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Dr. Nomi Prins: The Fed has Permanently Distorted the World

Tom welcomes economist and author Dr. Nomi Prins to the show.

Nomi explains how central banks are adversely affecting everyone on the planet. The Fed is the mothership in this global policy structure. Tensions are building between the United States and China, particularly around monetary policy. Since the financial crisis of 2008 the Fed has blown out their balance sheets with monetary easing. China had a similar policy, but they channeled that monetary energy into building up the country. As a result, they had significant growth, while in the United States the economy staggered.

She explains how financial markets have become permanently distorted due to a move away from real economics. When there is a crisis, we will once again double the size of the balance sheet to resolve the problem. This has become a permanent policy because there is no going back. The Fed admits that it would take at least five years to begin to lower their balance sheet. Money remains easily obtainable to the financial system, but it doesn’t provide true follow through to the real economy.

She notes that central banks exercise a huge amount of control and power over the economic system. Jerome Powell can move markets, and amounts to a remarkable amount of power.

Emerging markets and other central banks end up forced to follow the policies of the Federal Reserve. The majority of them follow closely on the actions of the Fed. The stronger the U.S. dollar, the harder it is on other fiat currencies. Central banks do collude to achieve specific goals, and they are rarely transparent about it.

At a fundamental level, the system is too complex to go back, and the result is an economic system that is becoming increasingly volatile. The economy really hasn’t grown for the last decade. We would have had a series of major corrections if it wasn’t for the continuous intervention.

Powell doesn’t talk much about what is occurring outside the United States. Major countries like Japan and the U.K. are having to intervene to support their currencies. The Fed seems to more concerned about what the markets think than the problems of other countries.

Europe is already having an economic crisis impacting both industry and citizens alike due to costs of energy. We’re already seeing companies close or reduce hours, and there is no reason to believe that will change anytime soon. The conversation about energy and fuel prices is occurring everywhere in Europe.

Time Stamp References:
0:00 – Introduction
0:46 – Financial Conditions
1:53 – Monetary Restraint
4:50 – Permanent Distortions
9:22 – Monetary Power
11:40 – Following Suit
13:57 – Banking Collusion
19:45 – They Don’t Care
21:42 – Increasing Volatility
24:45 – Marginal Utility
29:05 – Feds Inflation Talk
33:52 – Yen & Pound Interventions
38:00 – Energy & Europe
41:12 – Wrap Up

Talking Points From This Episode

  • Why there is no going back for the Fed, and its economic policies.
  • Impacts of a higher dollar on emerging economies and other currencies.
  • Europe’s already severe energy crisis and why the economic impacts will only worsen.

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Dr. Nomi Prins as a Wall Street insider and outspoken advocate for economic reform, Nomi Prins is a leading authority on how the widespread impact of financial systems continues to affect our daily lives. She has spent decades analyzing and investigating economic and financial events at the ground level and meeting with those that shape the world’s geopolitical-economic framework. She continues to break stories by conducting independent research, writing best-selling books, and traversing the globe to share her knowledge and demystify the world of money.

Before becoming a renowned journalist and public speaker, Nomi reached the upper echelons of the financial world where she worked as a managing director at Goldman Sachs, ran the international analytics group as a senior managing director at Bear Stearns in London, was a strategist at Lehman Brothers and an analyst at the Chase Manhattan Bank. During her time on Wall Street, she grew increasingly aware of and discouraged by the unethical practices that permeated the banking industry. Eventually, she decided enough was enough and became an investigative journalist to shed light on the ways that financial systems are manipulated to serve the interests of an elite few at the expense of everyone else.

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