Mervyn King: I want people focused on public service, not bankers, supervising the city … Mervyn King is looking for a new breed of regulators focused on public service and not huge banking-style pay packages when responsibility for financial regulation transfers from the Financial Services Authority (FSA) to the Bank of England in 2012. The governor said it was time to move away from the model where people take two or three years out to work as a regulator before returning to City of London jobs. "What we really want is a cadre of people who see their professional motivation in life as being regulators working in public service," he told the Treasury Committee. … "What we want to build up now in the area of regulation is not a team of what I would call bankers, but a team of people who clearly understand banking, but who have professional commitment to a lifetime of public service as a regulator." – UK Telegraph
Dominant Social Theme: Good, gray men will save us.
Free-Market Analysis: And so we see how memes grow. One dominant social theme we already understand. Central banking itself is a kind of priesthood with Wall Street execs, such as Goldmas Sach's Llyod Blankfein (above left), publicly boasting of their divine relationships to society. And "Mervyn King, Good and Gray" (or is it Gandalf the Gray?) is one of the leading servants in this area. Then there is public service itself and the calling that is regulatory work. This is another priesthood entirely, or shall we say a priesthood aborning.
It reminds, in addition to Tolkien, of the Doublemint gum commercial – "two mints are better than one." And so are two priesthoods. Of course separately both priesthoods are dysfunctional. But no matter, the mainstream media will continue to treat these two separate entities as logical outcomes of Western regulatory democracy. Both are dominant social themes – regulation and central bankers – and both are central to the power elite's command and control. One denies all but a few the power of printing money. The other denies all but a few the ability to do as they choose in the Western world's larger securities markets.
Only in the era of the Internet is it possible to see entirely what has been wrought, and it is impressive indeed. The central bank structure has enabled the elite to build privileged bank franchises around the world. These banks are protected entities, unable to fail and more and more they are the cynosure of ALL significant funding in both the public and private sector. Sure there are anomalous events such as Microsoft or Apple. But for the most part if you want to Do Something Big, you have to run it past Wall Street or the The City, etc.
Then there is the regulatory side. Here we see a consolidation of power as well. Regulatory capture is well known, of course – the idea that the regulatory authority ends up serving the largest entities that it regulates. But beyond regulatory capture, there is the aspect of control. There are so many regulations at this point that almost everyone is doing something wrong at some point in some way. Regulators that want to shut down inconvenient entities merely have to probe until they come up with something that serves as suitable rationale.
What is an inconvenient entity from a regulatory standpoint? Assuming that one believes that Western regulatory democracy is a form of leveling (in which only a few chosen entities are allowed to grow bigger), most ventures of any ambition are probably looked upon with suspicion by the powers-that-be.
Naked short selling syndicates, for example, manipulate the markets for public securities (once they are sufficiently short) by illegally "kiting" short positions through various clearing brokers (thus avoiding buy-ins) and then utilizing the power of their puppet "journalism" friends (often holding themselves out to be private "market cops") to launch public smear campaigns. The short-sellers benefit as "diligent" regulators quickly respond to the blasphemous reports, which naturally drives the share price of the attacked enterprise lower. The short-sellers walk away with pockets full of cash at the expense of the investing public and the elite benefit from manipulative market practices that ensure their enterprises are never threatened from below. The idea is that between control of money and control of business behavior, any non-controlled power centers can be snuffed out at will. The whole process is destructive, corrupt and intentional. Fraud with destructive intent, if you please.
Alternatively, the structure gives the power-elite tremendous control over entities that it chooses to encourage. Google and Facebook are both said to have been at least partially funded by American intelligence operations. (That's no secret, just go on online and look for yourself.) The idea is that such entities benefit inordinately by exposure to the power-elite nexus and are therefore bound by chains of gratitude and business rather than by regulation and monetary control.
What is interesting about all this is that the power elite feels the need to work in such a roundabout way. A thousand years ago, kings and queens equipped themselves with the requisite military power and declared their virtual Godhood. Whatever was to be controlled by these mortal divinities would occur because of divine right. There was no need for justification from a market standpoint. The Church itself would make the argument to the faithful and military force would deal with the rest. One can see the "progress." Today instead of the twin "convincers" of religion and force-of-arms, we have regulators and central bankers.
It does not amount to quite the same thing, though. The elite has felt, throughout the last several centuries the impetus to work circumspectly. This is because – as we often mention – the Gutenberg press changed the playing field about 500 years ago. The elite's command and control strategies shattered and were only reconfigured over time into something we call regulatory democracy. Thus, instead of exercising God's will, the elite are supposed to rule on behalf of the "people's" will.
This has certain problems though. Since the elite is not actually looking for guidance – merely justification – the elite needs constantly to work via subterfuge. This actually worked quite well for several hundred years but now the Internet has likely revealed this strategy. Democracy is indeed the "God that Failed" – and in turbulent times epiphanies having to do with the larger power structure are increasingly available not to the general mass of people (who don't matter) but to the animating intelligentsia (which does matter).
It is this unaffiliated intelligentsia, which is ALWAYS the target of any power elite. Those who have been co-opted are not a threat, but millions of wide-awake people who arrive at their understanding of manipulation and control later in life and begin to resent the lack of fairness and equity – these are a mortal danger, always, to the powers-that-be. In the era of the Internet, the elite is feeling most stressed, we would guess.
Thus cometh, once again, a form of Divinity. It is all too predictable. Mervyn King is looking for the pure of heart. He is looking for those willing to sacrifice a dramatic career (so the implication goes) for the steady remuneration of a few hundred thousand a year and a generous pension for life. Oh, the sacrifices! Well, we suppose nothing much changes, actually, as past priesthoods were probably fairly well compensated as well. It all has to do with what the state deems important. It will pay as much as it has to in order to implement dominant social themes.
Our point is this. Europe is something of a tinder box these days. The Greeks are rioting and the young Irish are emigrating. In America, the anti-establishment Tea Party is sweeping the nation and when one looks at the Internet comment sections of the mainstream media one is apt to be surprised by the vitriol, the nearly out-of-control hatred that many US citizens seem to spew toward both Congress and President Barack Obama.
The power elite had to know this day was coming. And our hypothesis is that they intended it – as the logic of central banking would predict an eventual crack-up boom. What the power elite did not anticipate was that the remedies that had worked so well in the 20th century would be entirely penetrated by this new electronic media. What was justifiable became questionable. And what was once beyond question became dubious indeed.
Still the power elite and its enablers sally forth. They bail out banks because they always have – unaware perhaps that by doing so in this day and age they are raising tremendous questions about money and its control. They regulate and re-regulate, unaware of the massive resentment that is aimed not only at the private sector these days but at regulators as well. They intend to play on popular resentments but do not understand that the resentment now extends to governance as well. The meme of regulatory democracy has become, you could say, a victim of the crack up boom.
It will not in our opinion benefit King to proclaim a combined regulatory and central banking Divinity. The conversation has moved past that. He may indulge in wishful thinking and rearrange the deck chairs on the Titanic, but the ship is still sinking. One cannot elaborate on a priesthood when faith is actively diminishing. The regulatory state has been the protectorate of the power elite for over 100 years. Is tolerance now lacking?
"God" may be dead, but we are not yet willing to say the same about regulatory democracy. On the other hand, it is not nearly so persuasive as it was in the 20th century. Much has changed. Dominant social themes are under attack. Yes, the power elite is a formidable invention. But perhaps they will have to take a step back as they did long ago. Divinity in certain eras is easier to proclaim than install and sustain.