Are Central Banks Losing Control Over Currencies? “Era Has Ended, Threats Are Ineffective”

by | Mar 10, 2017 | Aftermath, Conspiracy Fact and Theory | 13 comments

Do you LOVE America?



    This article was written by Charles Hugh Smith and originally published at his Of Two Minds blog.

    Editor’s Comment: World power is shifting… but to what extent? The more things change, the more they stay the same. When civilizations rise and fall, and ebb and flow with the passage of time, the central banks remain close to the center of power, or least they have for the past 500 years, and at other points in history.

    What are the limits of this economic power base? How far will the powers that be go to retain control? Will they stage financial crashes, and draw out the pain of collapse? Just study history to see where this is all going…

    Are Central Banks Losing Control?

    by Charles Hugh Smith

    Eight years after the crisis of 2008-09, central banks are still injecting $200 billion a month into the global financial system to keep it from imploding.

    If you want a central banker to choke on his croissant, read him this quote from socio-historian Immanuel Wallerstein: “Countries (have lost the ability) to control what happens to them in the ongoing life of the modern world-system.”

    Stated another way, Wallerstein is asking: what do central banks no longer control?

    The quote is from Wallerstein’s recent meditation on China: China is Confident: How Realistic?
    “The question is how realistic is this self-assessment of China? There are two premises embedded in China’s self-confidence, whose validity need to be investigated. The first is that countries, or rather the governments of states, can actually control what is happening to them in the world-economy. The second is that countries can effectively contain popular discontent, whether by suppression or by limited concessions to demands.

    If this was ever even partially true in the modern world-system, these assertions have become very dubious in the structural crisis of the world capitalist system in which we find ourselves today.”

    Central banks still claim absolute control over their currency, interest rates,what’s legal/outlawed in their financial systems, and so on.

    Wallerstein is suggesting that era has ended and central banks are losing control of the value of their currency, their role in the global economy and the social discontent that is the ripening harvest of central bank policies that have greatly enriched the rich at the expense of everyone else.

    I don’t think Wallerstein picked China out a hat. Though every central bank is experiencing the same erosion of control, China is visibly losing control of the value of its currency, the yuan, and its runaway debt burden, which has skyrocketed from less than 20 trillion RMB 13 years ago to over 160 trillion RMB.

    This matters because instability in a nation’s currency quickly spreads to the economy and then to society: as a currency depreciates, the value of everyone’s money declines, i.e. the purchasing power of their money is diminished.

    When a currency is devalued, everyone holding that currency is instantly poorer.

    When people become poorer through no fault of their own, they become angry with the authorities who engineered the devaluation or let it happen.

    This leads to the social discontent Wallerstein references.

    Another erosion of purchasing power occurs when wages stagnate while the price of goods and services rises. Can central banks control the erosion of wages’ purchasing power? There is little evidence they can.

    As for a central bank’s control of its role in the global economy: those confident in China’s ascent to global #1 power assume China will remain the world’s workshop at least until its domestic populace can absorb all the goods it produces.

    But it seems increasingly evident China’s role as the world’s workshop is under threat, and that it doesn’t control the erosion of that role. Domestic populism is trending against globalism, wages are rising in

    China as the populace urbanizes, prices are rising faster than wages and the potential for disruptive trade wars is rising.

    As for what’s outlawed/banned: recently, I’ve been engaged in some lively online debates about the possibility of China banning bitcoin transactions.

    Most people in the discussion reckon China (or any government with a high degree of control of its populace) can shut down bitcoin with no difficulty. The threat of a severe penalty would be enough, or so

    I’m told.

    I’m not so sure. Look what prohibiting alcohol did: it created an entire economy devoted to bypassing the authorities’ restrictions on alcohol. The penalties were fairly severe, but threats didn’t work when profits beckoned.

    If a nation’s currency is losing purchasing power, threats are unlikely to be effective. Indeed, threatening the populace as they try to retain the purchasing power of their capital/savings would be an act of desperation born of a recognized loss of control.

    Wallerstein is right: central banks–including the Federal Reserve– are losing control of the value of their currencies, their role in the global economy and the social discontent that arises as central bank policies negatively impact average citizens.

    It’s by no means guaranteed that central banks will be able to maintain their death-grip on interest rates, either.

    Eight years after the crisis of 2008-09, central banks are still injecting $200 billion a month into the global financial system to keep it from imploding. The returns on their “investment” is diminishing rapidly, and they’re losing control of everything that matters.

    This article was written by Charles Hugh Smith and originally published at his Of Two Minds blog.

    If you found value in Charles Hugh Smith’s content, please support his work by becoming a $1/month patron of my work via or visiting his site. Check out both of his new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.


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      1. BLAH, BLAH. BLAH. I thought as I read this they would be telling me to buy more Gold and Silver. But no its about China. I could give a Rats Ass about China. What will be will be.

        Keep saying “Central Banks Losing Control Over Currencies” one day it will come true. But until then I’m going to keep doing what I have been doing.

        Tell me a TIME and a DATE. until then I’m going to keep on keeping on!


        • Damn Sarge, couldn’t agree with you more. I’ve had it up to ‘here’ (place hand apx. 2″ flat over the top of head) with all the pundits, prognosticators and other so-called experts predicting what is bound to be …”someday”. Where I come from we say, “no sh*t Sherlock” to those who tell another what is already known. Yeah it’s to happen. Has to. What goes up must go down; and baby baby baby, it’s risen way past it’s limit. But ‘when’. What will be the kick-off? Specifics Sir. Specifics. I used to have a gal who’d promise me “I’ll make it worth your while”….. and though I admit, often she did…. she never told me exactly what I could expect. So, like you Sarge, I’ll just keep doing what I feel needs doing (like a fine rifle chambered in 22-250 I just purchased) and be ready as I was for that woman had pledged me, regardless of what she had in mind.

          • “H”
            22-250 nice choice flat shooter and tears the crap out of its target. One problem they tend to burn out barrels. If you got a Savage I would pick up another barrel for it. All in All good choice.


      2. This is why countries like China are moving to back their currencies again with Gold. To give it more legitimacy.

        PM’s Gold and Silver are real money legal tender.

      3. When we stop consuming, China feels the pinch. They are definitely feeling the pinch.
        When everyone here starts buying t-shirts at the resale shop instead of Walmart, they
        will really feel it. We probably have enough clothing in resale stores to clothe us for the
        next 5 years easily. If this Depression hits as bad as the financial heads say, thrift shops
        will outnumber dollar stores 10 to 1. Necessity is the mother of invention. We can really
        stick it to the globalists if we made do with a lot of the things that are already floating
        around in this country. Why buy new cheap crap if we can still get use out of the cheap crap thats already here. Want to see the trade deficit go down considerably? Just buy
        food at Walmart and ditch all the other junk. You can find a lot of that stuff at garage sales.
        In classified ads. Thrift shops. You name it. If we spread the money out here instead of
        sending it back overseas, we would be in much better shape. Bright and shiny is not
        always better. Penny smart and dollar foolish is one one our downfalls.

      4. I was in a San Francisco Area store. The people behind the counter and the many customers were all Chinese, or at least all Asian. The store carried gold; not 14 carat gold, like most stores catering to Americans. It was ALL 22/24 solid gold. I’m talking rings, watches, necklaces, coins, bars. The stuff was flying off the shelves. There was a line waiting for the day’s shipment of what I believe were the gold bars and gold bricks. Amazing. This was probably ten years ago.


      5. REPEAL that darned Obamacare!

      6. “Can central banks control the erosion of wages’ purchasing power? There is little evidence they can.”. This has been one of my pet technology revolution impact points. Humans are such a pain in the ass, that their labor will be replaced by machines. This will lead to wages dropping unless you are in a profession that can’t be robotized, just, yet.
        As the vast majority of the worlds labor consists of very clever, low IQ people, we will have to figure out how to deal with that.
        Monetary policies won’t fix stupid, poor education, and dystopian cultural practices.

      7. ” This will lead to wages dropping unless you are in a profession that can’t be robotized, just, yet.”

        Even if your profession cannot be robotized the relocation of those in other professions that are robotized / outsourced flood the market. The engineer losing their job, or lowering its compensation due to competition from India becomes a Registered Nurse. In effect the displaced with intelligence vie for the jobs not yet impacted and by supply and demand wages are lowered across the board.

        • Agreed that H1B is a problem. But it has an easy fix. In my profession, had I not retired, I would be earning around $150,000 per year today. My peers from India, Vietnam, Iran, Urkraine et al. made the same money, but they were citizens. What drives the wages down is the non-citizen. When they become citizens, they demand wage equality and get it. Throttle the H1B stuff and wages will go to where they belong, plus you get better team members as they are stuck with you.

      8. 1948 Israel’s rebirth
        + 70 years / 1 generation
        ” 2018 “

        • Joeybagofdonuts:

          70 years is the average lifespan, but not one generation.

          I was taught that a generation is 20 years. Now Wikipedia says 30 years.
          A generation is the time between birth to the time when ones children give birth.
          If grandmother, daughter, and granddaughter are in a photo, we say, “there are three generations of the so-and-so family in the picture”. All people who are born around the same time, belong to the same generation.

      9. This article is spot on. The banks are losing control and they know it. That’s why they are feverishly working on Plan B: the Digital Financial Identity for all global citizens. There are three groups working towards this: corporate businesses, governments and the banks. I haven’t figured out yet if they are working together or if they are in a race, but their documents seem to each tackle a different aspect.
        Take the United Nations ID2020 for example – a hair raising plan to give everyone this financial number for ‘inclusion’: access to food, water and other ‘services’ that can be bought with their digital currency. More here:

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