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The Tragedy of Ben Bernanke

Sometimes a seminal event passes unnoticed.  Subsequent developments and hindsight eventually place it in proper perspective. Just such an event may have happened or be in the process of playing out regarding Ben Bernanke, Chairman of the Federal Reserve.

Ben Bernanke’s Warning

Mr. Bernanke expressed the following regarding the precariousness of our economic and financial situation (my emboldening):

By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis.

This statement could have been issued by innumerable internet pundits. Warnings like these are commonplace from so-called internet whack-jobs. But this one came from Ben Bernanke in recent remarks to Congress. Gentle Ben is not one to exaggerate (unless it is toward the positive). His track record for forecasting has consistently erred on the side of optimism, whether it was the housing crisis, the spread of financial contagion or the condition of the economy.

Something’s Changed

These comments differ so sharply from Bernanke’s past pronouncements that one must wonder what

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Why High Inflation Is Inevitable

How this economic disaster ends is something about which many of us speculate. Two extreme endings are likely — a sudden deflationary collapse or a period of very high inflation/hyperinflation which ultimately cripples commerce and resolves itself in a deflationary collapse. In either case, the deflationary collapse is another Great Depression.

It is important to know which route will occur because of what will happen to asset values along the way. A move directly into a Great Depression will depress severely most asset values, especially common stocks, housing and other hard assets. Bonds, cash and fixed incomes may be beneficiaries in the sense that their purchasing power increases.

If the Great Depression is preceded by hyperinflation, just the opposite will happen, at least through the transition stage. Cash, fixed incomes and bonds will be devalued, perhaps even wiped out, if the hyperinflation is severe. Stocks, housing and other assets are likely

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Bernanke is A Goat Not A Hero

The Atlantic magazine cover of April 2012 features Mr. Ben Bernanke as savior and hero. This is silly even by the media’s standards.

Perhaps the Atlantic has suddenly become a humor magazine or perhaps they are revealing their ignorance of all things economic. Or perhaps the adulation of Bernanke is an attempt to convince readers that the worst is over and an economic recovery is underway. All are potentially valid hypotheses for such an absurd cover.

Magazine covers like this one often are looked back on as markers signifying turning points. History is filled with such examples. In the sporting world, Sports Illustrated covers regularly proclaim the invincibility of various teams or individuals only to have them collapse shortly thereafter. In the business world, proclamations of a forever bull market usually precede a collapse. Likewise, proclamations like “the end of stocks” usually precede a massive bull market.

The covers are not causal; i.e. reporting does not influence subsequent events. They reflect the euphoria of the time and the common mistake of assuming a trend can be extrapolated forever. The media, generally late to pick up on trends, jumps on the bandwagon at the (then unknown) end of the trend. This rather consistent behavior of recognizing reality late is used by some as a contra-indicator. That is, when something is hailed in the media, it is a sign that the trend is old and about to be reversed. Contrarians often place bets just the opposite of what the media proclaims.

This Atlantic cover is so outrageous that it is likely to be just such a marker. It is likely to be viewed as the watershed of media folly and ignorance that preceded the coming massive economic disruption. This particular cover may be viewed as the signal for the end for the following:

  1. Ben Bernanke, his monetary policies and the Keynesian paradigm upon which they were based.
  2. The deathblow to what remains of the mainstream media’s credibility.

Regarding the two, I am more confident of the first than the second. There are existential economic and mathematical laws that cannot be avoided. Absolutely nothing has been solved by Mr. Bernanke or government fiscal policy other than a shift in the occurrence of events. In all other respects, matters have been made substantially worse!

An unbearable debt problem was addressed by making it bigger and more threatening. Government spending was out of control and unsustainable. That problem was “solved” by increasing spending massively. Problems that were intractable were transformed into impossible. Nothing has been solved on the economic front. Everything has been made worse!

Claiming that Mr. Bernanke is a hero is akin to claiming that an arsonist is a hero because he reported the fire. Bernanke will eventually be viewed in history not as a hero but as a goat. His legacy will be that of a well-meaning, but pathetic, man who was in over his head and co-opted by political forces. He will be seen to have inherited a very difficult situation and fought it with an incorrect paradigm which made it worse.

Ultimately he will be faulted for the worldwide economic tragedy ahead. His name, rightly or wrongly, will rank with the likes of John Law and other monetary cranks. In short, he will be blamed for the demise of the US as a first-world economic power and possibly held responsible for the collapse of the worldwide financial system.

The second point above is less certain. The motivation behind the Atlantic’s praise of Bernanke is probably an attempt to convey that an economic recovery is underway in advance of the election. While an economic recovery is nonsensical to those who understand economics, the public’s acceptance or rejection of such a claim cannot be determined. Credibility of the mainstream media is a function of perception rather than reality.  The “dumbing-down” of our citizenry, plus the dependence of almost 50% of the public on government support in some form, strongly biases them toward the Statist propaganda spewed by the mainstream media. Eventually this propaganda will be dispelled, although it may not happen until after the economic tragedy.

Regarding Mr. Bernanke’s expertise, there is no evidence that it exists or ever did. To demonstrate his faulty understanding of events and his ability to forecast, one need view this collection of his prior pronouncements:

 

A hat tip to Mish who first reported on this nonsense and who is less kind than me in his assessment of Bernanke. He had another critical article entitled Ben Bernanke: Inflationist Jackass, Devoid of Common Sense, and Clueless About Trade, Debt, History, and Gold that was especially damning. Both articles are worth reading and the video is worth watching (again — I think I may have posted it twice prior to this posting!).

If you view this material and do not question Bernanke’s abilities, then you and the author of the Atlantic article may be the only two literate people in the country dumber than the new “Maestro.”

Armageddon Dead Ahead

We are living through the death throes of an empire. For those citizens who understand what is occurring, the process is akin to being trapped in a taxicab where the meter is on and running at an infinite pace. We cannot get out; nor will we be able to pay when the bill is submitted.

Government Duplicity

The duplicity and outright lies of government are becoming more apparent. There are too many to list here. Here are a few:

  • Favorable forecasts regarding the economy are cruel jokes to everyone, but especially to those unemployed and underemployed. The country is told that the economy is out of the woods and on its way, recovering from the worst recession since the 1930s. No one with an IQ higher than room temperature or the ability to see should believe that.
  • The Obama Administration stumbled badly with their first major promise. We were told that if the stimulus package was passed, unemployment would not exceed 7%. It was passed and unemployment soared over 10%. The package had no promised shovel-ready jobs and turned out to be the biggest pork bill ever. Virtually nothing went to Main Street to help individuals. Unions, government employees and other Democrat constituents were the primary beneficiaries along with the banking industry. President Reagan, like President Obama, inherited a difficult situation when he entered office. To the right is a comparison of what happened under Reagan and under Obama. The chart compares unemployment rates. Changes in the manner in which unemployment is currently measured favorably distort the unmitigated disaster that is Obama’s economic policy. Adjusting data to the same basis, would make the comparison even worse.
  • To issue such an unemployment forecast, the Obama Administration had to be either desperate, economically illiterate, lying or just stupid. Feel free to pick from multiple categories is making your judgment. If that one forecast were all that was involved, there would be little need to harp. Yet every subsequent pronouncement or projection has similarly been wrong, often in similar magnitude. I have not checked all the statements, projections and claims, but I do not recall a single major economic promise or projection being correct. Many have resulted in additional outright lies to cover the impotency of this administration.
  • The projections of Federal Reserve Chairman Ben Bernanke are no better.  He is the only one who might be able to compete with Administration economists for worst forecaster of all time. Again, without checking every major item, I think he is batting 1,000 in terms of incorrect projections. YouTube and other websites provide ample evidence, mocking his dismal forecasting record.

Despite record stimulus, both fiscal and monetary, the economy has not improved. The declaration of the end of the recession was reminiscent of George W. Bush’s premature claims of victory in Iraq but was a necessary part of  of the pretend and extend game that government must play. There is no escape from an economic apocalypse, hence much of the duplicity.

An Economic Collapse Is Unavoidable

It would not be too late to avoid this collapse if this were a corporation operating in a free market. In that case, a hard-nosed, savvy turnaround specialist could come in and save the company by slashing spending mercilessly. But we are dealing with a political entity run by political animals who are neither very smart nor very brave. In such a situation and especially today where leadership is absent in either political party, there will be no solution. Competing interests and entitlements are too entrenched. Politicians behave only to get re-elected and no one has ever run for office successfully by promising to cut programs. Imagine the slogan: “Vote for me and this is a list of things I will take away from you.” Thus, it is impossible to avoid the coming disaster.

The economy continues to worsen because we have squandered and continue to squander valuable resources in an attempt to avoid doing the right things. The political class has chosen to protect their positions by pretending that matters are getting better. The economic system is now so burdened with debt, price distortions and asset mis-allocations that we are on the verge of an economic collapse. When this happens or what of the many incidents that might trigger it is anyone’s guess.

The best efforts of both government and their media cronies are devoted to covering up

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The Outrageous Federal Reserve

This article from Unelected.Org should get your blood pressure up. If you have a problem in this area, perhaps you should not read it.

Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts
unelected.org

The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out. Ben Bernanke(pictured to the right), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning.

What was revealed in the audit was startling:

$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious – the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.

“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.” - Bernie Sanders (I-VT)

When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.

Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar printing presses will eventually plunder the world economy.

The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places

View the 266-page GAO audit of the Federal Reserve(July 21st, 2011): http://www.scribd.com/doc/60553686/GAO-Fed-Investigation

Source: http://www.gao.gov/products/GAO-11-696
FULL PDF on GAO server: http://www.gao.gov/new.items/d11696.pdf
Senator Sander’s Article: http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

www.unelected.org

 

 

 

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