Are our central banks running out of willing and able consumers?

central banks
The collapse of the 20-65yr/old population growth across North America (US/Canada) is only accelerating and most if not all population growth will be among the 65+yr/old population
This is an interesting article by Chris Hamilton from Economica about the role of the US central bank – the Federal Reserve – in feeding great riches to the super rich at everyone else’s expense – ie. the bottom 80%.
Basically, Hamilton looks at the inflation of asset prices, especially financial assets and property, in the wake of the 2008 crash and how this has facilitated an economic recovery just for the wealthy.
Meanwhile, the 20 years of stagnant real-terms earnings for the bottom 80% continues.
And the scope to stimulate growth by encouraging more people to buy yet more stuff on shedloads of credit is being stymied by a shrinking population of spendaholic young and middle-aged consumers.

This side of the pond

Britain is not as polarised as the US, but the prosperity of its citizens is constrained by issues of a central bank relying on debt-fuelled consumption.
The Bank of England’s is a finance-heavy worldview, as opposed to one that encompasses manufacturing. Hardly surprising, admittedly, but this fact alone has helped propel us towards the low-productivity, high-debt conundrum that now traps us.
And, to prove the Bank of England inhabits a different time-space continuum to the majority of us, it’s now looking to start increasing interest rates from next month, ostensibly to curb inflation but, presumably, also to bolster the value of the pound on the foreign exchanges.
Both outcomes will please the City. Neither are likely to help ordinary people who have been encouraged to borrow like there’s no tomorrow, or the manufacturing sector. Neither will it deliver us a managed devaluation of sterling that the economy could do with. 
Instead, the bottom 80% will shoulder the rising cost of servicing the nation’s colossal household debt, which will almost certainly reduce spending at a time of great uncertainty in the run-up to Brexit.

Back to the Land of the Free

So while the Economica article is mainly focused on the Federal Reserve’s shortcomings, many of the themes are relevant here.
Part of the problem is that central bankers are treated with the same hushed respect of corporate and academic economists, as if they were neutral guardians of a monetary system designed to support all our livelihoods.
Eight years of quantitative easing and the like should be enough to prove that they’re not. On its own, QE facilitated the greatest transfer of wealth from the poor and middle classes to the already rich in human history.
Instead, the whole central bank culture and its obvious shortcomings should face a much sterner critical examination than today’s mainstream press and media seem prepared for.

‘Revolutionary’ change

Finally, here’s the nub of Chris Hamilton’s article:
The Federal Reserve is protecting, enabling and rewarding a shrinking number simply for being asset holders (not for doing anything with those assets) while punishing the growing majority for having few or no assets… and ensuring the vast majority never will be asset owners as asset prices surge versus stagnant wages.
This is all because a flawed economic model premised on perpetual population growth (turning into consumer growth) has now gone off the tracks as growth of the consumer class is collapsing.
While presidents and political parties have swept in and out of ‘power’, the Fed hasn’t changed a bit for decades and is protecting the wealthiest 20% of families (though really it’s more like the top 1% to 2% truly raking in the benefits) and punishing the other 80% holding minimal or no assets. And America’s ageing population will not allow America to grow her way out of this hole.
Only an outright, ‘revolutionary’ change from the current paradigms and removal of ‘powers that be’ will save the bottom 80% from watching the American dream race ever further away. 
Indeed. Don’t hold your breath, though.


Peter a journalist with 30 years experience of freelance writing, UK national newspaper and magazine production roles, and business development. In 2007, he developed and launched a mainstream-style green consumer magazine in the UK, called GreenerLiving, as a means of promoting sustainable change ‘within the system’. GreenerLiving closed during the post-crash recession, but Peter went on to become managing editor of the international ethical business title, Ethical Performance. However, Peter felt that the CSR sector has not succeeded in changing corporate priorities anywhere near fast enough, and so I decided to leave the treadmill of corporate employment and debt accumulation to focus on my own projects. Now poorer but a billion million times happier, he writes on political, economic and social issues – usually seriously, but sometimes as satire. He's currently writing Psychopath Economics, a book about the logic of social and economic power, belief systems, and the rise and fall of societies. Peter is convinced that ordinary people must educate themselves and exercise their economic leverage if we are to avoid social and environmental destruction.

peterbatt has 170 posts and counting.See all posts by peterbatt

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