In 2016, on the eve of Donald Trump’s victory, the BBC released a provocative documentary from British filmmaker Adam Curtis. Like all of Curtis’s movies, the film is kaleidoscopic in its presentation and sprawling in its scope, but it centers around a relatively simple thesis. Over the past forty years, our leaders have abandoned mass politics for a consumerism whose convenience and seeming security have enabled them to preserve their grip on power. “Extraordinary events keep happening that undermine the stability of our world,” he declares toward the beginning of the documentary. “Yet those in control seem unable to deal with them. And no one has any vision of a different or a better kind of future.”
Curtis calls this experience (and the film that explores it) “hypernormalisation” — a term he borrows from the Russian science fiction authors Arkady and Boris Strugatsky, who captured the alienation of late Soviet society in their novel Roadside Picnic (the novel later served as the inspiration for the Andrei Tarkovsky film Stalker). In her latest book, Goldman Sachs executive–cum–journalist Nomi Prins coins the titular phrase “permanent distortion,” which she uses to describe a related phenomenon: the growing cleavage between global financial markets and real-world economies.
While it acknowledges a range of bad actors ravaging working people, Permanent Distortion sets its sights on the US Federal Reserve and the practice known as quantitative easing. In the wake of the 2008 crash, Prins writes, the Fed poured trillions into banks with no strings attached, while millions of people sank into destitution and despair.
If the Federal Reserve is the progenitor of permanent distortion, she argues, then the subprime mortgage crisis serves as its villainous origin story. On October 3, 2008, amid historic financial losses, President George W. Bush signed the Emergency Economic Stabilization Act, creating $700 billion as part of a Troubled Asset Relief Program (TARP). Two months later, the Fed cut interest rates to zero, where they would remain for seven years. Taken together, these moves signaled the emergence of the Fed as a new “sub-superpower” — one that could bend global markets to its will by providing credit swap lines to other central banks to convert their currencies into sought-after US dollars.
The rest is misery. Citing the research database RealtyTrac, Prins notes that foreclosures leapt 21 percent in 2009, affecting nearly three million households. As many as 3.7 million slid below the poverty line in 2009, per the Economic Policy Institute, while one in five children were living in poverty. The banks paid their fines and emerged largely unscathed. By 2014, Prins observes, their stock index was up 280 percent from a market low five years earlier.
The federal government could have addressed the economy’s persistent stagnation through fiscal policy. Instead, it leaned on the loose monetary policy of quantitative easing, or QE.
“The idea [was] that ultimately business and people living in the real economy would be able to borrow more and pay less interest on their debts,” Prins writes. She further explains:
These [QE] injections were intended to generate more consumption and investment that would impact real people at every level of the economy. . . . The problem with the QE premise was that it relied on big banks doing their part. It assumed that megabanks acted in predictable ways and would work to support and build out the broader economy. The injected money would then flow to smaller businesses and the general population instead of megabanks using the funds to fuel speculation and market-oriented trading activity. Reality was much different.
At a time when the Fed is violently reversing its post-2008 easy-money policies, events would appear to have eclipsed this critique. But for Prins, the pandemic ushered in a new stage of capitalism whose dimensions are still being determined by the QE experiment that preceded it. Even before the first official COVID-19 infection, a kind of hypernormality had already overtaken our financial system, warping economics as we had previously understood them. In 2019, eleven years after Lehman Brothers filed for bankruptcy, the Fed announced another rate cut — its first since the crash. This wasn’t a response to a specific crisis. Instead, Prins contends, low rates and the seemingly limitless ability to print money had become a “permanent fixture” in the Fed’s toolkit.
During the pandemic, Prins explains, “too big to fail” became “too big to correct.” As economies ground to a halt around the globe, central banks printed trillions more to keep markets afloat. The result has been perhaps the single greatest transfer of wealth in human history. Between the fourth quarters of 2019 and 2020, she writes, the planet’s more than two thousand billionaires saw their net worth increase by $1.9 trillion — a figure that has only increased in the years since. In December of 2020, when the United States averaged approximately 2,500 COVID deaths per day, the Dow Jones Industrial Average soared to a then record 30,606.48. Meanwhile, poverty rose from 9.3 percent in June of that year to 11.7 percent in November, with eight million more people falling below the poverty line. The latest Congressional Budget Office report indicates that the poorest half of the country now holds just 2 percent of its wealth.
The chasm separating markets and people has never been wider.
“The pandemic aggravated the existing distortion between the wealthy and everyone else,” Prins writes. “Cheap money found a natural host in the markets, much as the coronavirus did in humans. Just like the virus, money was bent on multiplying itself as quickly and easily as possible, no matter what asset bubbles, inequality, political polarization, or economic or social unrest it caused along the way.”
Permanent Distortion is not without its false notes. As perspicacious as Prins is in her critique of elite consensus, she nonetheless succumbs to one of its more pervasive language tics. The word “populism” appears over twenty times in the body of the book, but Prins never provides the reader with any kind of working definition of the term. Instead, she uses it almost interchangeably with words like “nationalism,” “jingoism,” and “extremism.” Populism can contain these elements, of course — Brazilian president Jair Bolsonaro offers one example — but it’s not a foregone conclusion.
Along similar lines, Prins tends to dismiss left and right populism as two symptoms of the same disease, as though presidents Andrés Manuel López Obrador of Mexico and Nayib Bukele of El Salvador are equally harmful to a body politic. This skepticism is especially confounding considering that Permanent Distortion is devoted in no small part to detailing the failures of the technocratic center.
Still, these criticisms amount to quibbles. Not unlike Adam Curtis before her, Prins has attempted to give language to a period of accelerationism we are all living through but struggle to name. Reflecting on the end of Angela Merkel’s rule in Germany, she writes:
More important than the direction of sentiment was the speed with which political preferences were flipping back and forth. This meant even if the left side of the political spectrum gained marginal favor against more right-wing or conservative leaders, chances were it was only a brief window before voter sentiment would swing back again.
Recent polling suggests that Democrats have been buoyed by the Supreme Court’s decision in Dobbs v. Jackson and Republican legislative overreach on abortion, but a piano is dangling above the Biden administration, to say nothing of American workers. In an address last month at the Jackson Hole Economic Symposium, Fed chairman Jerome Powell signaled a willingness to loosen the labor market as a means of controlling inflation, which reached a forty-year peak of 9.1 percent in June. As others have written, the speech carried echoes of the first Reagan administration, when then Fed chair Paul Volcker raised interest rates as high as 19.1 percent and triggered a massive recession in the process, causing unemployment to rise to 9.7 percent in 1982.
Increasing interest rates could wipe out labor’s recent nominal gains by reducing employment and weakening worker bargaining power — all to address a crisis largely of the Fed’s own making. Prins reminds us that that Fed is “an organization established by elite bankers and led by unelected government officials who [face] minimal accountability for their decisions.” Until we can begin to imagine a truly democratic alternative, we will remain at the mercy of this financial distortion, and all of the monsters it will unleash.