Three years ago, I reviewed Nomi Prins’ last book, All the Presidents’ Bankers. (See “Finance According to Non-Academics,” Spring 2015.) The book traced a century of connections between U.S. presidents and U.S. banks. As I explained it, the book’s endnotes made clear that Prins relied on “a wide range of contemporary books, articles, and original documents drawn from the deep bowels of the archives of numerous presidents.”

In her new book Collu$ion, she departs those dusty presidential archives for an around-the-world tour of many of the key global financial centers. According to her Author’s Note:

To research this book, I set out on a global expedition. I visited Mexico City, Guadalajara, Monterrey, Rio de Janeiro, Sao Paulo, Brasilia, Porto Alegre, Beijing, Shanghai, Tokyo, London, Berlin and many cities throughout the United States.

As the book’s subtitle makes clear, her focus is the world’s central bankers and their method of creating money out of thin air. Throughout the book, she uses such verbs as “fabricated” and “conjured” to describe the many methods of creating money. No matter which descriptor she chooses or which global city she is talking about, the result is always the same:

Since the financial crisis, these illusionists have created money, altered the nature of the financial system, and orchestrated a de facto heist that enables the most powerful banks and central banks to run the world…. Much of the twentieth century belonged to Wall Street. The twenty-first century now belongs to the central banks.

Prins’ approach / Her method for laying out the facts is relentless. Her formula is to choose five global economies: Mexico, Brazil, China, Japan, and Europe. She explains how the Fed conjured up money to prop up the banking system in the United States and then how, in rapid-fire succession, central bankers in each of the other economies responded to the Fed.

Prins tracks Mexico’s two central bank governors during the crisis and summarizes their balancing act between looking inward to respond to domestic pressures and outward to coordinate interventions with the Fed. She explains how Guillermo Ortiz (late 1990s through the end of 2009) and Agustin Carstens (2010 to 2017) “reacted in different ways to the push from the Fed and the pull from their country.”

Ortiz cooperated with the Fed on issues like a $30 billion foreign currency swap line that supported the Mexican financial system and he even dabbled with quantitative easing. But he was not seen as a team player, as he took the opportunity of the crisis to stress that the G10 economies, especially the United States, failed at regulating and supervising their financial institutions. As Prins puts it, “Ortiz had gone too far” and was replaced by Carstens, who was “likely to be more of a yes man…. With his establishment background, he would be a point person of the Fed and offer a gateway to Washington Beltway economic leaders.” Although Carstens did criticize U.S. monetary policy at times, he was considered much more of a team player.

The leadership of Brazil’s central bank fell to the hawkish Henrique Meirelles during the crisis years through January of 2011. As Prins bluntly states it:

Meirelles did not blindly follow the Fed’s money-conjuring policies. Instead he was forced to balance domestic requirements against those of external monetary doves espousing cheap money as a cure-all for economic woes.

Brazil made it through these years with a relatively mild recession in 2009. During 2010, a year Prins labels “The Best of Times,” the Brazilian economy clocked a strong 7.5% growth rate in gross domestic product. That same year, voters elected Dilma Rousseff as president, which resulted in a change in central bankers, as Prins explains:

Rouseff changed the guard at the [Central Bank of Brazil]. Inflation hawk Henrique Meirelles got the boot. The dove Alexandre Tombini became chairman on January 1, 2011 when Rouseff took office…. Rouseff’s choice signaled that Brazil would follow the United States and Europe and embrace lower interest rates.

By 2013, Brazil “faced a potential currency crisis” and the financial system was “in distress.” Inflation rose and rates rose to double-digit levels and by 2015 a deep recession had taken hold. “Responsibility for [the] decline was connected to multiparty economic elites and political hits and errors,” writes Prins.

In China, Zhou Xiaochuan was the dominant figure in central banking circles since 2002, relinquishing his chairmanship earlier this year. Zhou chose to criticize the United States and leveraged the crisis to raise China’s profile and push the yuan as an alternative to the almighty dollar as part of the International Monetary Fund special drawing rights (SDR) basket of currencies. With the crisis still in full swing, he spoke publicly that the “financial crisis was a by-product of loose regulations and U.S. dollar dominance in the international monetary system.” In early 2008, when many in the United States were hoping the turmoil of 2007 would blow over, Zhou correctly predicted, “The crisis has not yet run its course and it shouldn’t be ignored.”

Notwithstanding his criticisms, Zhou followed the Fed’s lead in reducing interest rates during 2008. But the criticisms continued, as Prins explains how

Zhou presented a detailed critique of the monetary policies of major countries such as the United States, United Kingdom, European Union, and Japan. According to him, they negatively affected the way emergent countries were supposed to deal with their own monetary policies. He lambasted money-conjuring policies.

By late 2016, the yuan was included in the SDR basket. U.S. Treasury Secretary Jack Lew’s snarky response: “Being part of the SDR basket at the IMF is quite a ways away from being a global reserve currency.”

The leadership of Japan’s central bank has not been dominated by a single figure as in the case of its Asian neighbor. Masaaki Shirakawa was governor of the Bank of Japan during the height of the crisis from 2008 to 2013 and Haruhiko Kuroda has served in that role since 2013, chosen by Prime Minister Shinzo Abe. Prins does not hold back in her introduction of the latter governor: “Kuroda took the helm on March 2013, and proceeded to conjure money faster than any other central bank leader—including Ben Bernanke—ever had.” She further gives the Bank of Japan (and Shirakawa) credit for being “the original G7 money conjurer, formulating an early version of quantitative easing in 2001.”

Right from the start in 2008, Shirakawa was all-in with the Fed’s loose-money, coordinated approach: “He believed that there could be no solution to its pressures without collaborating, or colluding, with other central banks.” But Japan faced a problem because its rates were already quite low, so the first intervention was a cut of the key benchmark interest rate from 0.5% to 0.3%, combined with “powerful monetary easing.” Enter Kuroda in 2013, along with negative interest rates and the concept of “unlimited easing.” Even after the Fed ended its final round of “quantitative easing” in October of 2014, Japan still had its foot on the monetary accelerator: “Kuroda picked up where Bernanke left off.”

The last stop on Prins’ world tour is the European Central Bank (ECB), whose actions many readers who follow central banks are likely already familiar with. Prins dedicates one chapter to the term of ECB President Jean-Claude Trichet (“Monsieur Euro,” 2003–2011) and another to the term of Mario Draghi (“Super Mario,” 2011–present). She addresses their contrasting styles:

The French hawk and the Italian dove controlled money according to their monikers and on the basis of their individual relationships with the U.S. elite. And though Trichet was slightly reluctant to follow the Fed’s easy-money lead at first, Draghi would adopt the Fed’s policies, hook, line, and manufactured-money sinker.

Trichet agreed to a swap facility of up to $30 billion with the Fed in March of 2008, which would soon balloon to $240 billion by September. But rather than fall in line with the thinking at the Fed and cut rates, Trichet chose to raise rates in July 2008. As Prins tells it, “He struck an independent path from his Fed brethren.” But by October, “Trichet realized that he would have to succumb to collusive forces.”

Prins’ finale / Prins pulls together her work on the collusive central bankers in her final chapter:

Policies that conjured artificial money to deal with the crisis continued far beyond their originally stated purpose. Measures that were supposed to be temporary lingered, virtually unchecked, unquestioned, and unstoppable by an external authority.

She echoes Milton Friedman’s old line that central banks “vacillate between taking credit for what they deem are positive results in the world economy and remaining silent in the wake of catastrophic failures that result from their policies.” Her final conclusion is not optimistic: “The threat of a collapse larger than the 2008 financial crisis looms because of the plethora of asset bubbles that central banks have created and fueled—setting the scene for a disastrous fall.”

My one substantive quibble with the book is that although Prins emphasizes her travels in accumulating much of the material for the book, very few interviews are cited in the endnotes. The vast majority of the sources cited are online references to speeches and articles.

Readers of this review might think that a narrative discussing intervention after intervention for 250-plus pages could be a dry read. They would be right. All the Presidents’ Bankers was more readable, thanks in part to its manageable chapter lengths of 15–30 pages as compared to 30–50 pages for Collu$ion. But I am hard-pressed to say that there is a different way that the many monetary interventions could have been presented.