Collecting Evidence on Central Banks' Distortions.

• Author: McKinley, Vern
• Position: Permanent Distortion: How Financial Markets Abandoned the Real Economy Forever

Permanent Distortion: How the Financial Markets Abandoned the Real Economy Forever

By Nomi Prins 352 pp.; Public Affairs, 2022

Ever since the early indications of the Great Recession began to appear in late 2007, a mix of government insiders, journalists, and historians have been publishing books about the dangers of high finance and government's attitude toward it. (See "Will We See Another Bumper Crop of Financial Crisis Books?" Spring 2021.) None of these writers has been more prolific than Nomi Prins in releasing consistently strong titles regarding the interventions and distortions of governments, and in particular those of the world's central banks.

In the acknowledgements for her newest book, Permanent Distortion, she refers to her "trilogy" of recent books on these topics. All The Presidents' Bankers chronicles the development of big banks as wards of the government. (See "Finance According to Non-Academics," Spring 2015.) Collusion traces how major central banks worldwide have followed the same script on their interventions since the global financial crisis. (See "Colluding with Central Banks, Not Russians," Fall 2018.) Permanent Distortion picks up where the others left off in explaining the evolution of finance and central bank policies during the pandemic, the inflation those policies begot, and the rapid flow of funds into meme stocks and cryptocurrencies.

Genesis of distortion / Prins begins her introduction in a logical place by explaining the book's title:

The epic divide between finance and the real economy is what I have defined as a permanent distortion. This is not a phrase chosen lightly. There's no going back from here. There's a seismic rift between, on the one hand, economic growth, wages, and a decent standard of living and, on the other, market-driven wealth accumulation that during a devastating global pandemic minted nearly five hundred new billionaires in 2020 alone. She places the blame for the permanent distortion squarely on the evolving role of central banks since 2008:

Today's financial system is as unhinged from the realities of classic capitalism as it is from the economy. Central banks have become money dealers and inequality enablers. When faced with crisis, they zoomed past being lenders of last resort to being arbiters of who wins and who loses in the economy. They are now money-creating machines that are fostering riskier and bigger bubbles than ever before. Their policies are setting up future crises and systemic economic fractures.... They have ensured that the markets are destined to collapse without constant support. Chaotic discussion / Prins sets the scene in her two initial chapters...