THE POWER OF

DARK MONEY
T H AT ’ S R U N N I N G T H E W O R L D

NOMI PRINS

An Exclusive Report From

STRATEGIC INTELLIGENCE
Investing in a complex world
 Strategic Intelligence

The Power of Dark Money That’s

Running the World
By Nomi Prins,

“Truth is stranger than fiction… because fiction is obliged to stick to possibilities;

Truth isn’t.” — Mark Twain

To invest profitably in financial markets, you need to understand the hidden power
relationships that drive financial and political events. Ideologies and personal
associations among elites are oblivious to political party lines and international
boundaries. So is dark money.

Dark money is the life force of today’s rigged financial markets. It drives entire
markets up and down. It’s the reason for today’s financial bubbles.

This “dark money” comes from central banks. In essence, central banks “print”
money or electronically fabricate funds by buying bonds or stocks. They use tools
like adjusting interest rate policy and currency agreements with other central banks
to pump liquidity into the financial system.

That dark money goes to the biggest private banks and financial institutions first.

From there, it spreads out in seemingly infinite directions affecting different

financial assets in different ways.

It’s easy to see how this dark money affects the stock market at a high level,
because we can monitor its constant movement.

Yet these dark money flows stretch around the world according to a pattern of
power, influence and, of course, wealth for select groups. To be a part of the dark
money elite means to have control over many. How elite is a matter of degree.

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 The Power of Dark Money That’s Running the World

These dark money flows are not based upon conspiracy theories. To the contrary,
elite alliances make perfect sense and operate publicly. Even better, their exclusive
dealings and the consequences that follow are foreseeable. But only if you
understand how the system works and follow the dark money flows.

After having formed the international analytics group for Bear Stearns in London,
I was a managing director at Goldman Sachs in New York. Goldman is the poster
child for hidden international power alliances. It’s one of the Big Six U.S. banks
and has produced Treasury secretaries for three of the last four presidents, Robert
Rubin for Democrat Bill Clinton, Hank Paulson for Republican George W. Bush and
Steve Mnuchin for Donald Trump.

Those types of elite political-financial connections don’t happen by merit or by

accident. For Goldman, they go back to the Great Crash of 1929. Back then, former
Goldman head Sidney Weinberg nearly watched his firm go up in flames. People
were panicking. So what did he do? He became very friendly with post-1929 crash
U.S. president Franklin Delano Roosevelt.

Travelling the country, raising money for FDR’s campaign, Weinberg worked the
political-financial establishment in a way that lasted more than seven decades and
half a dozen presidents. Further back, J.P. Morgan, who bailed out the Treasury
Department, was asked to solve the 1907 panic by Teddy Roosevelt and sponsored
the meetings that turned into the Federal Reserve. I traced more than a century
of these power-elite lines in my book All the Presidents’ Bankers. They continue to
colour how things work today.

The Truth: How the Global Dark Money System

Really Works
Shortly after 9/11, I left Goldman Sachs because I was disgusted that everyday
Americans were collateral damage to these financial banksters, especially during
such tragedies. And I’ve dedicated my work since to helping you understand what’s
happening in the world and what it means for your money.

I first began digging into the elites’ connections covering the past few decades in
my first book, Other People’s Money: The Corporate Mugging of America. There,
I warned of the calamity that would befall the financial system due to the newly
emerging credit derivatives and CDO markets.

While other analysts and researchers, like Jim Rickards and even David Stockman,
reached similar conclusions, I was one of the few turned “insiders” that delved into
the details of this global exclusive framework to see it coming, and I wasn’t afraid
to talk about it.

It was clear to me what would happen in the aftermath of the repeal of the Glass-
Steagall Act that since 1933 had separated people’s money from complex trading
practices, which is why I forecast the recent financial crisis and how and why it
would unfold. Nobody listened then. Dark Money won yet again.

I continued along this path later in It Takes a Pillage: Behind the Bonuses, Bailouts
and Backroom Deals From Washington to Wall Street, which I wrote during the

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 Strategic Intelligence

financial crisis. I saw that the same people and their families kept popping up
in different administrations or cycled multiple times through Wall Street and
Washington. They benefitted from dark money and public office.

The banks that survived, got bailed out and expanded in the wake of the crisis had
the strongest top-level government connections. Full stop. If you can believe it,
these ties span back over a hundred years. So in my last book, All the Presidents’
Bankers: The Hidden Alliances that Drive American Power, I dug deeper.

The project took me to presidential libraries across the country, perusing documents
that hadn’t been touched in decades — or ever — to unearth the evidence that
supported one key conclusion from which so many others stem: These elite
relationships shape the world around you.

Politics and finance are driven by people using their relationships to keep their
position and their power. This power-politics-finance tripod shapes global markets
and international economies — and ultimately the way you live, invest and work.

Turning Dark Money into Real Money

Since late 2007, the Federal Reserve has embarked on grand-scale collusion with
other G-7 central banks to manufacture a massive amount of dark money. The
scope and degree of this collusion are unprecedented.

Their efforts to provide dark money into the banking system are constantly
peppered with cheerleading phrases like “unlimited” and “by all means necessary.”
What they are really saying is that they are playing a game with no defined
objectives.

Starting with the Fed, central bankers have continued to build policy on the fly.
The central bankers’ science experiment has spread beyond financial policy. It has
morphed into something even Dr. Frankenstein couldn’t have imagined.

Confidence in the Fed and the U.S. dollar (as well as in other major central banks
globally) has dropped considerably.

Even central bankers have admitted that their dark money creation scheme was
largely a bust, but not in any official statement.

The fact is, this dark money system is not going away. If anything, it is evolving.

As Janet Yellen, the Federal Reserve chair, told a crowd during a recent speech in
Washington, “The bottom line is that we must recognize that our unconventional
tools might have to be used again.”

What she was signalling is that this era of collusion and inflating balance sheets is
far from over.

Cracks in the Facade

On July 31, 2017, Stanley Fischer, vice chairman of the Fed, delivered a speech
in Rio de Janeiro, Brazil. He addressed the phenomenon of low interest rates
worldwide.
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 The Power of Dark Money That’s Running the World

Fischer admitted that “the effects of quantitative easing in the United States and
abroad” are suppressing rates.

He also said there was “a heightened demand for safe assets affecting yields on
advanced-economy government securities.” What he meant was that investors are
realising that low rates since 2008 haven’t been effective at fuelling real growth,
just asset bubbles.

Remember, Fischer is the Fed’s No. 2 man. He was also a professor to former Fed
Chair Ben Bernanke and current European Central Bank President Mario Draghi.
Both have considered him to be a major influence in their economic outlook.

The “Big Three” central banks — the Fed, the European Central Bank and the Bank
of Japan — have collectively held rates at a zero percent average since the global
financial crisis began. For nearly a decade, central banks have been batting about
tens of trillions of dollars in dark money.

They have dictated the cost of money and fuelled bubbles. They have amassed
assets on their books worth nearly $14 trillion.

Since the global financial crisis, the big winners have been the big six U.S. banks
that profited from access to dark money. They benefitted from central bank
purchases of their securities that exaggerated the value of the remaining securities
on their books. They used printed money to fund buybacks of their own shares and
pay themselves dividends on those shares. By producing and distributing artificial
money, central bankers distorted reality in global markets. Multi-national banks
have colluded with them.

After the Big Six banks passed their latest round of stress tests in June 2017, they
began buying even more of their own shares back. The moves elevated their stock
prices. The largest U.S. bank, JP Morgan Chase, announced its most ambitious
programme to buy back its own shares since the 2008 crisis, $19.4 billion worth.
Citigroup announced its biggest buyback, $15.6 billion.

The Fed’s all-clear was another version of QE for banks courtesy of the Fed. Instead
of buying bonds via QE programmes to keep rates down and the cost of money
cheap, the Fed greenlighted banks to speculate in their own stocks, creating more
artificiality in the level of the stock market. U.S. banks disclosed plans to buy back
$92.8 billion of their own stock to say ‘thank you’ to the Fed.

Continuing the trend, according to S&P Dow Jones Indices, “Stock repurchases by
financial companies in the S&P 500 rose 10.2% in the first quarter [of 2017] and
accounted for 22.2% of all buybacks.”

More ominous than that was a clear sign that decades of money-conjuring collusion
had helped the same banks that caused the last crisis. Proof came in the form
of a letter to the U.S. Senate banking committee from Thomas Hoenig, the vice-
chairman of the U.S. Federal Deposit Insurance Corp. (FDIC), the government
agency in charge of guaranteeing people’s deposits. He wrote that in 2017, U.S.
banks used 99% of their net earnings toward purchases of their own stock and
paying dividends to shareholders (including themselves).

They legally manipulated markets in plain sight by pushing their own share prices

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up with cheap money availed to them by the central banks that are supposed to
regulate them.

As of January 2017, global debt levels stood at 325% of GDP. Global debt estimates
in 2016 were at $217 trillion. The amount of securities the G-3 central banks held
on their books, about $14 trillion, was equivalent to a staggering 17% of all global
GDP. In mid-2017, The ECB, BOJ and Bank of England were still buying $200 billion
worth of assets per month.

In the wake of that buying, noncash instruments — crypto currencies and hard
assets like gold, unrelated to the main G-7 monetary system — will be increasingly
attractive on the fear that in another major downturn, central banks and private
banks will collude to retract cash and liquidity from their customers.

Banks will want to protect themselves and turn to governments and central banks
again. In the absence of some sort of outside central bank benchmark, like a
modern gold standard or more use of currency baskets like the SDR, currency wars
will continue to be fought.

With rates already near zero and in negative territory in some countries, there
would be little to no room to manoeuvre in the face of another crisis. After a
decade of dark money policies with no real end in sight — one thing has become
increasingly clear: Central bankers have demonstrated gross negligence regarding
the consequences of their actions.

If rates were to rise higher for the U.S., so would the cost of servicing all the
accumulated debt. This would hurt companies domestically and abroad, incurring
more defaults and prompting a rush by the banks involved in derivatives associated
with that debt to concoct more toxic assets. The vicious cycle of central bank
bailouts would simply reverberate again. But — and this is the tricky part — we will
also need to watch closely for the other side of those trades.

Savers and pensioners are getting close to no interest on their nest eggs.
Meanwhile small businesses have to jump through hoops to get loans to grow.
Ultimately, big banks have played the system — and us — again, this time with
central banks helping them. The threat of an even larger collapse looms as stock
markets and global debt have been propelled higher.

As we approach the tenth anniversary of the collapse of Lehman Bros. and the 11th
anniversary of the true beginning of central bank collusion into the financial crisis,
we recommend ensuring you have adequate portfolio exposure to defensive assets,
including those related to gold, the yen, and U.S. Treasury bonds.