The American Spectator : Stop Bernanke's Hanky-Panky

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Stop Bernanke’s Hanky-Panky

By Quin Hillyer on 3.4.11 @ 6:10AM

Raise rates, strengthen the dollar, now.

It’s time to start hiking interest rates.

Just as the Fed did early in the previous decade, Fed Chairman Ben Bernanke is artificially keeping interest rates too low for too long, which could be baking hyper-inflation into the monetary cake while weakening the currency so much that numerous sources are predicting the dollar soon will no longer be the world’s “reserve” currency. If, as Milton Friedman said, “inflation is always and everywhere a monetary phenomenon,” then we’re in for trouble. In the year from January 2010 to January 2011, the M-1 grew by 10.3 percent and M-2 by 4.3 percent. The pace is increasing. In the three months since October, M-1 grew at annual rate of a whopping 15.6 percent.

Price hikes are occurring too. These aren’t all because of monetary policy: Ethanol mandates are driving up food prices as well, and political turmoil in the Mideast combined with President Obama’s multitudinous efforts to stop domestic fossil-fuel production are aiding the price hikes in oil and gasoline. But the fact remains that only a weak housing market — housing costs are weighted to count as more than a third of the Consumer Price Index — is keeping the official measure of inflation as low as it is. For owner-occupied housing, that’s an artificial means of assessment: Mortgage costs haven’t fallen even as housing values have dropped. But with food and oil and a huge spate of other commodities all seeing rapid cost hikes, the average person is feeling the pinch in his wallet even as the official index remains low.

Literally halfway through writing this column, the latest email arrived from the always-wise economist David Gitlitz, blasting Bernanke: “The Fed chair didn’t do any better attempting to explain the ongoing commodity price rally. The CRB spot commodity price index is now at record high levels and has risen by 85% since the Fed began its first quantitative easing program two years ago.” And: “At some point, the reality that inflation can no longer be dismissed as a non-issue might become too obvious even for Bernanke to ignore. That realization, however, is not likely to come soon enough… to prevent the American economy from facing a bout of substantially higher inflation.”

There’s a reason why gold has tripled in price in the past few years: The dollar is as weak as it has ever been, and gold buyers know that inflation is on the way.

Bernanke might think his zero-interest policies and weak dollar will stimulate the economy, but it won’t. It’s not fear of a hike in the discount rate to 1 or 2 percent (still remarkably low) that is keeping investment on the sidelines; what is hindering the economy is regulation, justifiable fear of out-of-control regulatory enforcement, fear of exposure to a systemic collapse caused by growing federal and state debts, and all sorts of other predictable (and eminently rational) responses to the policies and practices of the most leftist administration this country has ever known. When inflation finally kicks in, then, it is likely to be Carter-like stagflation, with the economy still relatively stagnant even as prices go through the roof — because investors still won’t want to invest, or consumers to spend, in the face of such headwinds.

In the long run, monetary market manipulation by the Federal Reserve is almost always a bad idea. On the other hand, if the market has been over-manipulated in one direction, it might make sense for the Fed to manipulate it for just a little while in the other direction to make up for the error. Hence, while purists might want to say it’s time for Bernanke just to let interest rates float however they want to, without his hand really on the tiller, it might instead be time for the Fed to actively push up interest rates for just a while in order to re-establish the interest market.

What is at play in this suggestion is the idea that psychology plays a large role in economic decision-making. Here’s how it works — at least at the extremely low interest rates in play right now: First, with all of these other uncertainties and bad policies weighing on them, businesses are perfectly content to sit on the sidelines and see what happens. American corporations right now are sitting on nearly $2 trillion in cash or cash equivalents right now, rather than investing it. That $2 trillion is a record, by a long shot. But if the people who run businesses see interest rates start to creep up, and expect them to creep up some more for a while to come, they might figure it’s time to unleash their capital while the getting is still good. In other words, if they want to make investments that require a combination of capital expenditures and new borrowing (or expenditures backed by credit of some sort), the thought of rising rates might make them act now rather than later — because later in this case would mean at higher rates.

This might be counter-intuitive, but it makes sense. It’s like the oil Fram oil commercial: You can pay now when it’s cheap, or pay later when it’s more expensive. In that case, you should pay now — or, in this case, invest now. The corporate dollar will buy more right now than it will later. For a little while at least, then, slowly rising rates (combined with the expectation that the Fed will keep hiking them at least for a little while) will actually spur, rather than retard, economic activity. More economic activity means more economic growth, which means more tax revenues without higher rates, which means a better long-term outlook for the dollar as well. And that, in turn, helps avoid what few Americans realized would be an absolute nightmare for us, which would be the loss of the dollar’s status as the world’s reserve currency and the advantages that accrue for Americans from that status.

Increasing signs of the Republican House’s seriousness about budget discipline, and about rolling back regulatory excess, will only increase the confidence of corporate leaders in the relative semi-safety of bringing their money off the sidelines. If adults are in charge, it’s more safe to play.

The Fed therefore needs to re-set the expectations game. If it signals that the economy is strong enough to allow interest rates to rise a little, investors will believe the economy is strong enough — and therefore, by acting with more confidence and investing more, they will actually make the economy stronger. At least at first, it becomes sort of a self-fulfilling prophecy of the right sort. That’s how psychology works.

None of this is to say that Bernanke should repeat the idiocy of continuing to push up discount rates and the federal funds rate month after month after month, as the Fed mistakenly did in the mid-2000s. What is suggested here isn’t a major and lasting artificial tightening, but only a temporary one. After that, the market can take over very well, thank you very much.

Inflation and especially stagflation must be avoided. The dollar must be strengthened. And the Fed must stop spooking the markets by signaling that only the drastic action of keeping its rates at zero can stave off another Great Depression. Confidence begets confidence. So far, Bernanke has acted as if we all should be running scared. He should reverse course now, before it really is too late.

About the Author

Quin Hillyer is a senior editor of The American Spectator and a senior fellow at the Center for Individual Freedom. Follow him on Twitter @QuinHillyer.

Letter to the Editor View all comments (93) | Leave a comment Leave a comment

Bill Hussein O'Stalin| 3.4.11 @ 6:19AM

The game is over for all contestants when the debt ceiling arrives.

If the Congress refuses to raise it, then Bernanke, Geithner and the Democrats are gutted.

The scare tactics have already been circulating but the wiser politicians should say enough.

If the debt ceiling is raised then the world will know we don't have the guts to handle our own priorities and set limits.

That's the only key left and if avoided, the end game is closer then many think.

Nancy in NC| 3.4.11 @ 12:02PM

Check out a video called "The Secret of Oz" available on line. I'm not sure how much of it I believe, but it will certainly get the wheels turning and scare the pants off you. But after some research, I believe there is more truth than fiction.

mames| 3.4.11 @ 12:41PM

Let me see, the Fed Res was going to buffer us from the ups and downs of the market/economy. Have they been successful _ NOOOOOO!

The Fed needs to be eliminated as it is unconstitutional and it is neither Federal or a reserve ( they just print inflationary dollars). Bottom line, let the market manage itself. What arrogance these little men have in believing they can manage anything let alone the whole USA economy. Truly evil men.

Shamus| 3.4.11 @ 1:07PM

Have you seen the new version of Monopoly?

You start by giving the banker all the money. Then the game ends.

GavInTucson| 3.7.11 @ 12:25AM

The game IS already over. We're doomed. Most republicans have signaled their willingness to raise the ceiling in exchange for concessions on small cuts. Again, small cuts.

And I think this will fly in the face of the budget that Paul will introduce later this year. It'll die the death of a thousand cuts by both parties, eventually.

The new normal is going to destroy our economy and the nation.

oldfart| 3.4.11 @ 6:42AM

Raising, or allowing rates to float, for a short period, is not the PC answer of the current government.

Deborah D | 3.4.11 @ 6:53AM

Quin, from your keyboard to God's ears (and I don't mean Obama!) :) I lose sleep thinking about a destitute America. I really don't have much confidence in Bernanke. I can't figure him out at all. I don't think the Fed cares about the country -- I think it's become a "global" bank. Americans are just the piggybank.

Occam's Tool| 3.4.11 @ 11:07AM

Quin---a beautiful, subtle and clearly reasoned argument. Absolutely georgeous and correct.

Judy | 3.4.11 @ 6:59AM

Economy is always a tough subject... No matter how Bernanke decided or how the FED act, US is already in huge debt - $14,205,639,600,000.00 & counting... Each of us bare about 45k USD in debt (& counting) ...

Chuck| 3.4.11 @ 7:23AM

This is simple, the Central Bank is unconstitutional. Congress, not the Fed is constitutionally authorized to coin money as in gold and silver coins. Many states are contemplating the re-introduction of gold and silver coins to replace the near worthless dollar. The foreign dominated Fed has behaved like the Weimar Republic in recent times therefore it's time for Congress to audit and then legislate the Central Bank out of existence.

mames| 3.4.11 @ 12:42PM

how right you are!

Gold BC| 3.4.11 @ 5:16PM

John Kennedy tried to bypass the Fed in June 1963 via an executive order allowing the treasury to print debt free US treasury notes aka silver certificates in lieu of debt ridden federal reserve notes. The amount printed equaled the value of silver in US vaults. Kennedy saw the financial danger ahead with massive federal spending and debt buildup/interest payments benefiting a few in the Central Bank but not the public at large. His untimely death 5 months later ended this.

Irish22| 3.5.11 @ 8:44AM

I agree the Fed must be ended -- they never get it right (Hmmmmm??????) But it scares the crap out of me that CONGRESS would be in charge of printing money!!! Have you seen what they have done lately????

martin j smith| 3.4.11 @ 7:48AM

Bernanake and Gheithner --agents of Obama. They must be grilled, skewered and demolished politcally speaking of their efforts to destroy our economy. Spending,printing money etc are totally destructive and they are defending these policies. Demolish their ar4guments and most important--get rid of Obama--politically speaking in an election. Or, in impeachment.

Bob White | 3.4.11 @ 8:08AM

Perhaps inflation is the goal, he just can't be honest and say so. How else are we going to pay off debt if we don't screw bondholders?

PhilTheCapitalistPig| 3.4.11 @ 9:10AM

Its not the goal, its a consequence of a goal of paying off debt by printing off extra dollars. In other words, its the consequence of not being responsible with spending and borrowing in washington.

There's nothing federal about the federal reserve. Its a private entity. But they are in cahoots with the govt. Whenever the white house needs to cover up their spending gaffes, they print off money to pay for it and its ultimately a back door tax on the people by making every dollar we have worth less.

Worth less to the extent that the money supply is increased. Quin gives those numbers at the beginning of the article. Just look at those numbers as the % tax increase on top of what you already pay.

Nunya| 3.4.11 @ 2:15PM

Phil, how right you are. The Federal Reserve is a private bank, with many foreign owners. They were set up to do exactly what they have done--steal the real wealth from the population for the benefit of the owners.

Think of this--the Treasury says we need "X" number of dollars for our budget--whatever the number is, doesn't matter. They go to the Fed, who print money out of thin air, then LEND the money back to the Treasury with interest. So, if We the People want to spend a billion or three, WE end up paying the Federal Reserve back ALL of that money PLUS the interest. Trillions have been taken from us in this way, which is why Rothschild made his famous statement: "Give me control of a nations money, and I care not who makes the laws" -- The banker in control of the money eventually ends up with all of it.

hardcard| 3.4.11 @ 8:35AM

benny and timmy are running a shell
game for obamasoros, sooner than later the end will come.

JP| 3.4.11 @ 8:38AM

I think Bob White hit the nail on the head. Borrowers in general and governments in particular like inflation, as it reduces the cost of thier debt. Also, Bernecke in a very round about way is forcing businesses to unleash thier capital. Inflationary policies reduces real net cash flow, as the value of the company's cash is whittled away. Better to spend the cash now then watch it decrease in real value tomorrow.

Bernecke is playing with fire. Once he finally realizes there's a problem (I think he really does, but his lords and masters prevent him from saying so), it is too late. Inflation once it gets going is a touch nut to crack. Volker did it, he readically increased interest rates for 2 years. The attendent recession was short, but very painful.

In light of the damage the Fed has done to our economy these last 12 years, it is time for Congress to reform it from top to bottom.

PhilTheCapitalistPig| 3.4.11 @ 9:18AM

I agree with everything except the word "reform". I would replace it with "eliminate". I think going back to the gold standard is the only way to ensure stability of our currency.

There's no way we will ever pay off the interest the central bank charges us. If I'm the only source of paper money, and I lend you a dollar, require that you pay me back $1.10, then where does the $0.10 come from? That's right, come back to me and I'll lend you $1.10. Just pay me back $1.21. And so on, and so on. Its neverending. The income tax, from what I've been told, is used solely to pay the interest on our debt to the federal reserve. I could be wrong on this stuff. Somebody correct me if I am.

Occam's Tool| 3.4.11 @ 11:08AM

Ya know, that might work.

Nunya| 3.4.11 @ 2:17PM

Yep, it's a good gig if you can get it....

The extra interest that the central bank is charging can only be paid back with tangible assets, which is why the Fed bank in NYC has such a large stash of gold...

SpiralArchitect| 3.6.11 @ 12:51PM

Gold is required to be on the gold standard.

The US dollar will not be the Global Reserve Currency much longer. You think $3 for bread & $4 for gas is bad? add a couple zeros to that - B.O. has said outright he wants to turn this nation into a Socialistic society. We are almost there...

MikeD| 3.4.11 @ 8:57AM

Both Bernanke and barry the muslim should be indicted for treason and then imprisoned for life. These two criminals are engaged in the most insidious campaign to destroy the American economy since the great depression.

It's beyond criminal. Unfortunately, the average American is so poorly educated about our history and general economics that they have no clue what is going on. And, the most ignorant among us is at the very center of barry's support. These people are sitting fat, dumb, and happy; completely oblivious to the tsunami of inflation that is going to slam us like a magnitude 10 earthquake.

It's a carefully crafted disaster that just needs some spark to set it off. With the misguided ethanol policy that usually intelligent farmers have become addicted to, the planned destruction of the Dollar, and barry's treasonous refusal to develop our own energy resources, the quake will hit with enough force to initiate riots in the cities when the least informed will cast their nets for blame. They'll focus on the GOP and Conservatives, egged on by the totally irresponsible media wing of the demo-comms.

Keep your powder dry, stock up on non-perishable foods, and prepare for several months of civil disaster. Acquire silver coins, and try to open a bank account in a stable foreign country with higher interest rates. Australia is paying 6% to 7.5% on savings accounts and CDs. Foreign bank accounts are still legal, although barry is slithering around behind the scenes to criminalize it before too many Americans wise up. The easiest way to do it is to open an account in a multi-national bank's American branch and use that account to set up a totally legal account in a country where the bank has a presence. As always, pay attention and read everything. As usual, ignorance is no excuse; it's easy to take your time and read the paperwork.

I must warn you that, if you do this, you will have to file a form on your 2012 income tax return; but that's a year out. Additionally, pay attention to the country where you send your hard earned money since some of them are even worse than the U.S. when it comes to taxing interest. At least your principle may be somewhat protected from the fall of the dollar.

I am not a financial advisor, and this certainly is no solicitation for anything; just some friendly advice.

During my long and occasionally successful career, I was in way too many countries where inflation measured in hundreds of percent DAILY ravaged the purchasing power of everybody.

Remember, if a loaf of bread cost $25,000, the national debt would cease to be a problem. But, our savings and retirements would be totally wiped out. Can you afford to take the chance? Knowledge is power.

Len| 3.4.11 @ 9:14AM

I read an article like this and the responses, and I can only shake my head. Seriously Quin, and I really mean this, do you not understand economics? Do you see anywhere in the USC where a private bank is allowed to determine monetary policy and essentially rule over the economy?

Money, real money, commodity money is an actual item that has value due to it's being able to be used by someone. The dollar itself used to be only a name/measurement for a specific amount of gold, 1/20 of an ounce. This meant that people would exchange dollars and be able to get food, or furniture or gold as they so desired. At one time instead of gold, people used tobacco, salt, furs, or other real items of value to engage in exchange.

Once though someone can counterfeit money, as in print pieces of paper that have no real value yet then use that paper to obtain real items, then that someone or someones will gain wealth without actually creating wealth. This means that those having first access to the newly printed money have that present purchasing power, while the rest of us down the line suffer from the inevitable inflation. You throw in fractional reserve banking, wherein a bank only needs to have 1 dollar to loan 10 dollars (HUH??), then those with this ability (monopoly privilege from the government) also gain wealth without actually creating wealth.

This is how many in this country get rich, not free market practices, but money manipulation that has nothing to do with actual wealth production, that adds nothing to the economy. It is upward wealth redistribution, it is legalized fraud and theft AND YET CONSERVATIVES IGNORE IT?

How is it that these crimes that the government actually by law grants to go on are not shouted against from the highest political rooftop? This is why I shake my head, Mr. Hilyer only criticizes the manner in which these crimes occur, not the criminality of the FED.

PhilTheCapitalistPig| 3.4.11 @ 9:25AM

And conservatives mock Ron Paul for attacking it so vigorously. I'm just sayin'.

I'm no Ron Paulite. As "out there" as he is, at least he has the balls to attack the fed. Actually, now there's two congressman prepared to audit the fed. He and Rand.

Our congress is a joke.

PhilTheCapitalistPig| 3.4.11 @ 9:28AM

I would also add that the IRS sure does reserve the right to audit YOU, or YOUR BUSINESS, but we don't audit the source of our currency????

What have they been up to over the last 80-90 years? Who knows.. I guess nobody gives a damn..

Occam's Tool| 3.4.11 @ 11:10AM

No, I don't mock Ron Paul on that. His domestic policies are very sound. His foreign policies are insane.

PhilTheCapitalistPig| 3.4.11 @ 11:41AM

Agreed!

Michael Tomlinson| 3.7.11 @ 3:02AM

Ron Paul and his greed for gov't pork are part of the problem in DC. It is time the Paul acolytes accept their guy isn't a conservative much less a deficit hawk. He's a big spending, conspiracy theroist with an anti-Semitic bent.

Quin| 3.4.11 @ 11:01AM

I'm dealing at the level of practicalities. Whether we like it or not, the Fed exists, and it's not going to go away overnight. Until it's no longer there, we may as well argue for it to do the wise thing economically.

PhilTheCapitalistPig| 3.4.11 @ 11:42AM

I agree with that 100%.

Len| 3.4.11 @ 11:43AM

No, it's not nor can go away overnight, but why accept it in our midst destroying our economy, selling us out to other countries, allowing the privileged "ins" to accrue wealth in an unjust manner, be an ally in the continual growth of government spending, etc., etc.

My question also still stands; why s the FED not exposed for what it is? Why are there no articles calling the congress to do what's right? Why not tell the truth that, yes, far too many republicans are in the pockets of big business/corporations/financial institutions, and that, THAT is why they will not reduce the scope of unconstitutional government overreach?

As for Ron Paul being "loony" on foreign affairs, let's say that he is; he would still only be man when it comes to those matters, but on domestic issues, why is he again only one man? Why are his arguments, his ideas, his plans for getting of entitlements and the FED so ignored? Why do even the "tea partiers" not rally around him domestically? Why are there no "true" conservatives who have advocated what he has domestically?

PhilTheCapitalistPig| 3.4.11 @ 1:30PM

I think you answer the question yourself, to a certain extent. Ron Paul makes himself the "Hot Potato" within Conservative circles for his foriegn policy views. As much as I agree with Ron on the Federal Reserve, he negates his credibility with foreign policy. Rand on the other hand, is much more sensible on foreign policy. I can only hope that he will have more success gaining traction on the issue. Who knows?

Len| 3.4.11 @ 2:21PM

My point was that he should be one of many on domestic issues, not one of one. I'm not going to argue the foreign policy right now.

Clint| 3.5.11 @ 4:48AM

"Rep. Paul’s overall victory in the Tea Party straw poll is a testament to two truths. The first is the mutual affinity between the Tea Party and the well-known aspects of Rep. Paul’s ideology. Perhaps without the Tea Party realizing it, its activism has emerged from a broader context of constitutionalism and libertarianism that has been championed for many years by Rep. Paul, who can legitimately be viewed as the grandfather of the Tea Party movement. Throughout his career, Rep. Paul has faithfully resisted the tide of fighting undeclared, empire-building wars, jacking up the federal deficit, and expanding government through bailouts and stimulus packages — the very same fiscally-conservative policies which helped galvanize the Tea Party movement."

Bob Miller| 3.4.11 @ 9:16AM

Someone should compare the results of all major US economy policy decisions since 2000 with the likely results had decision-making been random (flipping a coin).

Steve G| 3.4.11 @ 9:34AM

Too late, too late. The Bernank has jumped the shark and America, thru the election of Obama, has jumped it with him. It is now endless deficits, endless ZIRP, endless QE, endless treasury bond laundering.......

Hello Argentina!!!! Que lastima!!!

Hillel| 3.4.11 @ 9:38AM

Look at the bright side, with credit cards you won't need a truck to carry the cash you'll need to go to the supermarket.

AnyoneButNewt| 3.4.11 @ 9:41AM

We might as well call the current administration "That 70's Show." Only it is far more tacky and even less funny.

Stan Redmond| 3.4.11 @ 9:57AM

Eliminate the fed. How is it the most powerful man in the world is an unelected unnacountable bureaucrat? Scary.

But don't worry. Ben and Obama say there's no inflation. Even though the raw materials for my manufacturing business have increased nearly 400% in 10 months. Gasoline has raised 60 cents in 3 weeks, and 17 cents in just one night.

Louis Jenkins| 3.4.11 @ 10:39AM

The Federal Chairman, good old Ben, is shyster, a crook, and a charlatan. He hasn't a worry. We're the ones doing the worrying. Abolish the Fed. Ride Bernanke out of town on a rail, then maybe we can begin to talk. He's playing us like an out of tune banjo. Start prepping now folks. Yes, I know things are appearing to be a smidgeon better, but we haven't seen nothing yet.

Nunya| 3.4.11 @ 2:23PM

Agreed. It's going to get ugly...

Aquanomics| 3.4.11 @ 10:44AM

Mr. Hillyer's argument is wrong on several levels. It was either Kudlow or Reynolds who explained recently why American company cash holdings are not "bulging" from an unwillingness to invest. QH's demand that the Fed raise interest rates is just another example of the Keynesian claptrap running wild in D.C. Economist Sumner, whose bonafides far exceed Mr. Hillyer's, argues the Fed should set NGDP goals and let price levels come what may. He argues further (and my interp could be iffy) that NGDP expectations are jobs creators.

American history is riddled with fiscal irresponsibility followed by inflations as the central bank inflates away the debt and in the process our future. Our only hope is to devolve the federal government, eliminate the bulk of its current mandate and return to the republic centric model our founders gave to us.

Quin| 3.4.11 @ 11:05AM

No, not Keynesian at all. Totally supply-side, with a psychological twist. As supply-siders believe, I would be perfectly happy to let the rates float; the only difference is that I want the Fed to correct its current errors first, in order to re-set the market in the short term. After a year or so, I'd let the supply-siders take over monetary policy for good.

Steve A| 3.4.11 @ 12:00PM

Quin, Very logical, well constructed argument. The only flaws I see are that all of the valid reasons you state for corps. sitting on cash will still exist (regulatory etc.) even if rates are manipulated upwards. Further, as rates move higher, the negatives for the housing market would track right along & compound the problem.

I still say let it happen as you suggest. There is no way out of this box without some pain. It is too late.

Steve A| 3.4.11 @ 10:48AM

Bernanke is not too tough to figure out if you do a bit of homework. He can really be summed up in one sentence: He will use any weapon at his disposal to combat deflation.

David T| 3.4.11 @ 10:50AM

Quin--The last thing we want is for the Fed to raise interest rates as a sign of "confidence" in the economy. Let's avoid the whipsaw effect of bad Fed policy. Interest rates should not be raised artificially, but should be allowed to rise as a result of market forces.

David T| 3.4.11 @ 10:52AM

Quin--The last thing we want is for the Fed to raise interest rates as a sign of "confidence" in the economy. Let's avoid the whipsaw effect of Fed overreaction. Interest rates should not be raised artificially, but should be allowed to rise as a result of market forces

Clint| 3.5.11 @ 4:40AM

"Mises realized that lowering the interest rate below the free market rate causes bad business decisions. Those decisions may look good for a while and the economy as a whole may show apparent growth, but it is all unsustainable. All that is left after the bust are misallocated resources and piles of debt. True prosperity has to be built on savings. Low interest rates that are a result of an abundance of savings give accurate market signals that the resources necessary to carry out projects actually exist."

NeilBJ| 3.4.11 @ 11:29AM

I would like someone to justify why we should maintain the counterfeiting enterprise known as the Federal Reserve System. It cannot be justified on practical grounds or on moral grounds. It does more to destroy our economy than to help it -- unless you think the dollar losing 92% of its value since the Fed was created is a good thing.

Oldefarte| 3.4.11 @ 11:46AM

Quin, your usual TRUTH comes IMO to a false conclusion/solution. The WOLFMAN has obviously crawled into political bed with HOPE/CHANGE GUY in order to governmentally goose our economy. He/they are aware of inflation's distinct possibilities, but do not give an excrement, as long as their desired kick up in employment results. That's WHY they are all DOMESTIC TERRORISTS. They do things strictly for POLITICALLY BENEFICIAL PURPOSES [ie suing Arizona over immigration, withholding Gulf drilling permits, ignoring black on white discrimination cases at Justice, ramping up regulation when legislation fails, etc]. In my lifetime, there has never been an Fed chairman so obviously politically biased and corrupt as the current one, and his/their actions are destroying this country's economy in the process. Inflation will result [and business is on the sidelines] as you state. The solution is not for consumers/business to begin investing/purchasing, as long as this president is sitting in the WH. If/until he is either impeached or defeated, consumers/businesses should continue to save or stuff their mattresses!!!!!!!

PhilTheCapitalistPig| 3.4.11 @ 11:49AM

“The refusal of King George to allow the colonies to operate an honest money system, which freed the ordinary man from clutches of the money manipulators was probably the prime cause of the revolution.” -- Benjamin Franklin

Nunya| 3.4.11 @ 2:25PM

Awesome. :-)

axbucxdu| 3.4.11 @ 12:32PM

The Federal Reserve represents a large scale, centrally organized system, that uses time delayed incomplete feedback, riddled with noise, for control.

Such systems are prone to instability, and shall we say, the "smoke" effect. Just another example of the unrealistic ideas that lie at the core of prog schemata...

Who Knows?| 3.4.11 @ 1:00PM

Buy gold.

That said, grow up, Conservatives!

People who CORRECTLY bemoan the illegality of the Fed, as I’ve long done, are actually simply wasting their time. Yes, it’s fun to vent and blow off steam about all the CW ills of the human race.

However, screaming one’s opinion about the Fed is an opportunity cost, because there ain’t no way, Jose, the Fed is going away in our lifetime!

Also, dear Quin---where did you study economics? What are your qualifications to analyze and make recommendations about this very complicated subject?

Here’s a basic very conservative core aspect---never let the best be the enemy of the good.

Look, what Bernanke and the Fed WANT is reasonable inflation, because the bald and bearded Ben got a PhD that entailed serious study of what went wrong during the 30’s, especially foolish monetary policy.

So, he absolutely fears DEFLATION, because he and we know what its arrival would bring.

Also, Quin, do you read the Wall Street Journal?

If so, surely you noticed a recent myth-busting takedown by the supply-sider (?) Alan Reynolds, about all the trillions of dollars just “sitting” on the sidelines. Businesses are simply being CONSERVATIVELY prudent, and there’s no way that your psychological “confidence” argument is valid.

Therefore, a wise person would take care of him or her self, and family, by indeed recognizing that a dollar is just a piece of paper, guaranteed to slowly (hopefully) erode in value, but there is no law saying one must have on hand any more of them than are needed to transact regular business or personal purchases.

Short of a physical or economic or political catastrophe, even wasting dollars are adequate to grease the wheels of commerce, along with all the other fiat currencies.

And if all hell does break loose, we’ll all be in the boat anyway.

All this is written by one who’s spent MANY years whining about Fed-induced inflation.

Why, my parent’s generation complained about the way a coke cost only a nickel when they were young, or was it a penny? At the time, around 1958, it was all of a dime.

And now---what? I don’t eat such crap, but is it around a DOLLAR?

So WHAT!

America has endured such slow inflation, OVER TIME, with regular growth in per-person economic productivity, so that NOW our standard of life is pretty damn good.

Ah, it seems like just yesterday most families were limited to one car, and just walk around any city these days---the streets and driveways are crowded with BETTER cars!

PhilTheCapitalistPig| 3.4.11 @ 1:36PM

I agree with that. There's plenty that can be done to make things much better than they are without even thinking of the Fed. That being said, is there a reason to have an entity that can manipulate our economy to suit their interests?

The federal reserve was sold to the American people as a way of preventing recessions and depressions. Well, I want my money back on that deal! Literally AND figuratively!

Len| 3.4.11 @ 2:26PM

Correlation does not prove causation. Better technology + time = better cars and whatever else you want to throw in there.

Oldefarte| 3.4.11 @ 2:36PM

First, my qualification is GRADUATE BUSINESS SCHOOL, okay? So, what's yours........COLUMBIA/HARVARD LAW DEGREED, with a minor in CHICAGO COMMUNITY ORGANIZING? Bernanke [and now Greenspan] is obviously UNDER THE POLITICAL TABLE for the president and attempting to monitarily JUICE the economy's skids [since YA BOY can't now get any more fiscal non-stimulus out of the Republicans in congress]. Gradual inflation? Give me a GD break. Do you have nay recollection of the Carter presidency and the explosion of hyper-inflation, double-digit wise? Obviously not! How in hades can you have your professed increased productivity with 10% [actually 15-20%] UNEMPLOYMENT? Don'yt you understand that productivity becomes FINITE when you have decreasing employment [ever heard of GETTING BLOOD OUT OF A STONE?]. Oh yeah, your declared former generation post WWII exhibited ONE HOUSEHOLD WAGE EARNER, not today's TWO/BOTH [if employed at all]. Grow a brain....this economy is headed down the crapper, thanks to the current domestic terrorists in charge [and the only possible solution is the stalling of the Republicans in congress and the November 2012 elections]!!!!!!!!!!!

BackToBasics| 3.5.11 @ 9:13PM

Your argument held true until about 2000. Since then the average per capita income has dropped. Wages are going DOWN in most work fields.

Yet we are supposed to be happy that we are paying less for Chinese junk.

The problems we face are not just monetary and budgetary policy problems. Our trade policies, jobs policies and taxation laws are gutting our manufacturing base, our workforce and lowering our incomes.

And yes, hopefully inflation will be slow as you mention. Deflation can lead to a tremendous drop in consumer spending. But hyperinflation is equally as damaging, wiping out savings and causing the most suffering among the poor who have little assets to leverage.

But again, my main point is that the monetary model you speak of is broken and the breakage is comppounded by ruinous trade, taxation and jobs policies. On many levels the health and well-being of our nation is threatened.

Jeff| 3.4.11 @ 1:18PM

there is also a good chance that the 2 trillion will just be dropped in higher yielding short term securities vs the near zero rate they would currently earn ...

They will invest in their businesses when they see some signs that it will pay off in the long (2-5 year) run ... with $4 gas now and the very real possibility of $5 gas within a year I don't imagine too many non energy companies see much chance of a payoff ...

Tony in Central PA| 3.4.11 @ 1:24PM

The Bernank knows all he has to do to fix things is just print more money.

Dan| 3.4.11 @ 2:06PM

The FED overstimulates; the FED overcorrects. What's the common denominator? The FED! Until we come to the basic realization that a central authority can't plan a market - even the money and credit markets - we're going to have a situation in which the next major economic crisis is just around the corner.

jawin| 3.4.11 @ 4:24PM

Bernanke is supposed to be a student of the Great Depression. He's obviously learned the wrong things.

PhilTheCapitalistPig| 3.4.11 @ 6:31PM

By the way, everyone, there is no federal law that says you have to keep federal reserve notes. You can have your own "gold standard" as much as you would like. U just make not be able to make much more gold if they keep playing with the money supply.

WhiteBikerTrash| 3.4.11 @ 7:45PM

Money is a fiction, which only works as long as everyone believes. Money is just a measurement of wealth, not wealth itself. The confusion of the two, the measurement and the measured causes the problem.

Chappy4| 3.4.11 @ 9:43PM

Why do we listen to anything coming out of the Federal Reserve, which is just another private bank, owned by the money changers whose very goal is to devalue the dollar so that they can create a world bank and a new world order, so that they can control all the people of the world, all the world's money, all the gold in the entire world. There is a very good reason why this handful of men who own the Fed have never allowed it to be audited...they would all end up in prison! They have been behind all of the world's wars, all of the economic collapses, and many assassinations. If you do nothing else, please view "The Money Masters" on YouTube. It is lengthy, due to necessary historical background, but well worth the time, and should be required reading for every concerned citizen! Obama is but a puppet of these power-mongers, and his agenda is their agenda. Once we all have this info, defeating these bastards will be a cinch. Take back the Republic NOW!!! Their plan for world dominance is well under way, and we must act NOW!!!

Dee See| 3.4.11 @ 9:48PM

Forget flubba-dub fronts like Glenn Beck's
rally on the mall ---March on the New York Federal Reserve.

OPEN, audit, prosecute and dismantle the
illegal, unconstitutional, Rockefeller-Rothchild
owned ---Federal Reserve.

A century long legacy of foreign meddling
(MAJOR funding and assistance of the Bolshevik Coup in 1917, Stalin, Nazism, MAO) ---and, of course, MASS EUGENICS.

Now ON RECORD admissions of profound
economic subversion (the Great Depression
itself was 'their' op)---and the issuing of empty,
debt serving FIAT currency (the US dollar has
lost 96% of its purchasing power since the
est. of the FED).

OPEN, audit, prosecute and dismantle the ultra-rich, TAX FREE capstone foundations, proxies
and NGO's.

AGAIN, unflinching, sustained 'warm' prosecution
of the capstone creeps ----and decisive action on the 'Church and State' issue of unbridled, pervasive, inbred FREEMASONRY calling the
shots unchallenged, unchecked, and utterly unaacountable.

---Break this spell from hell!

------END THE FED!

Mike Rogers| 3.5.11 @ 10:42AM

South Park meets the Creature From Jekyll Island:
www.theamericandreamfilm.com
Show this to your friends and they will really understand how the big banks have screwed us.
Check out all the Jefferson quotations in the film, too. It's only 30 minutes, and I highly recommend it.

niteowl| 3.4.11 @ 11:25PM

When can we audit the government?Power to the people.

Who Knows?| 3.5.11 @ 10:50AM

Oldfarte---

Methinks thou do protest too much.

In my previous post I asked what QUIN’S qualifications were. Who cares about other people who comment, because whatever they may claim, such as graduating from a business school, could be a lie.

When I was in graduate school at the University of California Santa Barbara, going for a PhD in economics, after having earned a BA and MA in mathematics at Oregon, a professor highly recommended we all read the Wall Street Journal.

Stupid young me had to live ten more years and become a controller of a growing small business, during the CARTER years, before beginning this lifelong habit.

Ever since, I’ve always taken it as a given that unless you at least read the editorial pages of the WSJ, you are uninformed, and likely brainwashed and woefully ignorant---sort of a Chris Matthews clone.

Also, Oldfarte, the word is “monetarily”, spelled with an “e”, not an “a”.

In my opinion, just reading the WSJ editorial pages every day will, over time, result in even more than any credentialed “business school” learning one may claim. Besides, we all know that after leaving school, what we learned tends to be forgotten, if it’s not used, and a whole lot of people tend to fall into that category!

Don’t forget---there is monetary AND fiscal policy.

Congress politicized the Fed with the Humphrey–Hawkins Act. Enacted by, the 95th congress in 1946, and there’s all the trouble. If the Fed were only required to keep a stable price level and not ALSO aim for full employment, inflation would be mostly a non-story.

America’s real problem is the “people’s house”, to wit, those elected officials in DC, including the judges they select. And, this essentially means that, since you get the government you deserve, the American people have spoken—

And, they don’t read the WSJ!

Finally, wrt productivity: you certainly CAN have growth in productivity, even with unemployment of 10%. What is so magical about 10%, anyway?

Productivity growth means increasing the output with the same or less input. Since SOME working humans ever strive to improve in their own areas of expertise, competition being still alive, even during the Great Depression with 20% unemployment, wasn’t this obvious?

Back in the cavemen era, with rampant “unemployment” relative to today’s conditions, somehow the wheel was invented by a HUMAN and increased productivity, after all.

P.S.---using too many exclamation points indicates that one is not to be taken seriously.

Oldefarte| 3.5.11 @ 3:42PM

Does MY [Also, Oldfarte, the word is “monetarily”, spelled with an “e”, not an “a"] error EQUATE with yours [Finally, wrt productivity: you certainly CAN have growth in productivity, even with unemployment of 10%]. SPAIN what 'wrt' is? Wow, UCSB clarifies much, me thinks! ]sorry, did I use too many ! ?????] Shazam, you read the WSJ.....what about the Communist Manifesto [until FOX bought it, it was a typical MSM rag, similar to the NYT]? Oh, and as to the Fed's dual agenda of inflation and employment, one of the reasons why we're in the excrement pot economically speaking [with the worst yet to come] is because of HOPE/CHANGE GUY politically forcing WOLFMAN BEN into juicing/inflating our dollar by flooding the country with them with his QE2 terrorism which will render Carter's triple-digit inflation non-existent and financially collapse this country. Try not concentrating on misspellings and more on factual/accurate commentary, okay??????? [sorry, forgot your commandment].............

Oldefarte| 3.5.11 @ 4:13PM

As to this comment [Finally, wrt productivity: you certainly CAN have growth in productivity, even with unemployment of 10%. What is so magical about 10%, anyway?Productivity growth means increasing the output with the same or less input. Since SOME working humans ever strive to improve in their own areas of expertise,competition being still alive, even during the Great Depression with 20% unemployment, wasn’t this obvious?], the MAGICAL PART is that it should/would have been 5-7% if the moronic voters hadn't had a mental breakdown on 11/2/08, if the domestic terrorists Democrats had not forced through congress their NON-STIMULUS and WELFARECARE legislation [or their CRA of 1977 or their unlimited governmental bailout of Fannie/Freddie], etc. The Great Depression was ended by government's employment of the masses through make-work projects, and productivity had nothing to do with same. Productivity increases are only possible through improvements in technology [the factory assembly line, computers etc], and today's workers are now stretched to their human maximum limit, productivity-wise [so don't show ignorance by denying same].

Oldefarte| 3.5.11 @ 4:17PM

Who Knows? Certainly NOT Louisiana's CHARLIE BOY, that's for sure!!!!! Keep your DICTIONARY handy, okay?????????

Who Knows?| 3.5.11 @ 4:45PM

"wrt" is short for "with respect to".

WTF is "Louisiana's CHARLIE BOY", btw?

And, if you really believe the WSJ was equivalent to the NYT before Fox bought it, well---

no more comments for you, from me, because you just exposed either your youth and/or inexperience.

As a FINAL comment, though, back in the mid 70's, when I did start trying to grasp the deep and complicated writing in the WSJ, I was still infected by a radical leftist outlook, and sought initially to at once challenge myself AND see what the right wing "enemy" was up to.

They sure helped wake me up FROM the "Marxist" point of view!!!!!!!!!!!!!!!!!!!!!!

Have a good one.

Oldefarte| 3.6.11 @ 11:03AM

NO, wrong again, OH BRILLIANT ONE [no more comments for you, from me, because you just exposed either your youth and/or inexperience]! Using that U of C LEARNIN agin, huh? I'm 65, and worked for a major business corporation before retiring, DA. HAVE A NICE DAY, OKAY?????????

BackToBasics| 3.5.11 @ 10:50PM

WSJ editorials are as malleable as the "living" consitution the Dems speak of. Yes, theyhave some good information and one can learn a lot from reading them. But they are also more along the lines of Republican elitists / globalists than true conservatives. They are mostly an open-borders crowd too. Republican elites coupled with what's come down to alomst communist Dems have taken the country increasingly in the worng term.

I remember a WSJ article from the early 1980's ago that put forth an econimic model for America that said that since we were mostly a self-sufficient nation we did not need to worry about wage imbalances vis-a-vis the third world for example. The model seemed to work too since we were growing even though there were so many "imbalaces,"

WSJ has many guest writers who may differ with the editorial board but in general WSJ infected with the globalist bug too.

And globalism is seen by many of the commentators here as a sellout to the rest of the world. It is an economic model for sure, but not the one that built America and made here great. WSJ is feeding into this more than it is not.

BackToBasics| 3.5.11 @ 10:55PM

typos - increasingly in the wrong turn.
....built America and made her great

martin j smith| 3.5.11 @ 10:54AM

One final comment: Its all about Obama and the two prevailing theories: Theory one is he ( and rest of his crew ) are totally incomptent. Theory two--the one I believe is more true: Obama wants to destroy our country.

BackToBasics| 3.5.11 @ 11:58PM

I agree. And I don't think he knows or maybe does not even care what replaces it; as long as it is destroyed.

SpiralArchitect| 3.6.11 @ 1:25PM

He has outright stated Socialism is the way. If not, just look at him & his association and, above all - his past & current practices.

This is an incredible presentation -

http://www.youtube.com/watch?v.....ature=fvwp

BackToBasics| 3.6.11 @ 2:28PM

Appreciate the comments and link. I watched this a few weeks back after I heard an ad when listening to talk radio.

You may be right about the communist yearnings on his part. I know Obam has communist leanings. But I also think he is a confused individual who has communist, democrat elitist (almost the same), an atheistic mother, and Islamic "teachings" in his background. Plus he was raised sort of as a semi-orphan which certainly did not help. But I do not think he has actually sorted through the myriad views he was presented. Without his teleprompter, I think he would quickly get lost if he had to try to defend what it is that he believes.

Michael Tomlinson| 3.7.11 @ 3:08AM

The real problem with Barack Obama is he believes he's intelligent like the meida trumpets -- he's not and that's why those college and law school transcripts are locked up never to be seen by the people. John Kerry and Al Gore both academic duds were both supposed to be intelligent and brilliant. Time for Americans (right and left) quit swallowing this Democrat propaganda.

BackToBasics| 3.7.11 @ 11:42PM

I've seen it mentioned on AS before about why the transcripts are locked up. It was probably one of your posts. It sure seemed true to me.

And Bill Clinton was overrated too.

Yes Obam may think he's smart even though he's not even at the level of any half-respected college professor of any field. I was not trying to argue that he even would be able to sort through what it is he believes on a cerebral level. He's acting on mid-brain instincts of envy and hatred for whites or at least white-rule and accomplishments and Christianity. You don't have to be smart to do that. You just need a lot of willing accomplices. there's no shortage of them in the Dem party.

Dee See| 3.6.11 @ 12:37AM

----AGAIN

back to pushing forward that long overdue
HUAC meets NUREMBERG inquest and tribunal
for our 'charitable' (i.e. EUGENICS driven)
ultra-rich, TAX FREE 'shadow government'
(i.e. Ford, Rockefeller, Carnegie, Buffet, Soros
----------GATES Foundations, NGO's and proxies).

SpiralArchitect| 3.6.11 @ 1:27PM

I have heard many times in the last few weeks that there is no silver - that is, more people own silver than there actually is; value is akin to the dollar :/

Michael Tomlinson| 3.7.11 @ 3:04AM

"Mortgage costs haven't fallen even as housing values have dropped. But with food and oil and a huge spate of other commodities all seeing rapid cost hikes, the average person is feeling the pinch in his wallet even as the official index remains low." To hell with the core inflation rate BS! Thanks to Barack Obama working Americans are being hammered with rising costs. Take out the Obama caused housing collapse and then figure what real inflation rate is.

The Bruce| 3.8.11 @ 2:40AM

I'll have to redirect your request to the Federal Reserve. Obama is nothing more than a malleable symptom of the greater problem this nation faces.

Just ask the previous 15 administrations, beginning with Woodrow Wilson. Those that spoke against the real problem paid for it, either by death or consequences (read: National/Reserve Bank vs. the Constitution).

Erik Osbun| 3.7.11 @ 11:29AM

It's time to cut the administration's smokescreen. They are doing just what George Soros asked them to do.

The Bruce| 3.8.11 @ 2:30AM

"Price hikes are occurring too. These aren't all because of monetary policy: Ethanol mandates are driving up food prices as well, and political turmoil in the Mideast combined with President Obama's multitudinous efforts to stop domestic fossil-fuel production are aiding the price hikes in oil and gasoline. But the fact remains that only a weak housing market -- housing costs are weighted to count as more than a third of the Consumer Price Index -- is keeping the official measure of inflation as low as it is."

This is the telling point of the argument, as far as inflation goes. Energy and food prices are no longer factored into the inflation equation, while the artificially low interest rates, coupled with a dismal housing market are.

Welcome to the new Government Accounting 101!

Buckle your seat belts, folks. Real inflation, that which the rest of the world still calculates, is going to strip you of your middle class wealth, courtesy of the stealth tax imposed by Bernake (inflation).

See you all in the bread lines.