By Ernst Wolff
(Originally published by Rubikon.news in German, 17 September 2020. The translator has attempted to translate this text as faithfully as he could) https://www.rubikon.news/artikel/das-rekordjahr
Ernst Wolff is a German author and journalist, specializing on global financial institutions, particularly the IMF, the World Bank and the Federal Reserve. Among his books figure the English-language publication “Pillaging the World” (2014), available on paperback.
Introduction by Rubikon: The corona measures – the shutdowns, the countless bankruptcies and people who have to fear for their existence – it is only to everyone’s disadvantage. Consequently, the virus must be really dangerous, otherwise politicians would never have acted against the interests of the economy in such a way … This is how many argue and accept to endure without resistance the restrictions to their liberty. But it is by no means the case that nobody would benefit from the dramatic developments of 2020. And this does not only mean vaccine manufacturers, who are currently getting out the champagne. We are on the threshold of a world in which a triumvirate of a few digital and financial groups and the most important central banks will dominate the global monetary system and thus finally and irrevocably take over world power. In his lecture at the WEFF [alternative forum] in Davos, Ernst Wolff illuminated the economic background that even critics of the Corona measures are not necessarily aware of.
Here begins Mr. Wolff’s lecture
Not only do we currently live in a world of extremes and superlatives, we find ourselves in a historically exceptional and unprecedented situation.
Never before in the history of economy and society so many records have been achieved as in 2020. Never before have so many production facilities been closed down and so many supply chains interrupted. Never before has there been such a collapse in the demand for manufactured products and raw materials.
The lockdown we have experienced is the biggest economic shock in history – and it is not the result of wars, political conflicts or natural disasters, but the result of deliberately induced decisions by governments – against the following background:
We currently have the world’s highest level of debt – $275 trillion. This means that household, corporate and government debt has doubled since 2006.
We have the lowest interest rates since 3000 years. Never before in the history of money have there been such low interest rates as today. We are currently dealing with the highest number of zombie companies – i.e. companies that are no longer viable on their own and are dependent on loans and bonds – mostly expensive junk bonds.
We are dealing with the highest number of delayed insolvencies and the highest number of bad loans. We have the highest number of unemployed and the highest number of jobs at risk worldwide. And finally, we have the highest number of states in need: by April 2020 alone, 102 states had applied for emergency aid from the International Monetary Fund (IMF).
Moreover, we currently have the greatest disparity between the financial sector and the real economy. In the financial sector, we experienced the most severe and fastest stock market slump of all time in March 2020 – in just a few days, share prices fell more sharply than in the great crash of 1929. We then experienced the fastest recovery ever in April. Last week Apple was the first company in the world to record a stock market value of over 2 trillion US dollars. Apple was founded in 1976 and took 42 years to reach a market value of 1 trillion, and has now made the second trillion in two years.
This was all made possible by the largest injection of money ever. The US central bank (the Federal Reserve) alone expanded its balance sheet by 3 trillion US dollars in April 2020. And this against the backdrop of the longest stock market upswing ever recorded from 2008 to 2020.
We are currently seeing the result: we face the biggest bubbles ever – in stocks, bonds and real estate.
Let’s consider the social consequences: We are currently dealing with the greatest social inequality of all time. Never before in the entire history of mankind has there been such a gulf between rich and poor as in our days.
Moreover, in the past four months we have seen the highest increase in social inequality due to the greatest enrichment orgy in the history of money. The US billionaires alone have increased their assets by 637 billion US dollars from the beginning of the Corona crisis until the beginning of August. In the months of March and April 2020, the assets of Bill Gates increased by 7.5 billion US dollars, of Mark Zuckerberg by 23 billion US dollars, of Elon Musk by 50 billion US dollars and of Jeff Bezos by 75 billion US dollars. This means that four individuals have become more than $150 billion richer in two months – while at the same time 40 million Americans have lost their jobs and many their livelihoods.
It also means that of the $3 trillion that the U.S. government and the FED pumped into the system in April 2020, more than one-fifth went to the top 0.00001 percent of the U.S. population. By the way, these are the people whose taxes have been cut by 79 percent since 1980, with the last cut only 3 years ago by President Trump.
If that is not enough to see how sick the current system is, then you should take a look at July 20, 2020: On this day, there was the highest daily growth in an individual’s wealth ever: Jeff Bezos (he holds 11 percent of Amazon’s shares) increased his assets by $23.2 billion on July 20, 2020. That is twenty times what 600 million Africans earned that day.
This means that we are not only living in an exceptional situation, but with an unprecedented acceleration of these devastating processes and, above all, an unprecedented intensification of the most dangerous social phenomenon: 2,000 years ago Plutarch already said that the inequality between rich and poor is the oldest and most fatal suffering of all republics.
The fact that this inequality has reached astronomical levels in the past six months means that we are on absolutely unexplored new territory and are heading at a continuously increasing speed towards a millennium event of which nobody knows what it will be like because there are no historical precedents.
And if you ask what has triggered this dramatic acceleration, there is a clear and unequivocal answer:
In 2020, for the first time in history, a disease was used as an opportunity to push through economic and financial measures with unimaginably far-reaching consequences.
I must clarify something at this point: I have no inclination for conspiracy theories and am no corona denier. I have dealt extensively with the medical side. We are undoubtedly dealing with a pandemic. Covid-19 is a serious disease that is dangerous for certain groups of people, and for some it is even deadly: However, this does not include all people – 75 percent do not notice that they are ill, and 20 percent remain completely symptom-free – but [primarily] those with high blood pressure, obesity, vitamin D deficiency, serious pre-existing conditions, particularly in the respiratory tract, a weak immune system and age-related immune deficiency. These people should definitely be protected.
But one doesn’t help these people by scaring the entire world population, by providing them with partly unscientific rules of conduct while paralyzing the global economy, by sending millions into unemployment, by further inflating the circulating money supply, by distributing billions and billions to those who have the most anyway, and certainly not by sending hundreds of thousands and possibly millions in developing countries into certain starvation, as is currently happening.
What we have seen here in Europe is nothing compared to the gigantic catastrophe that is currently taking place in Africa, South America and Asia…A statement issued by the ILO (International Labour Organisation, sub-organisation of the UN) in Geneva at the end of April 2020 indicates how dramatic the situation is there:
“For almost every second person, the corona pandemic represents an existential threat to their livelihood. Most affected are 1.6 of the two billion people engaged in irregular work, i.e. working without employment contracts, and who often live from hand to mouth. The income of these people has fallen by an average of 60 percent worldwide, and by more than 80 percent in Africa and Latin America. They have no savings or access to credit. That means no income, no food, no future.
In view of this situation of an irreparable worldwide damage caused intentionally and in full awareness of the consequences, going far beyond what the disease Covid-19 itself causes, every critical person today must ask himself one question above all: WHY?
Why did we do something we have never done before in the entire history of the world – not to react calmly, prudently and with a sense of proportion in the face of illness, but to crash the world economy with a jolt?
Why have governments that have made every effort in recent years to cut back on their health care systems suddenly made such a drastic turnaround, showing concern about the health of the population in an unprecedented way since February of this year?
Why, since the beginning of the pandemic, have governments only listened to experts who have reacted to earlier pandemics with completely exaggerated forecasts, and whose predictions have to a large extent long since been refuted by reality?
Why do governments consistently ignore and block the opinions of experts who disagree with them?
Why are the criteria for lifting coercive measures being changed time and again in favor of their retention?
Since all these questions have remained unanswered by the official authorities to this day, one must inevitably ask oneself the next question: Are there possibly behind the professed protection of the population different motives? Is it perhaps not at all about health, but about something completely different? Is there possibly a second agenda?
And indeed, there is a great deal of evidence and masses of facts and figures that suggest that a second agenda does exist. And since we are here in Davos: The most important indication comes from the founder of the World Economic Forum (WEF), Klaus Schwab, who last winter was one of the first internationally known personalities to speak quite openly about the need for a “Great Reset”.
What does this Great Reset mean? Very simply it means that the system under which we live is no longer functioning and must be restarted. In itself, that wouldn’t even be a bad thing, only: Klaus Schwab is not speaking for just anyone, but for his clientele, the international moneyed aristocracy, and they want a fresh start that will enable them to protect their assets under the current difficult conditions and also maintain their political power.
If you look closely, you will see that the Great Reset is basically nothing more than a brutal acceleration and intensification of several processes that have been going on for years and that benefit precisely this clientele: namely, the concentration of ever larger assets and ever more power in ever fewer hands and the global tendency towards monopolization and cartel formation. It is precisely these two trends that currently stand in the way of obstacles that need to be removed in the interest of the moneyed aristocracy. What are these obstacles?
- The global financial system. It is in its final stages and must therefore be reshaped in the interest of big money.
- The consequences of the digital revolution. They lead to unprecedented job losses that threaten to disrupt very soon the global social fabric.
- The role of central banks. This role is no longer sufficient to maintain a world in which the ultra-rich and their vassals have the say.
All three problems together have so far presented an almost insurmountable hurdle for the following reason: They can no longer be eliminated by reforms within the framework of parliamentary democracy. And if we look around the world with our eyes open, everything suggests that for this very reason we are currently experiencing a scenario in which a huge global chaos is being deliberately and intentionally created to enable changes that could not be made under normal circumstances – all this under the leadership of the current world power No. 1, namely the digital-financial complex.
Remember: In his farewell speech in 1960, American President Eisenhower warned against the “military-industrial complex”. Paraphrasing the term he used, I would describe the current world power, for which Klaus Schwab, among others, speaks and which he gathers around him every January here in the Swiss mountains, as the “digital-financial complex”.
At the top of this digital-financial complex are, in the corporate sector, the major corporations Apple, Google, Amazon, Microsoft, Facebook and, in the financial sector, the giant BlackRock. In order to understand how this new world power has been able to gain so much influence, I would like to briefly discuss the three processes that have made this possible.
Development No. 1: The global financial system
I will start by looking at the development of the financial system under which we live. It is fundamentally undemocratic and contradicts all principles of justice or equality. It goes back to the Bretton Woods Conference in 1944, when the United States was the most powerful state in the world, with the strongest economy, the strongest military, and the only country in the world with the atomic bomb.
The US did something that had never been done before: it made its US dollar the world’s reserve currency, pegged it to gold and pegged all other world currencies to the dollar at fixed exchange rates. This means that this system is nothing other than the dictatorship of one currency over all others. With this system, the USA seized not only military and economic but also financial world domination. And this has paid off for them, as the post-war boom from 1948 to 1973 has shown.
The greatest beneficiary of this boom was the banking industry, which, due to the high demand for credit, was able to record a huge increase in assets and power. When this demand slackened in the mid-1970s, bankers took advantage of their power status gained in the 1950s and 1960s and urged politicians to open up other ways of earning money for them in addition to their main source of income, lending.
In fact, politicians around the world made ever greater concessions to banks by abolishing numerous rules and laws that had previously restricted the financial sector. This trend quickly gained momentum and led to increasing deregulation in the 1980s and 1990s, giving banks more and more freedom.
The most important milestones in this development were the introduction of constantly new financial products, the approval of share buybacks, the increasingly lax legal requirements for hedge funds and the abolition of the separation between banking and other financial institutions in the Anglo-Saxon countries. All of these measures led to a continuous restructuring of the global economy in favor of the financial sector, which gradually grew many times larger than the real economy.
A decisive consequence of this development was the increasing concentration of financial power, first in the hands of investment banks and later of hedge funds. The crisis of 2007/08 marked the beginning of the great era of asset management, the largest of which brought together the most lucrative hedge funds and whose most important representatives – above all BlackRock, Vanguard, Fidelity and State Street – now dominate large parts of the financial sector. These four companies alone manage a combined total of around 19 trillion US dollars, which is roughly equivalent to the GDP of the USA.
BlackRock alone manages $7.4 trillion of assets, making it the largest asset manager in the world. In addition to private investors’ money, BlackRock manages the assets of sovereign wealth funds, pension funds, insurance companies and corporations. Just to show the power of BlackRock in the state sector: California is the fifth strongest economy in the world after the USA, China, Japan and Germany. BlackRock manages Calpers, the Californian pension fund, one of the largest in the world. BlackRock also advises the FED and the ECB and, together with both central banks, allocated funds in the crises of 2007/08 and 2020 – to a not inconsiderable extent to companies in which BlackRock has a stake.
BlackRock’s most important tool is Aladdin, a computer-based risk analysis system that has been in operation for 34 years and can perform 200 million calculations per week. This system can calculate how the value of shares or funds changes under the influence of currency and oil price fluctuations. The company sells the knowledge and analyses gained through Aladdin – and thus also influences the global financial market by selling insider knowledge.
There is an April 2020 announcement that should make everyone sit up and take notice: “BlackRock and Microsoft Corp. have entered into a strategic partnership to host BlackRock’s Aladdin infrastructure on the Microsoft Azure cloud platform and provide advanced functionality to BlackRock and its Aladdin customers, who include many of the world’s most sophisticated institutional investors and asset managers.”
So what we have here is a direct collaboration between the absolute biggest players in the financial and digital sectors, which brings us to the next topic: digitalization.
Development No. 2: Digitalization
The development of digitalization took its course in the USA in the 1970s. At that time, some young technology freaks founded companies specializing in the still young computer technology. Initially ridiculed by many, several of these companies, such as Apple and Microsoft, virtually exploded and established a trend that was to have a greater impact on global economic events than the industrial revolution of 250 years ago.
One of the most important characteristics of this development is the great influence these corporations can exert on other companies, since they organize their business processes to a large extent and thus have access to the most important asset within our modern society besides money: data.
Some large corporations that were added later, such as Google (founded in 1998, now Alphabet) and Facebook (founded in 2004) base their power almost exclusively on the acquisition and dissemination of information. Because their sheer financial power enables them to keep competitors at bay by buying them up at an early stage of their development, they have become almost untouchable monopolies in their fields.
The position of the major corporation Amazon, founded in 1994 as a bookselling platform, is also unique. It has now completely dominated Internet trade in the Western world and has risen to what is probably the largest monopoly in the entire economic history.
With these companies at the top, an industry has established itself which has penetrated the entire economic system in a historically unprecedented way and which, due to its economic power, has also become a decisive factor in finance.
Not only have digital companies laid the foundation for crypto-currencies and the groundbreaking block-chain technology, they have also become the undisputed heavyweight in the stock markets. The Nasdaq technology exchange, for example, owes its historic rise almost exclusively to the price gains of the five corporations Microsoft, Apple, Alphabet, Amazon and Facebook.
Above all, the interaction with BlackRock gives this cartel-like structure even more power than it has already seized. BlackRock not only holds shares in all five corporations, but due to its unimaginable financial power, it can move any market in the world in any direction desired.
Nevertheless, this absolute superiority faces a huge, historically unique problem that has a similar effect to the low-interest policy in the banking industry: While ever lower interest rates are destroying the banks’ basic business, lending, digitalization is gradually destroying the most important foundation of our society, namely human labor.
Due to the development of artificial intelligence and the resulting increasing robotization of work, digitalization has reached a stage that nobody would have thought possible even five years ago. We are in a phase of job losses that is progressing faster than anything we have ever seen. According to insiders, up to 80 percent of current jobs are expected to disappear in the next ten years due to digitalization.
This has created a new, historically unprecedented problem that raises the following questions: 1. how to keep societies together where there is only room for 20 percent of the workforce? 2. how are an economy and a monetary system supposed to function when 80 percent of the workforce must be kept alive by social benefits? 3. how should an economy and a monetary system function when consumption is only ensured by 20 percent of the people?
The digital-financial complex already has an answer to this problem, but it itself cannot give that answer – at least not yet – because it needs a third party – and that is the central banks.
Development No. 3: The central banks
In the crisis of 2007/08, as in the corona crash of March 2020, central banks saved the system from collapse by mobilizing huge sums of money. Without their intervention, the global financial system would have collapsed.
In both cases – 2007/08 and 2020 – both the US Federal Reserve (FED) and the European Central Bank (ECB) immediately turned to BlackRock in their attempts to stabilize the system. This is no surprise to insiders, for three reasons:
- With Aladdin, BlackRock has more information than all central banks combined.
- After all, the power of the central banks always relates only to their own currency area. BlackRock, on the other hand, is present in all markets of the world.
- To act against BlackRock would cause even to the central banks great difficulties.
So it is only logical that the largest central banks take BlackRock on board in crisis situations when distributing newly created money. This means, however, that we are dealing with a concentration of power such as has never been seen before in the entire history of finance.
But now these partners are facing the problem of the greatest unemployment in the history of mankind. What is their answer? Their answer is: helicopter money. The answer is justified with Modern Monetary Theory. To put it in the simplest terms, it is as follows: To keep consumption going as unemployment rises, central banks need only print enough money and make it available to those who are out of work in the form of a regular payment, euphemistically called an “unconditional basic income”.
This basic income is, of course, by no means unconditional and certainly not a gift to the unemployed. Its sole purpose is to stimulate demand in order to keep an economic system going that is no longer functioning.
But this helicopter money only eliminates temporarily the basic problem and at the same time creates a new one: since the money does not end up in the financial sector as in the past, but in the real economy, it leads to a rapidly progressing devaluation of money in everyday life. In order to counteract this devaluation, the basic income must therefore be constantly increased – and this leads straight to inflation, which quickly becomes hyperinflation and must therefore lead to the complete collapse of the existing monetary system.
So what is the plan of the digital-financial complex? There is a lot of speculation about this at the moment, but we know that both the central banks and the digital companies are working on new currencies. And since we live in a time when this complex has long since overcome national borders, they will all be world currencies.
We may see a flood of such currencies in the near future, but they will all have one thing in common: They will be issued not only by central banks, but also in cooperation with digital companies or perhaps vice versa by digital companies in cooperation with central banks – in other words: they will be semi-private currencies.
We are thus on the threshold of a world in which a triumvirate of a few digital and financial groups and the most important central banks will dominate the global monetary system and thus finally and irrevocably take over world power.
How quickly this will happen can be seen from the roll-back, or rather the abolition of cash, which has been rapidly accelerated during the Corona crisis.
I warned a year ago that cash could be abolished at some point by means of the tax on cash proposed by the IMF. This is exactly what has now been started in the course of the corona crisis in Germany: VAT has been reduced there and the first companies are now passing this reduction on to their customers – on condition that they pay digitally. To put it somewhat more simply: customers pay less for a product if they pay for it digitally.
It will certainly not be long before this principle spreads internationally and rapidly accelerates the process of cash disposal.
If you look at the increase in power that the digital financial complex has achieved in the last six months, you will see that the new system has been a great success: A force has formed here that far outshines the military-industrial complex that U.S. President Eisenhower described in his farewell speech in 1960 as “potential for the catastrophic rise of misguided power.” The power of this digital-financial complex is infinitely greater than that of any government. When this power wants something, it enforces it – as we are experiencing right now – globally.
These are all very bleak prospects, but it is not wise spreading artificial optimism in times like these. Nevertheless, it is precisely in such situations that one should remember that the most brilliant ideas and solutions to problems of mankind in the past rarely came about in simple and trouble-free times, but rather mostly under very difficult circumstances. Perhaps it helps to remember that the Chinese word for crisis consists of two words – danger and opportunity. And even the most important philosophers in our latitudes, especially the fathers of dialectics, have always insisted that, simply put, every thing has its two sides.
But of what consists this chance?
For me, it consists in the logical development of the current situation, which will lead to the bankruptcy of tens of thousands of companies and the dismissal of hundreds of thousands and millions into unemployment in the foreseeable future. That we will experience further, even worse collapses of the financial markets and, as a consequence, riots and social unrest and possibly the sparking of new wars.
All of this means nothing other than that people who, in their majority, have so far refused to deal with political and economic issues, will be physically confronted with huge problems.
But this in turn means nothing else than that we are facing a period in which Enlightenment [in German ‘Aufklärung’ – the translator] is likely to fall on a rarely fertile ground. And in my eyes, Enlightenment is by far the most important task of our time.
So let’s use every day and every hour to open people’s eyes and in this way, without violence and by virtue of our conviction, prevent the digital-financial complex from succeeding in realizing Benito Mussolini’s dream of authoritarian corporatism and leading humanity into a digital prison, into which future generations will be forced.
Let us work for a truly democratic system. In a world dominated by money and characterized by huge inequality, this means first of all: a truly democratic monetary system. One that does not assign preference to one currency; one that does not result in individuals accumulating greater wealth than entire states and giving them the means to rise above others; one that does not allow the real economy to wither away while the financial casino takes on increasingly grotesque forms, and where those who earn most bear the lowest tax burden and where the most clever speculators can avoid all payments [to society].
Let us stand up for a world in which everyone, regardless of the circumstances under which they were born, has equal opportunities and for a world in which people need not be frightened when it comes to illness, but in which it is a matter of course to protect the old, the weak and the sick. And let us remember every day anew: If we don’t act, who else will?