’s the Federal Reserve — who have created and fueled the oncoming disaster by “subsidizing” private banks with fabricated money for the last decade. In doing so, they’ve created asset bubbles, argues Prins, who before Goldman, held high-level posts at Bear Stearns and Lehman Bros.
Both the Fed and President Donald Trump are ignoring the red flags, she insists in the interview.
Since leaving Goldman in 2002, Prins has “dedicated [her] life to exposing the intersections of money and power,” she says.
In her new exposé, she has harsh words for the Fed, which “greenlights legal manipulation of the stock market” by allowing companies to buy back their own shares, she charges.
Prins, who cautioned about credit derivatives four years before the 2008 financial crisis, argues that the central bankers — or “illusionists,” as she calls them — indeed practice collusion because they secretly and deceitfully coordinate their efforts to control global markets and dictate economic policy. Such “collusion has run rampant and deep,” contends Prins, who, at Goldman, was responsible for the analytics underlying credit derivatives.
She further maintains that “subsidies” courtesy of the central banks, supposedly intended to help economies, are only helping private banks, big corporations and Wall Street realize record profits and stock market highs.
The central bankers have no exit strategy when it comes to the flow of “conjured money” — as Prins terms it — that’s artificially lifting up the financial system. But if it’s reduced or eliminated, another disastrous meltdown will result, she predicts.
Prior to Goldman, Prins was a senior managing director at Bear Stearns in London, having started out as a Lehman Bros. strategist in the U.S.
Reinventing herself as an investigative journalist, the Poughkeepsie, New York-born Prins has so far penned seven exposés, including “All the Presidents’ Bankers: The Hidden Alliances that Drive American Power” and “Other People’s Money: The Corporate Mugging of America.”
Her newest work reveals the international relationships and coordination among the Federal Reserve, European Central Bank, the Bank of Japan and other central banks that have “funded banking activities at the people’s expense,” she says.
ThinkAdvisor recently interviewed Los Angeles-based Prins, on the phone from Seattle, a stop on her book tour. The ex-insider’s advice to financial advisors: Watch what the central banks do — not what they say.
Here are highlights of our conversation:
THINKADVISOR: You write: “We’re standing on a dangerous financial precipice.” What could happen?
NOMI PRINS: Most definitely another financial crisis could happen. The major central banks of the world are providing a subsidy of cheap money upon which the private banking system and financial markets are floating. If that were to go away or be reduced, the money would come out of the same financial system that it’s been inflating. And that’s the definition of a crisis. We’re in a dangerous time because we’ve never had this much money provided by the central banks lifting up the financial system. We’re in unknown territory.
When would such a crisis occur?
It could be in a year; it could be two years. Or things could happen in small shifts along the way because central banks will continue what they’re doing for as long as they can. Ten years after the financial crisis, there’s a lot more money supporting the system artificially that the central banks have conjured [created] than we had going into the last crisis.
Why did you title your book “Collusion”? Have the central banks made a secret agreement for an illegal purpose?
There is a secret element. Deceit is part of collusion as well, but it’s not always criminal. With the central banks, there’s deceit in terms of secret meetings. A lot of conversation goes on that simply isn’t public. The members get together all the time, either in the aggregate or individually. They have a lot of face-time.
Do they coordinate their efforts?
They specifically talk about coordination. I have that in my book from multiple sources and statements provided by a number of central bank leaders over the last 10 years.
Why else is “Collusion” a valid title for your book?
The central banks have unlimited, regulatory and money-conjuring power that’s unchecked and unaudited. That’s not necessarily illegal, but it’s certainly deceitful because while the conjuring of money to the financial system and banking network is supposed to be helping [Main Street], there’s a low level of growth in the countries whose central banks have produced the most money.
But can’t they prove that it’s helping economies?
There’s literally no evidence to support central banks’ narrative of why they’re doing all this stock and bond buying through conjuring money, which makes it possible [for them] to one day not have enough money to buy a certain amount of assets from the market, but the next day to have it. They are the source.
What evidence do you see instead?
The [private] banks have had record profits and that although they’ve paid fines, they’ve given healthy increases in compensation and bonuses to their senior-level members, and the stock market is at record highs.
You write: “The big banks game the system repeatedly, and the central banks abet them.” Please explain.
Let’s say you go to a casino and don’t have enough money to play, but your parents — the central banks — say, “Here’s money, and you don’t have to pay it back.” Because you didn’t have that money, you might have been less inclined to play blackjack.
You say that “much of the 20th century belonged to Wall Street. The 21st century now belongs to the central banks.” Please elaborate.
They’re the source of a tremendous pile of money. In the past, they’ve only created it here and there. But in the last decade, [the amount] has been substantial. That creates asset bubbles because all this money coming into the system has to go somewhere. So it goes into the easy place: the stock market. And that creates bubbles.
You say President Trump and the Federal Reserve aren’t paying attention to alarm bells. What are those signs?
Record levels of consumer and student debt owed by citizens of our country [for example]. When that becomes difficult to repay, delinquencies happen; and that’s when corporations’ expenses get cut. Then jobs get cut. If the subsidies to private banks were to be taken away, we would definitely see crashes all over the place, which is why they’re not being taken away.