have chosen ‘class war over financial stability

An economist who correctly predicted the Great Financial Crisis says the world’s central banks have chosen ‘class war over financial stability

Marshaled by the U.S. Federal Reserve, central banks around the world have had a unifying philosophy over the past year: Bring down inflation no matter the cost, even if it means risking pain for people and businesses. But that approach has been questioned more than ever this month in the wake of several high-profile banking collapses in the U.S. and Europe. Now a British economist who predicted the 2008 global financial crash has escalated the issue, saying central banks prefer “class war over financial stability.”

The Fed and other central banks have underlined tight labor markets and high wages as key underlying causes behind inflation. But while loosening job markets might help cool down the economy, it also means layoffs, joblessness, and a potential recession—an unacceptable and risky trade-off for some critics.

“[C]ivil servants that head up central banks seem willing to sacrifice private banks and global financial stability in their rush to raise rates, crush demand, discipline workers and shrink the nation’s income,” Ann Pettifor, a British economist and frequent economic adviser who predicted the 2008 global financial crash with a prescient 2006 book on mounting debt worldwide, wrote in her Substack newsletter Sunday.

“In other words, their effective preference is for class war over financial stability."

“Hard to face up to what central bankers are doing”

Silicon Valley Bank took its fair share of criticism for its collapse earlier this month, with many slamming its management, but the Fed also had a role to play in its downfall.

The Fed has been accused of blocking any phrasing about regulatory blunders that may have led to the bank’s collapse when the government announced SVB’s rescue. SVB’s failure was also tied to its assets losing value over the past year as the Fed abruptly shifted away from a near-zero-interest rate environment. That made SVB particularly vulnerable to a liquidity crisis, and other banks are in a similar position.

Link: https://finance.yahoo.com/news/economist-correctly-predicted-great-financial-215332088.html