Quantitative tightening: Protecting monetary policy from fiscal encroachment • VOX EU

Source: https://voxeu.org/content/quantitative-tightening-protecting-monetary-policy-fiscal-encroachment

Since the global financial crisis and the COVID-19 pandemic, monetary, regulatory and fiscal policies have deepened the interconnections between the balance sheets of the central bank, the commercial banks and the government. Quantitative easing (QE), in which central banks buy long-term government bonds (to lower long-term interest rates), has created a rapid escalation in commercial bank reserve balances with the central bank. In addition, liquidity rules introduced after the global financial crisis have required commercial banks to increase their liquid asset holdings, including both reserve balances with the central bank and government securities (see Chadha et al. 2021a).

Threat to central bank independence
These developments threaten central bank independence and budgetary sustainability. Monetary policy now has large fiscal implications. When, for example, central banks begin to tighten monetary policy and raise rates (or when international long-term interest rates increase), there will be substantive implications for fiscal sustainability (Allen 2021 and Landau 2020). In the UK, the Office for Budget Responsibility (OBR 2021a) has underlined that even a modest rise in Bank rate with parallel moves along the yield curve might make it harder to stabilise the government debt-to-GDP ratio. In the United Kingdom, the independent Office for Budget Responsibility has carried out such an examination (2021b), and has identified plausible scenarios in which the public finances become unsustainable.

In this environment, there is a risk of central banks being put under pressure to keep interest rates low to manage government debt service costs. In other words, there is an unusually serious threat to central bank independence. Even the appearance that independence has been compromised would be dangerous. And because of the inter-connections among policy instruments, the transition to higher interest rates may be especially difficult. Achieving the transition while maintaining the independence of the central bank is crucial.

Reducing the interdependence between central banks and Treasuries
The central bank and the Treasury should consider how adjustments in their respective balance sheets could reduce the risk that fiscal considerations might inhibit a future tightening of monetary policy. Central banks may not be able to sell their large holdings of government bonds as quickly as they bought them, or as quickly as they might want to, for fear of damaging the structure of bond markets. The risk of disruption is more serious for long-dated than short-dated bonds, because long-dated markets are typically less liquid.

We argue that, once we enter the exit phase, these sales would be better managed by the Ministries of Finance, in the UK this means H M Treasury. It is the Treasury, not the central bank, that is responsible for the domestic policies which affect bond markets – that is, the medium-term fiscal framework and the sequence of current and expected government budget decisions. Moreover, it is responsible for the programme of bond sales that finance budget deficits and the redemption of maturing debt.

We propose limiting even the appearance of conflicts between the Treasury and the central bank when macroeconomic policies have to tighten. We do not discuss changing the monetary-fiscal policy mix. But our proposals would clear the decks for a future policy tightening by providing the central bank with securities that would be easier to sell. That would make it easier to conduct monetary policy, and it would mean that monetary policy actions were less consequential for fiscal policy. The roles of monetary and fiscal policy would be disentangled, so that each could be managed separately in pursuit of its own objective (analogous to the analysis of Mundell 1962).

The central bank balance sheet
Central bank assets

We propose that the central bank and the Treasury make the asset side of the central bank’s balance sheet more liquid by conducting a swap of securities with the Treasury. The central bank would exchange with the Treasury all or part of its portfolio of long-term government bonds acquired under QE for a newly created portfolio of shorter maturity bonds (short-term bills or short-medium term bonds). This would reduce present huge maturity mismatch (long-term assets with very short-term liabilities) on the central bank’s balance sheet.

The transaction would be wholly within the public sector, so that the consolidated balance sheet position of the public sector vis-à-vis the outside world would not change. The central bank would continue to roll over its holdings of government debt and banks’ reserve balances would remain unaltered. Hence the QE monetary stimulus would remain in effect until macroeconomic conditions dictated otherwise.

Our proposal involves the transfer of interest rate risk from the central bank to the Treasury. That would make no real difference in the U.K. case because the Treasury has indemnified the Bank of England against losses on bond purchases under its QE measures, and has already received the benefit of profits. Thus far, the programme has been very profitable for the Treasury, but it is very risky. The UK’s Asset Purchase Facility, the account in which the bonds are held, has so far yielded £112 billion to the Treasury. Paying the banks for the reserves created by QE has so far proved to be much cheaper than paying bond holders. The reverse would however apply if and when interest rates rose above the levels implied by current bond yields.

If the proposed transaction were not done, and bond yields rose more sharply than current bond market prices suggest, how might politicians and the public react to the losses that would be recorded by central banks such as the Bank of England? One can imagine accusations about the central bank being bailed out by the government and accompanying damage to central bank credibility. Moreover, the terms of the indemnity have not been published, for reasons that are not clear (House of Lords 2021).

The macroeconomic logic should be that sales will be larger when monetary restraint is required and slower when the economy weakens. If used in this manner, quantitative tightening – the opposite of quantitative easing – could become a useful monetary policy tool.

This proposal would in no way impair the independence of the central bank. It would not limit its ability to decide on operations in government bond markets if needed for monetary policy purposes. Such operations used in an expansionary direction were effective in 2009-2012. Long-term interest rates were reduced by QE, with significant macroeconomic and financial stability benefits at a difficult time (Gagnon 2016, Turner 2021). More recently, the prompt and substantial response of monetary policy to the coronavirus pandemic was a vital complement to expansionary fiscal policy in limiting output and employment losses (Chadha et al. 2021a, 2021b). But it would be impossible for central banks to sell government bonds of similarly long average maturity at a similar pace when restrictive monetary policy was required. If the maturity of the central bank’s bond portfolio were to be shortened, as we have suggested, the central bank would have more flexibility in tightening policy. If it wanted to sell bonds to tighten policy, it would transfer bonds from its portfolio to the Treasury in exchange for Treasury bills, and ask the Treasury to sell them in the market over a certain period. The central bank could choose whether to retain the Treasury bills, rolling them over on maturity, or allow them to run off (or sell them) and have the commercial banks’ reserve balances fall back in parallel.

Central bank liabilities
Most central bank liabilities are the assets of private financial institutions. The main central bank liability created by QE has been bank reserves – very short-term deposits of commercial banks which have since 2009 been remunerated at Bank Rate. Currently reserves at the Bank of England are about £800 billion (36% of GDP), and are still rising. The interest-paying liabilities of the Fed are about $4.5 trillion (20% of GDP). As already noted, such large reserves have made central bank payments to banks more sensitive to changes in the policy rate.

Rather than ending or curtailing the payment of interest on reserves, we would prefer to convert some proportion of banks’ reserves into shorter maturity government bonds (Allen 2021). The conversion would have to be compulsory, since an auction of a very large amount of bonds would certainly be undersubscribed. Such a measure could be made more palatable for the banks by exempting short duration government bonds from the leverage ratio. How much to convert would depend on an assessment of the structural demand for reserves, which has greatly increased since the global financial crisis. At current yields, the interest cost to the government would be low. This policy would transfer some interest rate risk to the banks. Regulatory stress tests on banks for a sharp rise in bond yields would be needed.

The conversion would replace a bank asset of zero maturity with assets of, say, 2-year average maturity (McCauley 2021 makes a similar proposal). The banks would therefore have to sell or hedge some bonds if they wanted to keep the duration of their interest rate exposures constant. Yields on government bonds would rise. A modest first step could test the size of such an impact.

After the operation had been conducted, the maturity structure of government debt held in the market, and hence the interest rate risk exposure of the government, might not be what the Treasury wanted. It would be open to the Treasury to adjust the maturity structure over time as it saw fit.

Conclusion
Government debt/GDP ratios have risen sharply. Major central banks maintain substantial purchases of government bonds. Higher interest rates will inevitably have large effects on the balance sheets of the central bank, the government and the commercial banks. There is a strong case for considering balance sheet adjustment now when interest rates are still low. This is why the current debate on this issue is important. In order to protect the independence of the central bank there is a case for alternative arrangements which better clarify the separation between monetary policy and fiscal policy. Cautious but early action is the order of the day.

References
Allen, W A (2021), “Managing the fiscal risk of higher interest rates”, NIESR Policy Paper 25, 26 March.

Blinder, A S (2010), “Quantitative Easing: Entrance and Exit Strategies”, Federal Reserve bank of St Louis, Review, November/December.

Allen, W, J Chadha and P Turner (2021), “Commentary: Quantitative Tightening: protecting monetary policy from fiscal encroachment”, National Institute Economic Review 257: 1-8.

Chadha, J S, L Corrado, J Meaning, and T Schuler, (2021a) “Bank reserves and broad money in the global financial crisis: a quantitative evaluation”, ECB Working paper No. 2463.

Chadha, J S, L Corrado, J Meaning and T Schuler (2021b). “Monetary and fiscal complementarity in the COVID-19 pandemic”, Covid Economics 81, June.

Dale, S (2011), “QE – One Year on”, in J S Chadha and S Holly (eds), Interest Rates, Prices and Liquidity Lessons from the Financial Crisis, pp. 222 – 232

Gagnon, J E (2016), “Quantitative Easing: an under-appreciated success”, Petersen Institute for International Economics Policy Brief PB16-4.

House of Lords (2021), Quantitative easing: a dangerous addiction?, Economic Affairs Committee 1st Report of Session 2021–22.

Landau, J-P (2020), “Money and debt: paying for the crisis”, VoxEU.org, 23 June.

McCauley, R (2021), “Unstuffing banks with Fed deposits: Why and how”, VoxEU.org, 30 March.

Mundell, R (1962), “The appropriate use of monetary and fiscal policy under fixed exchange rates” International Monetary Fund Staff Papers 10, pp. 70-77

Office for Budget Responsibility (2021a), Economic and fiscal outlook – March 2021.

Office for Budget Responsibility (2021b), Fiscal Risks Report, July.

Turner, P (2021a), “A new monetary policy revolution” NIESR Occasional Paper no 60. February.

Great Reset: NATO Vying To Be Global Censorship Police… • Helena: The Nationalist Voice

This blog is excellent, excellent insight on the globalist machine.

By: Helena

Source: Helena

NATO is inflamed over the amount of ‘disinformation’ that is plaguing social media platforms. According to their own self image, NATO states: “NATO member countries maintain open civil communications systems, some with very high rates of social media and social messaging use.” Simultaneously, NATO states that false messages and inflammatory statements are a direct danger in “the damage they can do to citizens’ faith in the institutions of democratic governance and resources of public information and discussion.” Therefore, ‘open communication’ must be censored.

These ‘warfare campaigns’ must be silenced in order to have a free open source of information. Please read that again… ‘silencing in order to be free and open source’. Claiming disinformation is warfare sets the stage for the institution of Nazi style laws that prohibit anyone from saying anything deemed disinformation.

Given that humans are currently responsible for tattling on other humans, NATO wants AI to take control.

Currently, certain words or phrases are delisted and are the source of censorship. But together with Johns Hopkins, NATO wants emotions to be targeted. They term this new design as ‘Sentiment Analysis’. If AI determines a particular sentiment is not within the programmed guidelines, a circuit breaker effect would be instituted globally.

Within this algorithm of AI regulatory analysis, censors will not only delete the communication pathway, but could also insert legal action resulting in censor police knocking down doors. All of this is based on The Great RESET of global governance.

Member states of NATO would be required to adopt these censorship mechanisms or face de-alliance.

DISINFORMATION Definition: false information which is intended to mislead, especially propaganda issued by a government organization to a rival power or the media.

In other words, disinformation is born of government propaganda according to dictionary.com. That would indicate that the government is using the media to convey the notion that disinformation is parlayed via individuals on social media – which IS the disinformation! Funny word-play!

Johns Hopkins is a partner of NATO. They have other interesting partnership alliances, including with; Tsinghua University in China, China University in Hong Kong, Shanghai Jia Tong University – China, and Nanjing University – China. They have been heavily involved in the Thousand Talent Program in China and have yet to decouple that arrangement despite concerns over the sharing of US intellectual property.

While our media, NATO and White House Handlers would have us believe China is our enemy… Johns Hopkins does not. ODD!

Johns Hopkins is also the designated source of statistics for CoVid cases and deaths via their algorithm. They are a perpetuator of Climate Change Theory including climate change’s racism. An event with two speakers , one from Bloomberg’s Johns Hopkins is scheduled at Harvard the latter part of this month to discuss Climate’s racism.

Given climate is racist, trees are racist, birds are racist, street signs are racist, sidewalks are racist, crayons are racist… the Cloud should be deemed racist given it represents fluffy whiteness. Right?

In 2020, Johns Hopkins contributed $2.4 million to Democrats and $92,000 to Republicans. But they are nonpartisan. Its most recent grant from NIH announced October 2021 is in the amount of $4 million. The purpose of the grant is to study and research the use of psilocybin mushrooms to explore the impact on tobacco addiction. So you might cure that smoking addiction but you’ll be crazy and confined in a mental institution, so who cares…

A total of 85% of Johns Hopkins funding is via federal and state governments – $2.562 million. That means ALL taxpayers are paying for Johns Hopkins to give the money to Democrat PACs… Sounds logical.

Johns Hopkins provides internships for students with: GAVI, UNICEF, WHO and Pan American Health Organization, although a WHO internship was cancelled this year because of CoVid. ???

At the recent NATO Summit, US Defense blunderer, Lloyd Austin, made the following playbook statement with regard to China: “We see an increasing interest in our allies and partners [in the Indo-Pacific] to ensure the region remains free and open, and the rules-based international order remains in place.”

However Jens Stoltenberg was quick to add that Russia continues to take a close second place as the target of demonizing after NATO expelled 8 Russian ‘spies’, errr diplomats. The evidence? NATO declared their decision was based on intelligence and they are not going to comment on their intelligence… Ah

NATO has gone Full ballistic mental in abiding by the Handlers that make the rules. What becomes increasingly clear is that the pedophilia based NATO is being situated to be the global police, not just of coups but of censorship as in Big Brother. Not one UN Peacekeeper or NATO personnel accused of sexual assault was jailed despite more than 2,000 allegations. Just one allegation was from a 12 year old who claimed she was paid 75 cents for each of the 40 men she was prostituted to.

THE CENTRAL BANKERS’ LONG COVID: AN INCURABLE CONDITION • Philosophical Salon

Source: Philosophical Salon

Sheep spend their entire lives being afraid of the wolf, but end up eaten by the shepherd. (Popular proverb)

By now it should be clear that COVID-19 is, essentially, a symptom of financial capital running amok. More broadly, it is a symptom of a world that is no longer able to reproduce itself by profiting from human labour, thus relying on a compensatory logic of perpetual monetary doping. While the structural shrinking of the work-based economy inflates the financial sector, the latter’s volatility can only be contained through global emergencies, mass propaganda, and tyranny by biosecurity. How can we break out of this vicious cycle?

Since the third industrial revolution (microelectronics in the 1980s), automated capitalism has been engaged in abolishing wage labour as its own substance. We have now passed the point of no return. Due to escalating technological advance, capital is increasingly impotent vis-a-vis its mission of squeezing surplus-value out of labour-power. With the unleashing of artificial intelligence this truly becomes mission impossible – game over.

This means that the foundations of our world no longer reside in the socially necessary labour contained in commodities such as cars, telephones, or toothpaste. Rather, they reside in highly flammable debt-leveraged speculations on financial assets like stocks, bonds, futures, and especially derivatives, whose value is securitised indefinitely. Only the religious belief that the mass of these assets produces value prevents us from seeing the yawning abyss beneath our feet. And when our faith dwindles, divine providence intervenes by sending us into collective hypnosis through apocalyptic tales of contagion and attendant narratives of salvation.

Yet, reality is stubborn, and keeps knocking on our door. As the financial tumour spreads through the social body, capital opts to unleash its Leviathanic doppelganger, a vampire that feeds on global emergencies and business models anchored in digital technology with the potential to securitize the entirety of life on earth. The writing is on the wall, a ‘soft dictatorship’ is already staring at us. Today, resisting the tide means defending the inviolable dimension of human dignity, a non-negotiable starting point for the construction of an alternative social project. There is still time, but we need critical awareness, courage, and collective awakening.

Pandexit in the land of unicorns

How close are we to Pandexit? The following excerpt from a recent Bloomberg piece has the most likely answer: “For anyone hoping to see light at the end of the Covid-19 tunnel over the next three to six months, scientists have some bad news: brace for more of what we’ve already been through.” To unpack this statement, let us surmise that our future is characterised by the following events: 1. Central banks will continue to create inordinate amounts of money, mostly destined to inflate financial markets; 2. The contagion narrative (or similar) will continue to hypnotise entire populations, at least until Digital Health Passports are fully rolled out; 3. Liberal democracies will be dismantled, and eventually replaced by regimes based on a digitised panopticon, a Metaverse of control technologies legitimised by deafening emergency noise.

Too dark? Not if we consider how the health crisis rollercoaster (lockdowns followed by partial openings alternating with new closures caused by mini-waves) looks increasingly like a global role-play, where actors pass the buck to make sure the emergency ghost continues to circulate, albeit in a weakened capacity. The reason for this depressive scenario is simple: without Virus justifying monetary stimulus, the debt-leveraged financial sector would collapse overnight. At the same time, however, rising inflation coupled with supply-chain bottlenecks (especially microchips) threatens a devastating recession.

This catch-22 appears impossible to overcome, which is why the elites cannot let go of the emergency narrative. From their perspective, the only way out would seem to imply the controlled demolition of the real economy and its liberal infrastructure, while financial assets continue to be artificially inflated. The latter comprises cynical tricks of financial greenwashing such as investment in ESG securities, an environmentally disguised loophole to legitimise further debt expansion. With all due respect to the Greta Thunbergs in our midst, this has nothing to do with saving the planet.

Rather, we are witnessing the accelerating dissolution of liberal capitalism, which is now obsolete. The outlook is objectively depressing. Global financial and geopolitical interests will be secured by mass data harvesting, blockchain ledgers, and slavery by digital app peddled as empowering innovation. At the heart of our predicament lies the ruthless evolutionary logic of a socioeconomic system that, to survive, is ready to sacrifice its democratic framework and embrace a monetary regime supported by corporate-owned science & technology, media propaganda, and disaster narratives accompanied by nauseating pseudo-humanitarian philanthro-capitalism.

By appealing to our personal sense of guilt for ‘destroying the planet’, the coming climate lockdowns are the ideal continuation of Covid restrictions. If Virus was the scary appetiser, a generous portion of carbon-footprint-mixed-with-energy-scarcity ideology is already being served as main meal. One by one we are being persuaded that our negative impact on the planet deserves to be punished. First terrified and regimented by Virus and now shamed for harming Mother Earth, we have already internalised the environmental command: our natural right to live must be earned through compliance with ecological diktats imposed by the International Monetary Fund or the World Bank, and ratified by technocratic governments with their police. This is capitalist realism at its most cynical.

The introduction of Digital Health Passports (only a year ago ridiculed as conspiracy theory!) represents a critical juncture. The tagging of the masses is crucial if the elites are to gain our trust in an increasingly centralised power structure sold as an opportunity for emancipation. After crossing the digital-ID Rubicon, the crackdown is likely to continue smoothly and gradually, as in Noam Chomsky’s famous anecdote: if we throw a frog into a pot of boiling water, it will immediately come out with a prodigious leap; if, on the other hand, we immerse it in lukewarm water and slowly raise the temperature, the frog will not notice anything, even enjoying it; until, weakened and unable to react, it will end up boiled to death.

The above prediction, however, needs to be contextualised within a conflictual and deeply uncertain scenario. Firstly, there is now evidence (however heavily censored) of genuine popular resistance to the pandemic psy-op and the Great Reset more widely. Secondly, the elites appear deadlocked and therefore confused as to how to proceed, as demonstrated by several countries opting to de-escalate the health emergency. It is worth reiterating that the conundrum is, fundamentally, of economic nature: how to manage extreme financial volatility while holding on to capitals and privileges. The global financial system is a huge Ponzi scheme. If those who run it were to lose control of liquidity creation, the ensuing explosion would nuke the entire socio-economic fabric below. Simultaneously, a recession would deprive politicians of any credibility. This is why the elites’ only viable plan would seem to lie in synchronizing the controlled demolition of the economy (collapse of global supply-chain resulting in an ‘everything shortage’), with the rolling out of a global digital infrastructure for technocratic takeover. Timing is of the essence.

Emergency addiction

With regard to a potential recession, financial analyst Mauro Bottarelli summarised the communicating-vessels logic of the pand-economy as follows: “a state of semi-permanent health emergency is preferable to a vertical market crash that would turn the memory of 2008 into a walk in the park.” As I tried to reconstruct in a recent article, the ‘pandemic’ was a lifeboat launched to a drowning economy. Strictly speaking, it is a monetary event aimed at prolonging the lifespan of our finance-driven and terminally ill mode of production. With the help of Virus, capitalism attempts to reproduce itself by simulating conditions that are no longer available.

Here is a summary of Covid’s economic rationale. The September 2019 bailout of the financial sector – which, after eleven blissful years of Quantitative Easing, was again on the verge of a nervous breakdown – involved an unprecedented expansion of monetary stimulus: the creation of trillions of dollars with the magic wand of the Federal Reserve. The injection of this inordinate amount of money into Wall Street was only possible by turning the engine of Main Street off. From the point of view of the short-sighted capitalist mole, there was no alternative. Computer money created as digital bytes cannot be allowed to cascade onto economic cycles on the ground, as this would cause an inflationary tsunami à la Weimar 1920s (which ushered in the Third Reich), only much more catastrophic for a stagnant and globally interconnected economy.

Inevitably, the (cautious) reopening of credit-based transactions in the real economy has caused inflation to rise, hence further impoverishment on the ground. The purchasing power of salaries has been dented, along with revenues and savings. It is worth recalling that commercial banks are positioned at the interface between the magical world of Central Banks digital money, and the emergency-swept wasteland inhabited by most mortals. Thus, any wild expansion of Central Bank reserves (money created out of thin air) triggers price inflation as soon as commercial banks leak cash (i.e. debt) into society.

The purpose of the ‘pandemic’ was to accelerate the pre-existing macrotrend of monetary expansion, while postponing inflationary damage. Following the Federal Reserve, the world’s central bankers have created oceans of liquidity, thus devaluing their currencies to the detriment of populations. While this continues, the transnational turbo-capital of the elites keeps expanding in the financial orbit, absorbing those small and medium size businesses it has depressed and destroyed. In other words, there is no such thing as a free lunch (for us). The Central Bank’s money-printer works only for the 0.0001% – with the help of Virus, or a global threat of equal traction.

At present, it looks as if central bankers are indulging in the noble art of procrastination. The Fed’s board will convene again in early November 2021, with taper (reduction of monetary stimulus) announced to start in December. However, with the Covid bubble deflating, how will the elites deal with zero interest rates and direct deficit financing? In more explicit terms: what new ‘contingent event’ or ‘divine intervention’ will get them out of trouble? Will it be aliens? A cyber-terrorist attack on the banking system? A tsunami in the Atlantic? War games in Southeast Asia? A new War on Terror? The shopping list is long.

In the meantime, ordinary people are caught in a suffocating double bind. If credit needs to be made available to businesses, Central Banks must keep a lid on inflation, which they can do only… by draining credit! Runaway inflation can be avoided only by containing the disruptive effects of excessive money creation; that is, by bringing work-based societies to their knees. Most of us end up squashed between price inflation of essential goods, and deflationary liquidity drainage via loss of income and erosion of savings. And in a stagnant economy with inflation off the chart, each suppressed business transaction is channeled into financial assets.

A tool preventing liquidity from reaching the real economy is the Federal Reserve’s Overnight Reverse Repo facility (RRP). While continuing to flood financial markets with freshly printed money, thanks to reverse repos the Fed mops up any excess of that very cash it pumps into Wall Street. Effectively, a zero-sum game of give and take: at night, financial operators deposit their excess liquidity with the Federal Reserve, which delivers as collateral the same Treasuries and Mortgage-Backed Securities it drains from the market during the day as part of its QE purchases. In August 2021, the Fed’s usage of RRP topped $1 trillion, which led the Federal Open Market Committee (FOMC) to double the RRP limit to $160 billion, starting from 23 September 2021.

Here, then, is the elephant in the room: how will the Fed’s taper square with reverse repos of this astronomical magnitude? Is the much-anticipated reduction of monetary stimulus even possible with a global financial bubble fuelled by zero-interest-rate leveraging and structural borrowing? But, at the same time, how can central bankers continue to expand their balance sheet, when the double whammy of stagnation and rising inflation (stagflation) is just around the corner?

The logic of this monetary mechanism is perverse. The solipsistic ‘mad dance’ of financial capital has spun out of control well beyond its customary madness, and the day of reckoning is fast approaching. Can a devastating recession be avoided? Today’s political answer would seem to mobilise the ancient wisdom that ‘extreme times call for extreme measures’, which translates as: no crime against humanity can be ruled out when systemic implosion is so stubbornly denied. Is this not what history has always taught us?

The crisis we are experiencing is not epidemiological. In the first instance, it is meant to take care of the potentially cataclysmic financial exposure to toxic risk and the associated management of inflation. Suffice it to note that central bankers do not succeed in increasing interest rates to 2%, when in the 1970s they were brought up to 20% to combat inflation. However, as Covid reminds us, financial acrobatics of the current magnitude only work under emergency cover: blockades, lockdowns, restrictions, etc. The purpose of the cover-up is twofold: 1. To conceal the sinking of the Titanic (finance-driven ‘work society’); 2. To coordinate the implementation of a colossal monetary reset based on economic depression and centralised control of people’s lives.

Digital fascism

The consequences of emergency capitalism are emphatically biopolitical. They concern the administration of a human surplus that is growing superfluous for a largely automated, highly financialised, and implosive reproductive model. This is why Virus, Vaccine and Covid Pass are the Holy Trinity of social engineering. ‘Virus passports’ are meant to train the multitudes in the use of electronic wallets controlling access to public services and personal livelihood. The dispossessed and redundant masses, together with the non-compliant, are the first in line to be disciplined by digitalised poverty management systems directly overseen by monopoly capital. The plan is to tokenise human behaviour and place it on blockchain ledgers run by algorithms. And the spreading of global fear is the perfect ideological stick to herd us toward this outcome.

As public debates are silenced by censorship and intimidation, we are being escorted to a bio-techno-capitalist dystopia whose hellish character is likely to manifest itself fully with the next global crisis. This would justify the rolling out of Central Bank Digital Currencies (CBDCs), which, in the words of Agustin Carstens (general manager of the Bank for International Settlements), will grant “absolute control on the rules and regulations that will determine the use of that Central Bank liability [i.e., money], and we will have the technology to enforce that.” Digital cash linked to digital identity is shorthand for hi-tech monetary serfdom, which will be extended to the unemployed first (e.g., UBI recipients), and potentially to most of us. When Larry Fink (BlackRock CEO) says that “markets prefer totalitarian governments to democracies,” we should better believe him.

Separating the population on the basis of vaccination status is an epoch-making achievement typical of totalitarian regimes. If resistance is quashed, a compulsory digital ID will be introduced to record the ‘virtuousness’ of our behaviour and regulate our access to society. Covid was the ideal Trojan horse for this breakthrough. A global system of digital identification based on blockchain technology has long been planned by the ID2020 Alliance, backed by such giants as Accenture, Microsoft, the Rockefeller Foundation, MasterCard, IBM, Facebook, and Bill Gates’ ubiquitous GAVI. From here, the transition to monetary control is likely to be relatively smooth. CBDCs would allow central bankers not only to track every transaction, but especially to turn off access to liquidity for any reason deemed legitimate. The ‘digitisation of life’ project also includes an ‘Internet passport’ which, subject to periodic review, would exclude from the web anyone considered undeserving. Should the social credit score fall below a certain level, finding a job, traveling, or obtaining loans would depend on willing subjection to ‘rehabilitation programmes’. Presumably, there will be a black market for the outcasts.

A cornerstone of historical fascism was industry controlled by government while remaining privately owned. It is quite astonishing that, despite the overwhelming evidence of systematic revolving doors between public and private sector, most public intellectuals have not yet realized that this is where we are heading. Italian writer Ennio Flaiano once said that the fascist movement is made of two groups: the fascists, and the anti-fascists. Today, when most self-proclaimed anti-fascists are quietly or enthusiastically supporting the medically driven authoritarian turn, this paradox is more relevant than ever.

From conspiracy theory to successful paranoia

The epistemology of conspiracy theory drives much of today’s propaganda as a rhetoric of exclusion. The a priori rejection of ‘paranoid thinking’ leaves the official narrative as the sole bearer of truth, irrespective of empirical verification. Therefore, as argued by Ole Bjerg, “the real pathology emerges on the side of the mainstream reactions to so-called conspiracy theorists […] in the form of an epistemic state of exception, which threatens to undermine the functioning of public debate and intellectual critique.”[i] In other words, paranoia qualifies the position of those modern-day Torquemadas whose inquisition tribunals silence any ‘heretical’ thinking that dares to depart from the dogmas of emergency capitalism. The blanket accusation levelled at ‘paranoid Covid-deniers’ and ‘anti-vaxxers’ is symptomatic not only of the dissolution of the democratic bond, but especially of a top-down contagion of ideological sickness never experienced before on such a global scale.

As Jacques Lacan argued in the 1960s, capitalist power works by vanishing, by making itself secret and invisible, thereby dissimulating not only its authority but also its impotence. Everything seems to function spontaneously in capitalism, as if no-one was giving or obeying orders, but just following their spontaneous desires: “What is striking, and what no one seems to see, is that by virtue of the fact that the clouds of impotence have been aired, the master signifier only appears even more unassailable […] Where is it? How can it be named? How can it be located—other than through its murderous effects, of course.”[ii] Should this prompt us to enlist Lacan in the army of wacky conspiracy theorists? While the traditional master relies on symbolic authority, the capitalist master delegates authority to the intangible objectivity of its modus operandi. As made abundantly clear by neoliberalism, mastery is officially relinquished but simultaneously reasserted in its relinquished form, for example as ‘leadership’. And Lacan’s point is that this stratagem opens the space for deeper, more insidious forms of manipulation.

Just like corporate-owned mainstream media, today many Lacanians love to ridicule ‘conspiracy theorists’. Typically, they do so by citing Lacan’s motto that “there is no such thing as a big Other” – so, ultimately, no-one can possibly be plotting behind the curtains. Or, to quote from a recent piece by Slavoj Žižek, “there is no need to invent pandemics and weather catastrophes, since the system produces them by itself.” But these arguments miss the target, for they overlook how power functions precisely by occupying the ontological inconsistency of the big Other, manipulating it in its favour. Differently stated: if there is an unconscious, conspiracy and manipulation are inevitable. The success of any power-structure depends on its ability to weaponise the self-contradictory status of its universe of sense against the neurotic masses.

For all his Hegelianism, here Žižek misses the speculative character of (capitalist) power: systemic contradictions are the very foundation and lifeblood of any power edifice. The elementary speculative ruse of power is that it turns ontological inconsistency into condition of possibility. This is clearly visible in the ‘authoritarian turn’ of contemporary capitalism as predicated upon the ideological use of emergencies. Ultimately, these emergencies are real only insofar as they are capitalist emergencies, deployed at the right time to further the interests of capital. The assumption that they will escape or subvert the existing power structure ignores the extent to which they already function for capitalist power. My reading of Covid as a product of financial volatility is consistent with this speculative stance: pandemic contingency is capitalist necessity, and as such it was supported from the start by a formidable ideological apparatus.

The rhetoric of exclusion that animates the public discourse on Covid can be described through what Lacan, borrowing from Freud, named “successful paranoia”, which “might just as well seem to constitute the closure of science.”[iii] Essentially, “closure” refers to the positivistic belief in scientific objectivity, which is built on the rejection (foreclosure) of the ‘subject of the unconscious’ as source of questioning, doubt, and error. In the context of Lacan’s discourse theory, successful paranoia aligns with a hyper-efficient belief-system secured by the “curious copulation between capitalism and science”.[iv] The power of what today is unilaterally promoted as ‘real science’ (so real that it bans doubt, prohibits debate, and promotes censorship) is akin to the power of a new religion, as Lacan cautioned in 1974: “Science is in the process of substituting itself for religion, and it is even more despotic, obtuse and obscurantist”.[v] And capitalism banks on science & technology just as it capitalizes on health, one of the most profitable businesses in the world.

The ‘science’ we are ordered to follow is hijacked by the financial elites and their political cronies, thus working as a barrier against the awareness that ‘our world’ is crumbling. Real science, which continues to operate behind the thick curtain of censorship, would never impose dictatorial mandates like those still in place in democratic countries around the world. Blind faith in ‘Covid science’, then, betrays a desperate desire to hang on to capitalist power, inclusive of its authoritarian mutation. Yet the history of scientific progress shows that science is, fundamentally, a discourse emphatically centred on what it lacks. All major scientific advances are based on a principle of insufficiency: the awareness that truth as cause of knowledge is ontologically lacking. Or, to quote Lacan: “Il n’y a de cause que de ce qui cloche” (“There is cause only in what doesn’t work”).[vi] This is the science worth fighting for.

While the system’s driving presuppositions (the value-creating relation between capital and labour) have stopped working, the Covid decoy allows capitalism, once again, to suspend any serious enquiry into its structural sickness and ongoing transformation. The clinic of neurosis shows us the extent to which the average neurotic wants a master, whose role is to reassure them that their world lies on solid foundations. Neurotics are often so desperately attached to their power-structure that they turn into perverts to secure its functioning – like a masochist eagerly handing the whip to his dominatrix. Perversion works as a command to enjoy the power relation, and contemporary subjects often readily submit to power in a desperate bid to consolidate it. Unfortunately, the conservative structures of neurosis and perversion are often shared by ‘progressive minds’ (including liberal and radical leftists) whose commitment stops at virtue-signaling or participation in conspiracy theory shame games.

And yet, not all is lost. Despite the unstoppable convergence of science and capitalism in establishing a watertight belief-system that excludes dissent, our successfully paranoid universe will fail to totalise its structure. Paradoxically, the current crackdown on humanity may be the best chance yet for radical opposition to the coming regime of capitalist accumulation and its relentless emergency blackmail.

Notes:

[i] Ole Bjerg, “Conspiracy Theory: Truth Claim or Language Game?”, Theory, Culture & Society, 2016, pp. 1-23 (6).

[ii] Jacques Lacan, The Seminar of Jacques Lacan, book 17, The Other Side of Psychoanalysis, trans. Russell Grigg (New York: Norton, 2007), pp. 177-78.

[iii] Jacques Lacan, Écrits. The First Complete English Edition, trans. Bruce Fink (New York: W. W. Norton, 2006), p. 742.

[iv] Lacan, 2007, p. 110.

[v] Jacques Lacan, Freud Forever: An Interview with Panorama, trans. Philip Dravers, Hurly Burly 12, 2015, pp. 13-21 (18).

[vi] Jacques Lacan, The Seminar of Jacques Lacan, Book 11, The Four Fundamental Concepts of Psychoanalysis, trans. Alan Sheridan (New York: W. W. Norton, 1998), p. 22.