Nomi Prins On What is Really Going on Behind the Scenes
Today on the Rich Dad Radio Show, we are joined by Nomi Prins, author of
“Collusion: How Central Bankers Rigged the World.” Nomi is a financial
expert and investigative journalist, and is devoted to empowering and
educating women on all matters of finance.
Nomi created “Know Money” salons, designed especially for women in all
professions. These salons dive into local, national and global financial
current events, and cover topics on the economy, banking, sociopolitical
environment, personal finance, business and more. Nomi intends to resurrect
the Know Money events in 2022, after shelving the live gatherings due to
COVID-19.
Nomi started banking, holding a math degree and a music degree. In her own
words, she wanted to move to New York City, and ended up with a job at a
bank on Wall Street before she even had her own checking account. She moved
through the Chase Manhattan Bank to Lehman Brothers, then to running and
creating a research department at Bear Stearns in London. She would then
wind up at Goldman Sachs.
What the banks were really doing behind the scenes…
Nomi left banking and Goldman Sachs after 9/11, having seen the changes in
the environment of banking, the negativity towards customers and what she
was observing behind the scenes. She became an investigative journalist so
that she could expose the truth of what she was witnessing, and to educate
people about what was going on inside the industry. “There were so few
people doing that at the time, and even today, it takes a sort of leap of
faith and some courage…”.
Combining journalism and consulting roles, writing books, she gets into the
nitty-gritty of central banks. Since the 90’s, Nomi has been ‘boots on the
ground’ and visiting central banks. One of the first in China. She marks
the changes of central banks from boring background players into being
really in the markets, and changing the very nature of finance.
After the Pandemic: the point of no return.
Nomi is working on a new book, tentatively titled “Permanent Distortion”.
There is a complete disconnect between how markets behave, in the
macroeconomic environment, she says. Where money flows into the financial
community and into financial markets, and how real people and the real
economy is working for the people, it’s limits in its growth, and how that
relates to how well the markets have done.
This was happening before the pandemic, she says, but it’s really increased
to a point of no return after the pandemic, because economies are slipping
so much further beneath where markets are performing. Central banks have
created a role for themselves, where not only are they the market, they
have unlimited abilities to continually, artificially, stimulate it. The
more they do that, the more the real economy is left behind and it becomes
a permanently distorted effect.
Buying Junk for Cash
There’s been a legacy, like a bloodline relationship, between bankers and
presidents, and the administration of presidents. It doesn’t matter if they
are Democrat or Republican, Nomi shares. The relationship transcends those
labels. Where it’s gone really off the rails in this pandemic environment,
she says, is that at the start of the pandemic, the Fed came in and
basically increased the size of its bond-buying program. It’s called QE,
Quantitative Easing. What it really means is buying junk for cash. The
Federal Reserve, Nomi says, and other big central banks around the world,
artificially or electronically conjures money when they deem it necessary.
That amount of money has doubled from its peak during the financial crisis
of 2008 to where it is now, and it’s happened more or less quietly, because
the Fed doesn’t talk about it.
“When Federal Reserve Chairman, Jerome Powell gets on Bloomberg, or gets on
CNBC, he talks about, "We need to do this. We're helping the economy. We
have a poor employment picture. We need to get to full employment, and all
of these things that we need to do, i.e., the Fed." What he doesn't talk
about is in the backdrop. What we're actually doing on a regular basis is
we are providing injections of money directly to the biggest banks, because
those are the ones that have the most bonds, or Treasury securities, or
mortgages already on their books.”—Nomi Prins
The banks are pumping the money back into themselves, buying back their own
stock and they money is not going back into the economy or the average
person.
In the very beginning of the pandemic, the Fed suggested or said that the
banks could not buy their shares for a few months or over a couple of
quarters, but then they said they could. The Fed created the idea that they
were sort of in conjunction with the mainstream economy by saying, ‘just
for a little while, hold off on buying your own stocks-it’s not a good
look.’ Now, they can do so.
In Crime, this is called Money Laundering
The Fed produced nearly $3.8 trillion of money from basically nowhere, Nomi
says, to funnel through the banking system. If the crime world, this is
called laundering, but they don’t call it that. The idea is the money is
going directly to banks and without strings attached, without having it go
into the real economy.
The government set up loans such as the PPP; loans that could go to small
businesses that were affected by the pandemic. The idea was that some of
this money would go through some of these banks, but the banks themselves
made money off of that funding from the government. So not all of it
actually went to people.
“So that brings up the point of, okay, we've got this economy, we've got
all these unemployed people, we've got businesses shutting down right, left
and center. We've got people suffering. The economy's in a mess but the
stock market's at all time high. There's no reality between the two.”—Kim
Kiyosaki
Think of money like a virus in the way it multiplies.
“It likes to find the easiest host and these are all new analogies. We are
all in a pandemic era. But it (money) likes to find the sort of host in
which it can multiply the fastest. This money was fabricated in many ways
by the Federal Reserve and gone out through Wall Street. And the same thing
has happened in other large economies for their central banks and banking
systems around the world. It’s easiest and quickest for that money to find
a host in financial assets. That includes the stock market. That includes
the bond market. That includes certain areas of real estate. But the stock
market is almost the fastest place for it to replicate itself, for it to
basically create returns on itself.
And so banks have a whole ton of extra money announce a 0% interest again,
plus they're getting extra money in return for bonds that they don't want
any way, that they have sitting around their books. They can also lend that
money to hedge funds and they can lend that money to private equity funds
or funds that basically take very cheap money from wherever they can get
it, and also get involved in multiplying that money-virus effect. And so if
they also get behind investing in or speculating in the stock market,
there's all this extra, extra money coming in that the sheer force of its
presence just by being there has this effect of lifting the markets.”—Nomi
Prins
The real economy doesn’t work that way, Nomi says. Restaurants and bar
owners, for example, cannot simply bounce back and they don’t have this
force beneath them of this sort of money.
Emerge from the Emergency: What you can do to take charge and gain control
of your own financial life.
Nomi Prins wrote an article called War of the Financial Worlds. She says
the Fed is basically distorting the value the real economy compared to
financial assets. The more those Fed assets grow relative to real assets,
the greater the inequality gap.
Nomi offers an example. If you have two blackjack tables at a casino, table
1 and table 2. Table 1 has a bunch of people around it, and all of the
money they are betting on every single hand is NOT THIERS. It’s fake money.
Money NOT coming from their pockets, their job, their savings. Every time
they lose a hand, they get more money to play with. At some point, they are
going to hit a winning streak and the money is going to multiply in that
game. No matter what happens on that table, win or lose, the players get
more money to keep the game going.
Then, you look at table 2. This table is people playing with their own
money, money earned, money that would be used for living expenses and money
that is at risk. If those players lose a hand, or too many hands, the
players stop playing. They lose too much and they stop playing because you
can’t bet money you don’t have.
The fake money in table 1 creates a bigger gap between the haves and have
nots. Table 1, full of fake money is loud and cheery. Table 2 is quiet,
because they don’t have fake money to risk. This visual is what has been
happening in the markets relative to the real economy.
The real economy got hammered…
Businesses closed, restrictions were placed, and many people’s livelihoods
were levied. A bar owner must close, for example, if they don’t serve food.
But there’s a lot of people that are affected by that; their wine
distributors, stockers, staff, etc. It’s a major impact on real people
through multiple levels of the economy. None of them are getting the fake
money. Even the help of the governments PPP loans can only help for so
long, before a small business dips too far into the red. They don’t have
the kind of lift that the reserves money has for the banking system and the
stock market.
Nomi explains in depth; “so that's definitely been a pattern change that
we're looking at, obviously people who have realized they can work from
home. They can find homes that are bigger outside of urban areas. They
don't necessarily have to come into those offices all the time, and they're
going into other places. The other effect that's happening it is that some
of these private funds and hedge funds and equity funds and sort of program
funds are kind of aggregating money together and buying some of this
property and sort of bidding up prices as well without even setting foot in
those houses. So there's a lot of different elements to that market. And so
what I tend to do is look at the financial markets as well, for example,
the stock market, and look at some of the behavior patterns that have
changed there.
So one of the things that we're talking about is that a lot of money flow
has gone into the markets through really big players that have had now
access to all this cheap money and all the fed support directly. And that's
elevated a lot of different companies to weigh more than they should
potentially be worth. It's also created a scenario where a lot of people
who were at home, looking at this happening, wondering how, wait a minute,
my economy looks nothing like what's going on on CNBC and the NASDAQ right
now. How do I play? And one of the things that that created is this
emerging group. You use the term emerging, that's great. This emerging
group that actually had been there for a while, but grew of retail
investors, finding different places to get involved in this market, because
it seems to be the only place where money can potentially accumulate.
And that happened through Reddit basically, with groups called
WallStreetBets. And there are a lot of stories out there about GameStop and
different companies being bid up by or elevated by interest for retail and
then slammed down by short selling from large investors, and all sorts of
back and forth play across the board. But there've also been some
opportunities where people have been able to get, because of seeing that
hype into some electronic platforms where they can basically monitor their
own money. And even if they don't have a lot of it, they have been starting
to look at ways to take control of it individually.
And one of those ways has been through, for example, the small cap market,
which is the part of the stock market that isn't Apple, that isn't Google,
that aren't these companies that are basically off-shore, all of their jobs
and all of their profits and don't really pay taxes no matter what the
corporate tax rate is. And channeling that into some of the smaller
companies. Still companies that are operating and buyable that have been
able to sort of survive through this period, but their share prices aren't
hugely expensive. Their market values aren't so high that there's no
upside. And so what I've been looking at just from that standpoint is
finding areas to be involved in the market in a way that the upside
actually is related to the business plan of the smaller business owner and
the employees involved in that.”
How do you get people to take action?
“The thing about money, as I was talking about in the earlier segment, is
that money will multiply if it is consistently involved in whether it's a
market or one small cap name or a real estate investment or whatever it
might be, or merely interest in your savings account, which is tiny right
now and insignificant. But the process, the behavior that overrides the
fear, especially when you have been knocked down and you're saying, "You
know what? I don't have money for extra groceries this week. You're telling
me to buy a stock. Are you insane?" And it's like, no. What I'm saying and
what I think is a really important behavior pattern to adapt, especially
after all that we have been through, is to start. As we're talking about
tiny, start with $10 a week and find an app, and there's many of them,
that'll just take it out of your bank account, and that you can divert it
into a slice of a share, a slice of a real estate endeavor or whatever it
might be.” - Nomi Prins
Rapid Growth Opportunities
Nomi has a new product, developed with her team, called Rapid Growth
Opportunities. The idea is to look at the small cap environment. There are
trends where the economy has been jolted or the markets have been jolted,
where there are smaller companies that can survive. They have cashflow,
good management, and can outperform not just other small cap stocks, but
also the broader market. This product helps define and recommend those
companies, and using education and research, help highlight an area that
could be strong for someone look to invest. Visit
https://paradigm.press/publications/prg/
for more information.
Nomi Prins Books are available at nomiprins.com.