It’s a big club and you ain’t in it.
The late great comedian George Carlin loved spitting this quote in his skits. He would talk about how the political power structure and the media always seem to march to the same beat… regardless of which political party happened to be in power.
What Carlin was talking about is often called the Deep State today. It refers to what appears to be a shadowy coalition of people behind the scenes who drive government policy.
Donald Trump catapulted Deep State into popular vernacular. But to be fair, Bill Bonner was using the term years ahead of Trump. Let’s give credit where it’s due.
But the question is… does this view of the power structure explain the macroeconomic events we are seeing play out today?
To be sure, the Deep State view can explain why nothing much seems to change regardless of which political party is in power. But it cannot explain the break between the Federal Reserve (the Fed) and the international power structure—the globalists.
As we discussed yesterday, the Fed coordinated monetary policy with the world’s central banks in the wake of the 2008 financial crisis. It certainly looked like there was a big club at work.
But the globalists did not want the Fed to raise interest rates aggressively last year. The Fed powered forward anyway… and fired the first shot in what’s become a secret financial war.
So what gives? Isn’t the Fed supposed to be part of the Deep State also?
If we want the real answer, we must look at the factions at work… and their incentives.
An Attack on Capitalism
In June 2020, an international organization called the World Economic Forum (WEF) announced what it calls the “Great Reset”. The WEF pitched it as an economic recovery plan in response to COVID-19… but that was just the cover story.
The WEF is a globalist organization that engages with government and corporate leaders from around the world. It designed the Great Reset in collaboration with many of these “leaders”.
The core idea is to shift from what they call ‘short-term shareholder capitalism’ to ‘long-term stakeholder capitalism’ with a focus on environmental, social, and governance (ESG) issues.
In other words, the Great Reset is about replacing the current economic system – with its focus on private property and competition – with a system where stakeholders collaborate on key economic and social issues.
It’s supposed to sound like a friendlier version of capitalism. But is it?
If we want to analyze the Great Reset and stakeholder capitalism, the most obvious place to start is this: Who are the stakeholders?
Well, it’s them. In their vision, their globalist organizations control everything.
In fact, these people were arrogant enough to make a commercial that pitches the slogan, “You’ll own nothing and be happy”. That’s what they think of everyone not in their circle.
The WEF outlined five pillars for their Great Reset. They are:
- Justice
- Sustainability
- Digitalization
- New Social Contract
- Shift in Capitalism
Let’s break these down…
When they talk about justice, they say we need to reduce inequalities and promote social inclusion. What they mean is that we need to get rid of competition and merit-based economic mobility.
When they say sustainability, it’s all about replacing traditional energy production with what they call “green energy”. This is the push for solar and wind power.
Of course, it isn’t economical. Solar and wind cannot generate enough baseload power to run our economy. We talked about that earlier this month.
And this is why they need to eliminate competition with that first pillar. Their green energy revolution simply will not happen within the current system.
The Great Reset’s next pillar is digitalization. This is about central bank digital currencies (CBDCs) and 15-minute smart cities.
We’ll talk about CBDCs is a minute—they are a big reason why the Fed is at war with the globalists. As for smart cities – they are all about herding people into small living areas where they can be subjected to total surveillance.
The fourth pillar is “new social contract”. They say this is about fostering social inclusion and reducing inequality between countries. Really, it’s about eliminating national sovereignty in everything but name. That’s the globalist fantasy.
And the last pillar is “shift in capitalism”. This is about replacing the current economic system with their model… which isn’t capitalism at all. It strikes me as a modern version of feudalism. It’s a system where the peasants can be kept subservient to their overlords.
I know this sounds like a giant conspiracy theory… except the WEF has talked openly about all of it. And they even set a timeline for implementation—2030. They wanted to get it all done within this decade.
And for a few years it looked like they just might pull it off. The Covid hysteria – with its lockdowns, travel restrictions, and contact tracing gave them a great head start in 2020 and 2021.
But then the Fed made its move in 2022.
I know this sounds backwards. The Fed is America’s central bank. Doesn’t it want to take on additional power and control with CBDCs?
Jerome Powell has indeed talked positively about a “wholesale” CBDC. But that’s just a back-end settlement system for use between the Fed and the commercial banks.
As for a “retail” CBDC – something meant for the American public – Powell said that would require the authorization of Congress.
He’s not interested in pushing a retail CBDC himself. One Fed insider even said that there will be a retail CBDC “over Powell’s dead body”.
To understand why, the Fed is at odds with the globalists over retail CBDCs and the rest of the Great Reset, we must understand what CBDCs are really about. Then we’ll realize that a powerful faction stands to lose out big time if they become a reality in this country.
The Real Threat of CBDCs
To implement the Great Reset’s five pillars, the globalists need to make central banks the ultimate arbiter of everything related to money and credit. That’s what CBDCs are all about.
With retail CBDCs, our bank accounts would reside at the central bank. This is true both for individuals and corporations. That would give the central bank full control over our money and our transactions.
Then, when we need a loan, they are the folks we would have to go to.
That’s huge. Especially when we consider that it’s not just individuals who would have to go to them for loans. It would be everybody, including large companies. They would have to go to the globalist power structure to get financing for their business and key projects.
That means the globalist faction would suddenly have direct control over which projects and activities could get financing and which couldn’t. This alone would give these people almost total control over the western world.
And the key is this – there would be no competition in their “stakeholder” model. It’s all about being able to finance uneconomical projects like green energy.
To accomplish this, they need to neuter the commercial banking system and eliminate the banks who don’t play along.
That’s because there’s fierce competition in the banking world. Competition ensures that each bank strives to make good credit decisions. The better their loans perform, the more money, power, and influence they accumulate.
And on the flip side, those banks who finance uneconomical projects struggle. And if they finance too many uneconomical projects, they collapse.
This dynamic creates built-in incentives that encourage wise resource allocation and economic growth.
Stakeholder capitalism is about tearing down those incentives and emasculating the banks. That’s the only way the Great Reset could come to fruition.
The New York Banking Cartel Woke Up
The American banking scene has an illustrious history. Not all of that history is noble and honest… but it’s illustrious nonetheless.
Of course, American banking revolves around Wall Street. And the top Wall Street banks trace their history back over a century.
The people running these banks are wealthy and well-connected throughout the American power structure. That makes them a faction unto themselves. We can call it the New York Banking Cartel.
At some point over the last several years the New York Banking Cartel realized that the Great Reset was a direct attack on their commercial banking system. And they said nope, that’s not happening here.
This is why Jamie Dimon is suddenly calling himself a red-blooded, patriotic free-market capitalist. He wrote that verbatim in his annual letter to shareholders this year. These are all dirty words according to the globalist rhetoric.
And notice how Dimon has also ditched the ESG meme. He’s now talking up the need for more oil and gas investment. Again, that’s a no-no from the globalist perspective.
This shift in rhetoric is just more proof that there’s a power struggle happening right now. It’s the globalists vs. the New York Banking Cartel.
And guess what?
Jerome Powell is a Wall Street guy. He’s deeply connected within the New York banking scene.
That’s why the Fed broke ranks. Powell and the Fed stand with the New York banks… in opposition to the international power structure.
It’s all about saving the current system.
And the only way to do that is to get back to having “normal” interest rates set by market forces. That’s where the Fed comes in.
Jerome Powell didn’t raise rates so aggressively last year just to fight inflation. He did so to save American capitalism and the commercial banking system as currently constructed.
Normalized interest rates will stop the massive misallocation of resources that’s occurred since 2008. Higher rates also curtail the globalists’ ability to leverage Eurodollars to finance programs they favor, as we discussed yesterday.
Of course, normalized interest rates also guarantee that we’ll have a recession. The media will raise a fuss about it… but it’s a good thing.
The coming recession will clear out all the bad debt and malinvestment that have clogged the arteries of our economy. This must happen if we want to get back to having an environment that favors capital formation, small business, and the middle class.
And here’s the key to it all – the New York banks need just that environment to stay alive.
It strikes me as ironic, but the Fed and Wall Street are fighting against further centralization right now. Yet nobody even realizes it’s happening.
And the story got even more interesting when the US Treasury threw its hat into the ring. More on that tomorrow…
-Joe Withrow
P.S. I know this kind of macroeconomic analysis isn’t everyone’s cup of tea. But if you would like to dive into the story in even more detail, check out my book Beyond the Nest Egg. You can find it right here.