The Investor
The Fed’s Philosopher King
Ben Bernanke is arguably the most powerful man in the world. And he answers to no one.
Having one man control the money supply of 311 million Americans is itself a fantastic and unreal notion. When you then consider the effects of the U.S. Dollar on the remaining 6.6 billion people on this planet, the idea becomes unimaginable.
Meet Ben Bernanke: the dollar’s whimsical “Philosopher King,” and the Chairman of the U.S. Federal Reserve. He is arguably the most powerful person in the world, with powers far surpassing those imagined when his position was created. Who knew the Fed Chairman could become so influential?
Well, perhaps there are some who foresaw the potential. In the Communist Manifesto, Karl Marx listed ten absolute principles for overturning capitalism. Number five on his list is the most relevant when discussing the Federal Reserve: “Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.”
Even the early Communists acknowledge this as a path to destruction, to say nothing of the Founders. Who does King Ben answer to? He is not an elected official. Where does a man who makes multi-trillion dollar bets and has control of the world reserve currency and its printing presses get such authority?
Chairman Bernanke only indirectly answers to the President. He can be impeached for a crime, but not for incompetence. The President appoints the Chairman, but once confirmed neither the Federal Reserve Chairman nor the Federal Reserve Governors can be removed for their policy views. So, like a union worker, the Federal Open Market Committee (FOMC) can’t be fired. All the Chairman has to do to get reappointed is help get the President reelected.
If you think the rest of the FOMC has any oversight on the Chairman, think again. As the anointed “sun king of currency,” no Federal Reserve Chairman can long tolerate discord in his ranks. The pressure for the FOMC members to follow the lead of the Chairman is immense.
Granting the power to print an unlimited amount of paper “money” to one unelected individual is like playing monetary Russian roulette with a Glock. Have we forgotten that Sir Alan Greenspan is now criticized for policies that led to the subprime collapse, including keeping Fed Funds at 1 percent for over a year at the start of the contagion? But no one says a harsh word about the current Chairman for keeping Fed Funds at zero for 33 months and promising to maintain zero Fed Funds for “at least two more years,” even though the National Bureau of Economic Research (NBER) claims the recession officially ended two years ago (June 2009).
Who wins from this structure? The government of course, because they borrow more money than anyone else, just ahead of the Fortune 500 companies and Wall Street traders and speculators. The losers will be savers — those on fixed incomes, the middle class, and of course the global poor, who will suffer most because of inflationary increases in the cost of basic foods and fuel.
The Federal Reserve’s rationale for focusing only on the seasonally adjusted “core rate” of the CPI is a complete sham, designed to obscure reality. The core rate weighs “wage increases,” but, unlike the gross number, does not factor in food and energy. Wage increases, like employment, are “lagging” events. For the record, inflation is only a monetary event.
The Federal Reserve’s current policy of “negative real interest rates” amounts to outright stealing. For example, the historic spread since 1926 between the CPI and Treasury bill rates is 63 basis points. The last reported CPI was 3.6 percent, which would put an appropriate T-Bill rate at 4.23 percent; add in the typical 25 basis-point spread between T-Bills and the Fed Funds rate and you get 4.55 percent. That is about what the Fed Funds rate should be today. Instead, Fed Funds are 0.25 percent and the T-Bill rate is around 0.03 percent, or 3 bps. The way things stand, savers are losing over 4.5 percent annually.
Some people claim that the zero interest rate policy (ZIRP), combined with printing countless billions of dollars in paper money, is leading to economic growth. If so, where are the jobs? Where is the GDP growth? Keynesians retort that there is a lack of “aggregate demand.” Strange that there is no lack of “aggregate demand” for the new iPad.
Jean-Baptiste Say (1767-1832) is generally credited with the creation of what is referred to as “Say’s Law” — the original version of what has developed into modern “supply-side” economics. The basic tenet of supply-side economics is that the level and extent of aggregate demand is a function of the long-term trend of innovations and new inventions. That trend is a direct function of the demand for workers and their productivity.
The number of workers demanded, and their productivity, in turn depends on the rate of capital investment by the private sector, which is caused by market demand and the quantity of innovations and inventions. These new products are driven — like almost all human endeavors — by incentives, and by a group of risk takers called entrepreneurs. These entrepreneurs are generally supplied with capital by a similar group of risk takers called venture capitalists, who measure each entrepreneurial opportunity as a ratio of risk to reward. These two groups thrive in direct proportion to the level of economic freedom, tax rates, and regulatory interference found in a nation.
Remember the internet and dot-com boom in the mid-1990s? Say’s Law operated with great results. Supply created demand as eBay, Yahoo, Amazon, Google, and many more great businesses flourished. Huge wealth expansion resulted for all, while the growth in profits and increased tax revenue created by these innovators helped balance the Federal budget. In the same period, Main Street saw 4 percent real GDP growth while employment increased across the board.
Now we need to return to an atmosphere of 1990s-style innovation, but be even more vigorous. This can only be done with private investment and an atmosphere of acceptable risk. It cannot be accomplished by borrowing 40 cents or more of every dollar spent by the government, maintaining zero interest rates, and devaluing the real U.S. Dollar by printing massive amounts of fiat paper money via a central bank under the banners of “quantitative easing” and “stimulus.” These government methods always fail because they are temporary and extremely expensive.
Letter to the Editor View all comments (111) | Leave a comment
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Timothy L. Pennell| 8.25.11 @ 6:25AM
The FED is this, and the FED is that. People know that the FED is Printing Money. What they DON'T KNOW, is where that Money has ended up. They think it's going for "American Jobs". They think it's going for the purpose of "Freeing Up Credit". They have no idea how they're being played for SUCKERS, by the Self Proclaimed Defender of the Middle Class against the onslaught of Millionaires and Billionaires, and their Private Jets: Barack Hussein Obama.
I wonder how the American People would react, if they knew that The Royal Bank Of Scotland was a recipient of BILLIONS of American Dollars, printed by the FED? Or that UBS - a Switzerland Bank - received even more than that?
Banks and Lending Agencies, all over Europe, received the Lion's Share of the $1.2 TRILLION that the FED printed, so as to help you and me. Providing that YOU and ME, are one of THEM.
This FED is a Star Chamber, filled with all those Millionaires and Billionaires, that Hussein tells us he hates so much, before he goes off on a Golf Outing, with these very same Millionaires and Billionaires. (Did I mention that they get there on their Private Jets?)
This Money went to them. To their friends, and fellow "Masters of the Universe". They keep printing money to SAVE THEMSELVES.
The only "EASING" that's going on, is on their Spread Sheets. They are using our money to make all of the losses that their Sugar High, "What Me Worry?", Crack Addict, I'm Invincible, ways of doing business have racked up, go away.
This Story needs to be told.
I'm just a guy who writes on the Computer.
This needs to be done by YOU.
We need a Paul Revere, right now!
Jack in Wi.| 8.25.11 @ 7:28AM
What a laugh. 76% of the people by polling want the Fed audited. That is the signature issue of Ron Paul. Do you think a dimwit like Perry can even put together 2 sane sentences on the subject? I will love to see them in a debate on the subject. The Fed is a huge issue for only one reaason. That reason is the 30 war of Ron Paul on this criminal counterfetting outfit. Audit the Fed. End the Fed. It is against everything the Constitution and comonsense tells us. Ron Paul is the intellectual and moral giant dragging the whole country back to sanity.
The people also by huge majorities in polling want the wars ended now and the troops home, and an end to all foreign aid. Those are again the issues of Dr. Ron Paul. Paul is is tied with Obama in 2 national polls right now. He is in 3rd place for the Republican nomination. This despite the fact he has been either ignored or attacked endlessly by the Neoconservative and liberal media. Perry is puffed up, Romney and Bachman are going down and Ron Paul is heading for the home stretch. He has the most fervent and active supporters. He raises the most money by far from small donors, and he has the issues that the people care about. I predict Perry will implode soon. Romney is a failure like last time and Mrs. Palin will endorse Ron Paul. I give the next President of the USA Dr, Ron Paul. By the way Fox has caved and will have Ron on Fox News Sunday.
mames| 8.25.11 @ 1:01PM
The Fed is and alwas was a corrupt immoral non federal and non reserve system. If we did away with it tomorrow we would all be freer for it. Any man who would occupy any office on the Fed is himself immoral and beyond our trust. Hear that Mr. Cain?
David| 8.29.11 @ 8:06PM
To Jack in Wi, I pray to God you are right! Our nation cannot afford four more years of failed economic policies.
The Fed has launched a huge inflationary missile towards the economy and there is no stopping it now. If this missile hits soon then Ron Paul has a chance. If it doesn't and the powers that be keep Ron Paul out of the debates then we are doomed.
I am shocked more Americans aren't paying attention to one of the most profound leaders of our time.
Mimi| 8.25.11 @ 8:59AM
Yea Tim the STORY DOES NEED to BE TOLD!!!
Take a look at us here on Main Street...we all lost money and wealth....WHERE DID IT GO ?....Whos got the MONEY ?
We all know there is no money, nobody seems to have any...It's GONE !
An old saying...." CASH isn't KING it's EVERYTHING"....Somebody, anybody....Where did it all go!
Dixie Pixie| 8.25.11 @ 10:52AM
Mimi....You know where the money went.
It went to the members of the Democratic Party and their crony capitalist and banking supporters / friends.
Could someone on this TAS thread with a better grasp of Federal Finances come up with a total figure on how much money Obama and his governmental spent and will spend up to the 2012 election?
It should be easy, just add up the yearly Federal Budgets amounts plus the amount in the Debt Ceiling Deal.
I am guessing the total money Obama spent on the Democrats and friends is over 16 Trillion dollars.
All of which came out of the Private Sector, that is you and me.
Boar Hunter| 8.25.11 @ 5:42PM
I know exactly how much of it they spent. They spent all of it. They have spent all our money, all our kids money and are spending the money of generations to come. The vacations taken by Michelle the shameless don't come cheap (10 million so far, if the numbers are even close to accurate).
The life styles of these people enjoy is so opulent it would defy the imagination of any king or emperor throughout history. I guarantee you this outwardly visible persona is only one small, visible sign of the disdain these arrogant elitists have for the American people. The only difference between our rulers today and the potentates of history is that Obama and the locusts he represents will leave behind nothing but desolation. They are actively and intentionally trying to destroy America.
I watched a movie years ago where the evil alien said, "I come in peace" before killing his hapless victim. Just like that alien, Obama simply keeps repeating "I come in peace" the liberals swoon and he eats their souls.
Kenny| 8.25.11 @ 7:00AM
Right on article on the Fed.
And say, is this Victor Sperandeo the one who wrote "Crashmakers"? Great, great book.
Ken (Old Texican)| 8.25.11 @ 7:05AM
Rick Perry wasn't very far off the mark after all was he? Treason IS too easy there at the FED.
Mimi| 8.25.11 @ 9:04AM
The "ONE " person who dared to ask....Kinda BOLD Huh ?
You know you get them when they sqawk the LOUDEST....He must be touching a NERVE ! About time !
mames| 8.25.11 @ 1:04PM
Treason is the Fed. Jefferson would have shot them all. And haven't they done such a good job of "leveling" the free market, depression after recession after recession...
JoeG| 8.26.11 @ 2:40AM
Jefferson and Jackson, too. Don't forget Jackson!
Jack in Wi.| 8.25.11 @ 7:06AM
The Paul Revere of the ending the Federal Reseverve is the real Dr. of democracy Ron Paul.
JoeG| 8.26.11 @ 2:44AM
Jack: I wish you would call him the Doctor of the Republic.
POST American| 8.25.11 @ 7:19AM
"Notice not a single top religious leader
here is issuing any warning, any challenge
whatsoever regarding what's coming
(ie TREASON, DE-in-dust-REAL-eyes-ation,
EUGENICS). This tells you they're ALL in on
it, they've all been 'brought in', they're all
'on board'. Very disturbing. Very, very
disturbing indeed."
-ALAN WATT
And when was the last time you heard ANYONE
calling out the Torah and pan-scriptural abomination
of USURY? --something out of nothing?
-let alone the outright ILLEGALITY
of a Constitution violating,
foreign owned, debt-serf generating, 'Federal'
Reserve?
------------------------WHEN?---------------------------
Clint| 8.25.11 @ 8:02AM
Dr.Ron Paul,
“The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch-- Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference-- that threatens to impoverish us by further destroying the value of our dollars.”
Dai Alanye | 8.25.11 @ 1:40PM
There are more ways than one to destroy a republic. Loose money will do the trick, but so will an overly timid foreign policy and a lack of national defense.
This nation can't afford either Obama/Bernanke or Ron Paul/Lew Rockwell.
Clint| 8.25.11 @ 2:21PM
The Nation Can't Afford The GOP Ruling Elite "Lesser Evil" Democrat Light.
Boar Hunter| 8.25.11 @ 5:10PM
I graciously agree with you on that account Clint, but Ron Paul is still a nut.
Clint| 8.25.11 @ 5:30PM
Read The Founding Fathers, The Old Right, Austrian School Economics & then get back to us.
Boar Hunter| 8.25.11 @ 5:45PM
Oh I agree with Paul's economic stuff Clint. It's just that part where he is a nut that kind of throws me off the whole Ron Paul for president thing.
Clint| 8.25.11 @ 7:37PM
Go Sell Your Sand To The Arabs, Bore.
"Rasmussen Has Ron Paul Running Closest With Obama
Erik Hayden Aug 24, 2011:
Who does the president fare worst against in a head-to-head matchup? On Wednesday, Rasmussen released its latest nationwide early campaign survey. And right now, Barack Obama does well against Mitt Romney (46 to 38 percent) and narrowly leads Perry (43 to 40 percent) and Michele Bachmann (43 to 39 percent).
Which means, if you combine these results with the Rasmussen poll released Tuesday, the GOP candidate doing the best against the president is....Ron Paul? Yesterday's head-to-head poll showed the libertarian trailing the president 39 to 38 percent, by presumably the same methodology."
The Tea Party Rebellion Is Here.
Rise Up In Rebellion.
JP| 8.25.11 @ 8:49AM
The best way to measure inflation is to price the currency against gold. In 2001 the price of gold was somewhere around $225/once. Today, it is pushing $1800. That is inflation. Beginning with Bush and accellerating under Obama, the dollar has lost much of its purchasing power. Since 2000, the purchasing power of the dollar fell 22%. If a person deposited $100 in a savings account in 2000 it would be worth $78 today.
But it gets worse. Since the 1913 Federal Reserve Act, the dollar lost 92% of its purchasing power. The century before (1813-1913) the dollar amazingly kept most of its value (when compared to gold and commodities). Our economy has only grown since 1913 because of histroric advances in technology and business practices. Industrial, agricultural, and financial efficiencies grew exponentially the last 100 years. But most of those efficiencies were wiped out due to inflation. A family of 5 today does enjoy many tangible benefits from today's economy. But, the price has been brutal. Catastrophic business cycles, sky-rocketing real estate, commodities, food and consumer goods prices have forced women into the workplace, the children into day-care (schools are now essientially state funded day-care), and the stress of job displacement.
All of this was brought to you by the Federal Reserve Bank. Inflation is now built into all economies. It is now acceptable to live with 2-3% inflation (in previous centuries that would have been unaccetable).
It won't be easy buy any means, but Congress has to re-think the entire banking model. The Federal Reserve cannot just go-away. But there has to be a way to reel in the authority and power of the Fed Chief. But then again, perhaps the whole thing should be demolished, and the dollar should again be partly based on gold. There are millions of people who are sick of watching thier money evaporate due to the whims and mechinations of one man.
Nunya| 8.25.11 @ 10:49AM
Actually, the Fed CAN just go away, though it needs to be planned out. One of my favorite Presidents was Andrew Jackson because of his act in helping to end the 2nd Bank of the United States. He, and others in his time including the Founding Fathers, understood that having an entity controlling the money of a country ultimately ends up with the bankers (effectively) stealing the wealth of the country with the result that the people of the country are left with nothing. I have two quotes for you:
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Thomas Jefferson, (Attributed)
"Permit me to issue and control the money of a nation, and I care not who makes its laws."
Mayer Amschel Rothschild (International Banker )
This is EXACTLY what is happening with the Fed, and what is in store for us uless and until WE THE PEOPLE take back our government from the Ruling Class bastards that are running it now. Otherwise, we are doomed.
Nunya| 8.25.11 @ 10:55AM
(That should be "UNLESS and until..."
Note to self--proofread!
Sheila| 8.25.11 @ 11:10AM
Excellent comment. I'm pleased to see I'm not the only one who immediately thought of Rothschild's quote upon reading this column.
Ryan| 8.25.11 @ 12:40PM
It's a good comparison, but gold is too volatile in dollars to use there. If gold crashes again, your argument loses its punch.
Probably a better idea is to see if someone can survive and keep the bills paid off of the average salary.
Not that I am arguing against the gold standard here, just saying it's a poor comparison.
tradguy| 8.25.11 @ 6:01PM
"The best way to measure inflation is to price the currency against gold. "
You have NO idea what you are talking about. No modern economy can operate on a gold standard. You are suggesting that an economic system be constrained by how much gold we can dig out of the ground. This is beyond foolish. If you want to have stable money, then look to the source of the problem -- FISCAL POLICY - deficits as far as the eye can see. Correct that problem and there will be no need for the Fed to accommodate with monetary policy.
Ryan| 8.26.11 @ 1:23PM
I've read enough on the gold standard to believe that this may not be the case, though there would be some SIGNIFICANT readjustment. There is merit in a fixed money supply that doesn't allow for inflation.
Though, contrary to many goldbugs, it wouldn't solve all our economic problems...
tradguy| 8.25.11 @ 6:21PM
"Since the 1913 Federal Reserve Act, the dollar lost 92% of its purchasing power. The century before (1813-1913) the dollar amazingly kept most of its value (when compared to gold and commodities). Our economy has only grown since 1913 because of histroric advances in technology and business practices. Industrial, agricultural, and financial efficiencies grew exponentially the last 100 years. But most of those efficiencies were wiped out due to inflation. A family of 5 today does enjoy many tangible benefits from today's economy. But, the price has been brutal. Catastrophic business cycles, sky-rocketing real estate, commodities, food and consumer goods prices have forced women into the workplace, the children into day-care (schools are now essientially state funded day-care), and the stress of job displacement."
This is simply untrue and the part about inflation is irrelevant. In the long term, money and inflation are neutral and super-neutral.
The Bruce| 8.26.11 @ 12:44AM
Inflation is irrelevant? I'll try to remember that the next time I go to the grocery store and pay $300 for what used to cost me $200 a couple of years ago.
The people's wages haven't increased to match, so your argument about inflation being irrelevant is, in and of itself, irrelevant.
David| 8.29.11 @ 8:22PM
Great post JP! I especially like the part in previous centuries 2-3 inflation would have been unacceptable. This illustrates the problem with modern economics which our leaders have listened to for decades and now has brought the economy to the brink of the abyss.
The Fed's policies will now push us over this abyss in the next few years. I always prayed our nation would change it ways and it wouldn't come down to this since millions of Americans will suffer even more when the next "bubble bursts".
LMajito| 8.25.11 @ 8:50AM
and the mindless voters keep on sending the same clowns to dc, electing the same crooks at the local and state and spend their waking hours wondering what all is going to hell in a hand basket...
when it comes to money issues, us citizens crap in their pants just to think the flow may be disrupted...so i don't expect this to change at all...we have become a nation of cowards afraid of any action that may disrupt the recliner, tv, net surfing life...
Mimi| 8.25.11 @ 9:27AM
Has anyone considered that the genesis of our PROBLEMS is the thing we will CELEBRATE next month On SEPTEMBER 11, 2011.
We divide ourselves and blame, when the genuine culprit in every way is Radical Islam!
We need a leader...a new leader one who will not "KISS THEIR BUTT" and tipttoe around as they destroy our Economy, and our childrens lives. Their methods just need to STOP and WE NEED to rise up and get ourselves a no-nonsense President who knows how to call a SPADE..A SPADE !!
Clique| 8.25.11 @ 10:01AM
About 100 years ago a clique of Americans and foreigners of the same ethnic origin put into place a plan to destroy American society. A permanent income tax along with a central bank has enriched them but impoverished the majority by devaluing the currency and initiating the Great Depression, other destructive recessions and the current depression. Masters of financial manipulation this clique has infiltrated the entertainment industry, educational systems, religion and promoted destructive personal behavior including sexual perversions, psychobabble and drug addiction. They have succeeded beyond their wildest dreams but when destruction come they to will be destroyed. But they know it and they don't give a damn. Their ultimate goal is to drag you into hell along with them.
Bill S| 8.25.11 @ 10:04AM
The author didn't mention that the Fed has been monetizing our debt since March, 2009. It's only a matter of time before we have hyperinflation like Germany did in the 1920s. The dollar will lose its status as the world's reserve currency. When everything costs ten times what it does today there will be million of Americans who will starve.
Nunya| 8.25.11 @ 10:52AM
I agree, and unfortunately that will mean riots and blooshed in our streets.
Be prepared. Buy silver, gold (if you can), and lead... Keep your powder dry, and your guns loaded, because it will get ugly soon and faster than anyone expects.
Ryan| 8.25.11 @ 12:41PM
If there are riots and bloodshed, gold and silver mean nothing until afterward. Food and tools and survival skills are more vital.
The Bruce| 8.26.11 @ 1:10AM
And the guns will certainly come in handy.
tradguy| 8.25.11 @ 6:04PM
"The author didn't mention that the Fed has been monetizing our debt since March, 2009. It's only a matter of time before we have hyperinflation like Germany did in the 1920s. The dollar will lose its status as the world's reserve currency. When everything costs ten times what it does today there will be million of Americans who will starve."
This is so breathtakingly ignorant. The Fed is not monetizing the debt. It is accommodating bad fiscal policy by buying time until the problem can be corrected. We will not have hyperinflation like Germany. You do not understand the Fed's balance sheet. You need to get an econ book and read it.
iamse7en| 8.25.11 @ 10:26AM
Giving Ron Paul legitimacy... Make sure you send this article to that moron Lord.
Bob K.| 8.25.11 @ 10:26AM
He was appointed by Bush and reappointed by Obama.
Here is "Wiki's" comments (for what they are worth) on controversial actions he has been associated with.
http://en.wikipedia.org/wiki/B.....e_Chairman
See" Controversies as Federal Reserve Chairman:" 4.o, 4.1 and 4.2.
Pretty interesting; as is Ron Paul's comment therein.
Paul from SA| 8.25.11 @ 10:50AM
And all it took was Rick Perry to mouth off and bring this issue up.
Many conservatives are aware of the Fed and it's involvement in the mortgage/banking meltdown and how the Fed is causing our frequently occurring boom and bust cycles.
I think the whole thing is corrupt -- too much power, too much short-term political gain.
David C| 8.25.11 @ 10:52AM
Victor, the demographic forces that drove Japan into a 20 year recession (with no growth in the Nikkei for 20 years) is now in the USA. Reduced demand from our aging population is a certainty, IPODS aside. Velocity of money slows, depression follows.
What can the Fed do? Soften the blow from the pain of numerous bubbles, real estate, stock market, commodities etc. What is the alternative, deflation? That would not be any fun and very painful.
"There must be come kind of way out of here, said the joker to the thief" There is no escape from the Dow at 4,100, 20% unemployment, and unions, the poor and minorities rioting. It is coming. But I would rather the Fed print as much money as possible short of hyperinflation to ease my pain.
Pushing on a string? Yes. Demand is waning and will for 20 years. But I really feel good wish cash in my pocket. Don’t you?
Regards
fmm| 8.25.11 @ 12:01PM
Instead of knowling pushing on a string and making matters worse, why not challenge yourself to come up with real solutions and discuss those? I for one would love to see some.
fmm| 8.25.11 @ 12:02PM
ooops for the misspelling of knowlingly
fmm| 8.25.11 @ 12:04PM
third time is a charm :) knowingly
weaverofdreams_2000| 8.25.11 @ 6:28PM
Alas, this comment makes a great deal of sense. I fear much of the developed world will just have to get accustomed to an age of lowered expectations. Advice: take care of yourself. Government has no solutions. But they have to keep trying. Otherwise, we may as well return to a state of nature. Nasty, solitary, brutish and short.
What has happened in Japan over the past decade-plus looks like what we in North America and Europe have to expect for the next decade-plus.
Barring some sort of miracle economic tonic cure (sold by a snake oil salesman, no doubt), this is likely to be life through 2025. Get ready for it. National governments are in no position now to do what they did in the past. The 2008-2009 stimulus measures of BushII and Obama were the failed parting shots of the ancien regime.
We have a capital strike now caused by all the uncertainty -- the same sort of uncertainty that finally led to the S&P downgrade. This is largely a political problem. I do not see a solution to that any time soon. I have seen it coming for a decade. The situation now is like two little kids falling out of a boat in the middle of a lake without lifejackets, neither of whom can swim, trying to stay afloat by pushing the other one down.
More of the same will follow in the not too distant future. Government "austerity" (term used loosely) is here to stay for the foreseeable future (although simply having to keep paying for old committments will keep deficits huge for a long time to come).
What is the Fed to do? It is doing about the only thing it can do to avoid things getting even worse. It's printing money to buy US debt which is now so out of control that its supply exceeds demand. If it didn't soak it up, then America would have a debt crisis regardless of whether Congress passed an increase in the debt limit.
Raising interest rates would be absurd in this environment. It would only contribute to inflation (the recent rise in which is a little commodities blip which is rightly factored out of "core" inflation to provide for meaningful comparisons over time -- do you really want the price of gold factored in??). It would kick the stuffing out of what little consumer demand is left (the main driver of the economy). It would cream small business, which is highly dependent on interest sensitive tied to prime lines of credit to keep things moving along).
AND, something amazingly little remarked upon, it would catastrophically escalate the deficit problem. Do you really want to increase interest on the debt? Raise the Fed rate a point or two and interest on the debt will double. Take a look at the DEBT CLOCK for what the interest on the debt currently costs and then double that. Is that really a solution to anything??
Cheers!
Petronius| 8.25.11 @ 11:06AM
Bernanke's job is to keep the Federal sow on life support by re-inflating credit. The presses roll. The bonds are sold to those who receive his monopoly money. Our equity is diluted if we have any. Our only consolation is that we all leave the world the same way we came in.
Kingofthenet| 8.25.11 @ 11:20AM
I'd wager Dr. Ben Bernanke knows more about Monetary policy and History, than ol Victor here...
R Martin| 8.25.11 @ 2:03PM
Were there a way to resolve the matter, I would gladly take that bet.
In any case the issue is moot, because it is not the possession of knowledge that matters in this case, it is the application of that knowledge. Mr. Sperandeo is advocating supply side monetary policy; Mr. Bernanke is practicing demand side monetary policy, i.e. Keynesianism.
Say’s law stipulates that new production in free markets is by definition noninflationary. Supply siders are all about new production. They advocate a monetary policy aimed at maintaining stable prices, coupled with a tax policy aimed at stimulating personal initiative. Together, such policies increase what is produced—that is, supply—in the economy.
A monetary policy aimed at maintaining stable prices is a tight money policy. It is not Quantitative Easing. Monetary tightening produces a rise in the rate of interest. A rise in the rate of interest attracts foreign capital. Tax cuts produce domestic expansion and a reduction in unemployment. However, domestic expansion does not produce inflation, because inflation, by definition, is absent if capital is flowing into a country. Capital inflows are a sign that the currency is not depreciating (as it does under inflation) but appreciating. Hence the inflation free boom that is supply side economics.
Bernanke is doing terrible long term damage, and he is doing it for political reasons. In my view, Governor Perry’s comments about Bernanke were, if anything, too kind.
Kingofthenet| 8.25.11 @ 5:34PM
What Inflation???? Oh right there is NONE! Today you get a Mortgage for under 5% that's super low.You want a return to 12% CD rates?
The Bruce| 8.26.11 @ 12:27AM
Kingofthenet, I'm sure you know that the government no longer counts the cost of energy and food toward the inflation index (it hasn't since 1992).
The real inflation rate this year -- if we rated as we used to -- is at 10%.
Apparently you haven't done any grocery shopping for the last couple of years. The price of milk alone has doubled.
tradguy| 8.25.11 @ 6:17PM
"Mr. Sperandeo is advocating supply side monetary policy; Mr. Bernanke is practicing demand side monetary policy, i.e. Keynesianism."
Where does this stuff come from? There is no such thing as supply or demand side monetary policy. This is economic nonsense.
weaverofdreams_2000| 8.25.11 @ 6:38PM
This commentator is as deranged as the author. Say'sLaw has about as much practical, empirical, observable evidence behind it as "intelligent design". Nice thought, but a total fallacy.
As pointed out above by another, if there was any truth to this, Say's law says we should be experiencing hyper-inflation.
We live in different times folks. Old nostrums/theories of the 1700's, 1800's, 1900's no longer apply. We do have a totally new world order. Rather than looking past for solutions, we need to start thinking totally outside the box and discovering new solutions to a totally different problem than anything we have experienced before.
Cheers!
Ryan| 8.26.11 @ 1:25PM
That's too closed-minded. An old solution may be just as practical as a new.
Vic| 8.28.11 @ 8:32PM
Yea, broke doesn't mean broke anymore. Get your head out of the 1800's man!
Boar Hunter| 8.25.11 @ 3:03PM
WARNING:
America hating liberals, as represented by Kingofthenut and the other America hating vermin of his ilk are liars and lovers of lies. Why anyone attempts rational dialog with this plague of locusts is beyond me. They are willfully ignorant and you will not convert them. You must endeavor to defeat them at every opportunity. They share no common ground with any real American. They are simply the fleas on the dog.
The only reason these cowards comment in the thoughtless and rude manner they do is because they have never been called on to back it up. Like all liberals, in government, just like in their homes, these self absorbed children have gotten their way for far too long because they scream about fairness till their weak willed parent provides what they demand just to shut them up. They lack even a modicum of social responsibility; have no manners, common decency or the ability to interact with adults. Like all liberals, Kingofthenut sees each day as a bright shiny start on a brave new world forgetting that some of us are gifted with the ability to remember their past words and actions.
If you chose to talk to any of these vermin in the flea and locust class you have only yourself to blame. You have been warned.
“I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” – James Madison
Kingofthenet| 8.25.11 @ 5:35PM
What are on about? Money is cheap, go get yourself a nice loan, and leave me alone.
weaverofdreams_2000| 8.25.11 @ 6:42PM
"Why anyone attempts rational dialog with this plague of locusts is beyond me."
Someone must have lost their meds. What kind of lunatic rant is this? I don't think any sort of rationale dialogue is possible with a Raging Bore.
Cheers!
no name| 8.25.11 @ 11:52AM
A MONEY CHANGER IS A MONEY CHANGER IS A MONEY CHANGER IS A MONEY CHANGER IS A MONEY CHANGER IS A MONEY CHANGER IS A MONEY CHANGER. In less than 100 years, the money changers have corrupted and drained this country. bernakie is just the latest pimple on the ase of thievery, nothing more nothing less.
Ryan| 8.25.11 @ 12:42PM
Here's an idea.
President Perry appoints Ron Paul as head of the Fed.
Clint| 8.25.11 @ 1:35PM
Better idea.
President Paul gets Congress to eliminate The FED.
Boar Hunter| 8.25.11 @ 5:07PM
Ron Paul is a nut.
Clint| 8.25.11 @ 5:34PM
You're still a Bore.
weaverofdreams_2000| 8.25.11 @ 6:43PM
Let's compromise:
The two of you are Boring Nuts.
Cheers!
Clint| 8.25.11 @ 7:40PM
Weave This Asshat .
"Rasmussen Has Ron Paul Running Closest With Obama
Erik Hayden Aug 24, 2011:
Who does the president fare worst against in a head-to-head matchup? On Wednesday, Rasmussen released its latest nationwide early campaign survey. And right now, Barack Obama does well against Mitt Romney (46 to 38 percent) and narrowly leads Perry (43 to 40 percent) and Michele Bachmann (43 to 39 percent).
Which means, if you combine these results with the Rasmussen poll released Tuesday, the GOP candidate doing the best against the president is....Ron Paul? Yesterday's head-to-head poll showed the libertarian trailing the president 39 to 38 percent, by presumably the same methodology.'
The Tea Party Is Here.
Dai Alanye | 8.25.11 @ 1:50PM
Best idea:
Ron Paul leaves politics.
Willis| 8.25.11 @ 2:15PM
The winner. And, one hopes, he does it hand in hand with Gingrich, Palin and Huntsman (gasp).
Clint| 8.25.11 @ 2:56PM
Smoke this RINO-CINO Flunkie Apologists.
Obama 39%, Paul 38%
Tuesday, August 23, 2011
The president and the maverick are running almost dead even in a hypothetical 2012 election matchup.
Texas Republican Congressman Ron Paul earns 38% of the vote to President Obama’s 39% in the latest Rasmussen Reports national telephone survey of Likely U.S. Voters. Fourteen percent (14%) like some other candidate, and eight percent (8%) remain undecided.
Boar Hunter| 8.25.11 @ 3:35PM
Hey Clint...pull my finger.
Clint| 8.25.11 @ 4:46PM
Hey Chairman of The Bores.
Get Bent.
Clint| 8.25.11 @ 2:19PM
Better than Best idea.
Learn about Inflation Creation & The Great Hidden Tax.
GW| 8.25.11 @ 2:33PM
If Keysenian economics were true it would have clearly worked by now. If it had clearly worked by now, there should be little debate. Economies could be easy to manipulate. If growth is not at a desired level, pump up stimulus funds. Recessions would be non-existent. Zimbabwe would be as rich as Luxembourg.
It should be added that economies are highly complex networks of people--trading time, money, energy, space, and effort for things beneficial to themselves and for others. No government policy can make them better. Only a laissez-faire approach with limited and needed government protections (against fraud for instance), allows economies to flourish. This is not to say even the best possible market system in the world would never enter into recessions. Natural disasters occur. People make irrational decisions based on greed or poor information. But markets are self-correcting and no central planner can prevent greed, natural disasters, or human irrationality.
Oldefarte| 8.25.11 @ 3:20PM
Ron Paul has some very intelligent ideas concerning this issue, but many of us are sick and tired of reading the same old, tired, repetitive EXCREMENT from these Paul-MORONS here. If it's true that Paul is so intelligent [and obviously he is], then why are his followers SO GD STUPID? That said, I'll proceed to my opinion concerning this editorial, which is that this Fed Chairman is being [either voluntarily or not so] politically manipulated by El Chosen One from 1600. I don't ever rmember a case where a previousl Fed-head was subversively attempting to do minitarily what government administrators had failed to accomolish fiscally. The sad [and possibly illegal] part is that this Fed policy of QE-isms is gasolinioning the inflation fires for possibly decades by this obviously partisaned attempt to juice the economy for the benefit of this USURPER-IN-CHIEF and his band of domestic terrorists in charge of this country!!!!
Clint| 8.25.11 @ 4:45PM
That's because you're one of The Ruling Elites' RINO-CINO Apologist Flunkies, Stinky Pants.
Boar Hunter| 8.25.11 @ 5:06PM
Whee! That was fun Clint...pull my finger again. I promise you won't get the same result.
Clint| 8.25.11 @ 5:33PM
We hear that you pull more than other dudes' fingers.
Boar Hunter| 8.25.11 @ 6:02PM
Clint, you are such a child and I don't mean that as an insult. I can agree to disagree with you on the Ron Paul thing (cause he's a nut) but I know you have good intentions and passionately love America. It is not you or those on the Ron Paul short buss (Just kidding) that I have issues with. You are just fun to tease.
The liberals on both sides are the ones who I hold in disdain. I believe that were we to have met in a tavern a few hundred years ago we could have had a spirited conversation about the best way to purge the British from our land. We might not have agreed about the best way to get there, but we would still have stood together in the fight.
weaverofdreams_2000| 8.25.11 @ 6:49PM
Time to join the modern era boys. Reminiscing about what it would have been like to sit in Ye Olde Tavern knocking back some of Sam Adams grog (his brew was apparently not so good -- the modern incarnation is quite pleasant)ain't gonna find us any solutions to the problems of the current day.
Keynsianism is dead. Monstarism and supply side had their moments, but have nothing to offer for the current problems. Time for some new ideas.
Just thinking. You are arguing over who sank the Titanic and who has the best idea to refurbish if we could refloat it. All utterly irrelevant.
Cheers!
Clint| 8.25.11 @ 7:43PM
Smoke This Uninformed Economic Buffoons.
" Rasmussen Has Ron Paul Running Closest With Obama
Erik Hayden Aug 24, 2011:
Who does the president fare worst against in a head-to-head matchup? On Wednesday, Rasmussen released its latest nationwide early campaign survey. And right now, Barack Obama does well against Mitt Romney (46 to 38 percent) and narrowly leads Perry (43 to 40 percent) and Michele Bachmann (43 to 39 percent).
Which means, if you combine these results with the Rasmussen poll released Tuesday, the GOP candidate doing the best against the president is....Ron Paul? Yesterday's head-to-head poll showed the libertarian trailing the president 39 to 38 percent, by presumably the same methodology."
Clint| 8.25.11 @ 7:44PM
Zzzzzzzzzz !
Margie| 8.25.11 @ 9:58PM
You see what they do to good people like you, Boar Hunter?
They're beasts. Keep hunting!!
Boar Hunter| 8.25.11 @ 11:33PM
Thank You Margie, I appreciate the sentiment. These children don't concern me. I have three fine sons and many grandchildren of which I am very proud. I personally have seen and done things in my life beyond their comprehension. I picked my name because my hobby as a retired old man is to hunt wild russian boar with a spear. I have killed many of them and only have one small scar to show for it. These children today are only brave behind a computer with no chance of being held to account for their deeds or words.
Osamas Pajamas| 8.25.11 @ 3:50PM
And check out economist Murray Rothbard's free and in pdf format at -----
"WHAT HAS GOVERNMENT DONE TO OUR MONEY?"
http://mises.org/books/whathasgovernmentdone.pdf
"AMERICA'S GREAT DEPRESSION"
http://mises.org/rothbard/agd.pdf
RP| 8.25.11 @ 11:28PM
Not to mention Rothbard's "Mystery of Banking." You don't know about money until you read Rothbard.
Clinton Lovell| 8.25.11 @ 4:05PM
All of this is to say that, once again, the fractional-reserve banking system has failed and the profits are going to the bankers and the losses go to the people. Fractional-reserve banking has failed in every single country that has adopted it.
It is time we admit it doesn't work and switch to the equity banking model before we all live on the banking industry plantation. Give me capitalism or give me death!
tradguy| 8.25.11 @ 6:12PM
Explain how the fractional banking system has failed. But first you should know that the Fed is NOT part of the fractional banking system. That system comprises private commercial banks. Yes, the Fed sets the fraction to be held in reserve, but the commercial banks can decide to keep more if they want. And the Fed can raise the reserve requirement. So, explain to us exactly how this has failed.
The Bruce| 8.26.11 @ 1:41AM
The Federal Reserve is a private commercial bank (with minor stipulation that the government anoint its chairmen), but thanks for playing.
PattyMor| 8.25.11 @ 4:21PM
Well you want to get really mad, read Reckless Endangerment. The greed, corruption and collaboration of the swells with politics and the Federal Reserve will make you head explode. And read at the end, that James Johnson, who exploded and exploited Fanny Mae's reach was a friend of the Bilderberg's!! Any surprises?
We need to end the Federal Reserve as the first step in getting our country back. Then we cut spending. But, we can't do it if we keep electing Bilderberg approved candidates. We need real conservatives. And that means you the ordinary citizen has to fund and work to get them elected.
tradguy| 8.25.11 @ 5:54PM
I'm tired of hit pieces against the Fed. First of all, there are so many inaccuracies in this piece it is not worth commenting on all of them. Second of all, the Fed is only reacting to the abysmal fiscal condition of this country. If the Fed did not accommodate federal spending, interest rates would be extremely high, causing the US even greater deficits and debt. High real interest rates cause Depressions because they attract investments into unprofitable government debt.
It's a good thing that interset rates are near zero or negative or is something about $14T that you don't get?
The author writest that negative interest rates are stealing? Not true. One has a choice of whether to invest in an instrument with a negative interest rate. If it is stealing, then why are not government deficits not stealing? Enough of this moralizing of economics. Enough. Enough. Enough.
aware| 8.25.11 @ 6:58PM
Knave(servant of the King), the Fed ain't "reacting to the abysmal fiscal condition of this country.".....It caused it.
"High real interest rates cause Depressions...." no low interest and the credit induced false booms they cause do that when they go poof.
"One has a choice of whether to invest...." that is true when dealing with any swindler or shell game operator except the biggest one in human history according to you.
By controlling money and credit the banking elite controls government. By controlling government they control what part of your little bit of wealth you get to keep through progressive income taxes, regulatory burden and State intervention into all manner of "evils", foreign or domestic . By controlling your wealth they control you. You will never control government if you don't control the purse strings. Period. Any kind of government. This is the insidious part of the Fed, and sinister. They always cover the gap between spending and taxes with debt. Trillions in debt.
I only answered this nonsense not to try to educate you, you are just doing your job, but just so any reading tripe like this but not sure it is tripe would know that it is indeed tripe.
tradguy| 8.25.11 @ 8:20PM
the Fed ain't "reacting to the abysmal fiscal condition of this country.".....It caused it."
What is it about $14T that you don't get? The Fed did not cause a $14T debt. Congress did.
tradguy| 8.25.11 @ 8:22PM
"This is the insidious part of the Fed, and sinister. They always cover the gap between spending and taxes with debt."
This is complete nonsense. The Fed does not create debt. The Treasury does. Gees.
The Bruce| 8.26.11 @ 1:57AM
"This is complete nonsense. The Fed does not create debt. The Treasury does. Gees."
Funny, I thought the Congress and the President create debt. Gees.
tradguy| 8.27.11 @ 5:28PM
Congress authorizes the Treasury to create the debt, bonds, bills or notes, etc.
aware| 8.26.11 @ 5:44AM
You are too economically stupid to argue with. When the Fed creates instant money to buy Treasuries(QE2) it creates debt for government. Without the Fed to cover the difference you couldn't get 14 T. Politicians always want to spend more than we have but someone has to lend for that to happen.
As private and sovereign lenders back away the Fed moves in. Every dollar the Fed creates is debt with interest. Knave.
tradguy| 8.27.11 @ 5:27PM
Government creates debt for government. The Fed just buys the debt. If another entity bought the debt, it will still be government created debt.
You could easily get to $14T and more if other countries or entities want to buy the debt. When the Fed buys debt, it has the additional benefit that interest rates are kept low.
The Fed does not create debt. See, in economics there is a rather large distinction between fiscal policy and monetary policy. Check out Wikipedia to learn about the difference.
Errick| 8.30.11 @ 2:59AM
Please look at a Federal Reserve Note and be advised that a note is a debt. Federal Reserve Notes are zero interest bonds that have a negative real rate of return do to inflation. They have also been made legal tender by government fiat. So you have a debt instrument that is payable for all debts including itself. The government no longer has to redeem it in either gold or silver.
"A banknote (often known as a bill, paper money or simply a note) is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender."
Everytime the FED prints money, it is creating new debt out of thin air.
cats1cowboy| 8.25.11 @ 7:23PM
I'm not an "economist" but one thing I do know. Everytime I go grocery shopping, food costs more and more. Somebody is screwing with the economy and I don't like it.
tradguy| 8.25.11 @ 8:25PM
"I'm not an "economist" but one thing I do know. Everytime I go grocery shopping, food costs more and more. Somebody is screwing with the economy and I don't like it."
Commodity prices increases are not inflation. Furthermore, the price increases in food are the result of prices increases in energy (e.g., fuel costs). The reason for that is that US has NO energy policy. If you want to blame, at least blame the right thing.
Clint| 8.25.11 @ 8:40PM
"Rising asset prices are the manifestation of inflation. The prices of financial instruments and commodities are rising more rapidly than consumer prices because they are traded on exchanges, where banks, insurance companies, hedge funds, and the like insert funds newly borrowed at cheap rates from the world's central banks."
tradguy| 8.26.11 @ 2:37PM
Fluctuating financial asset prices in the short term are speculative and unrelated to the macroeconomic fundamentals. In the long term, risk premiums of the financial assets reflect fluctuations in GDP and inflation.
Leveut| 8.25.11 @ 9:27PM
Compare and contrast:
Federal Reserve
Enron
Margie| 8.25.11 @ 9:59PM
Compare and contrast
Rick Perry
Ron Paul
No contest, Perry 2012!!
aware| 8.26.11 @ 6:02AM
Perry....doubled Texas budget in 10 years. Increased Texas debt faster than even Federal debt in the same period. Texas $27 billion short this year alone. Only avoided the same fate last year by using Obama's "stimulus" to cover the difference after speeches against it. Jobs? Most of them in Texas were government jobs.
POST American| 8.25.11 @ 11:10PM
-------------------BOTTOMESS LINE-------------------
"The Federal Reserve has pumped so many BILLIONS into (Nazi) Germany that they dare not name the total."
-Rep. Charles McFadden 1935
And that was after collaborating in the advent
of the First World War, the Bolshevik Coup d-etat, and, of course, the Great Depression.
The foreign owned, USURY-crazed, EUGENICS
driving 'Federal Reserve' ----has to be opened,
audited, high crimes prosecuted and abolished.
USURY, and certainly USURY of the scale and
psychopathic scope we have today --is a culture
and sovereignty destroying ABOMINATION.
ALL the neuro-linguistic programming tricks in the world wil NOT change that cosmic FACT.
-----------HUAC meets NUREMBERG 2012---------
tradguy| 8.26.11 @ 12:12PM
Posting a quote from Rep. Charles McFadden, a completely discredited politician whose statements on the House floor were defamatory, speaks for itself.
Ted Harwood| 8.26.11 @ 6:50PM
Interesting interview with Bernanke:
Ted Harwood interviews Ben Bernanke, Chairman of the Federal Reserve’d (for funding Wall Street speculators, foreign banks, and Washington, D.C. spendthrifts) Board of Governors
August 18, 2011 (Revised on August 21)
Ted:
Thanks, Ben, for making time available this morning. I know you’re very busy working to keep that federal reserve liquidity pump moving up and down, drawing more water out of the well to fertilize the economy’s parched earth. Be careful you don’t get a rotator cuff injury.
Ben:
You’re welcome. By the way, my arm is just fine. Others here do the heavy lifting. What you refer to as the “liquidity pump” we call the “server farm.” And mainly what’s involved is working the computer keyboard, to get funds flowing around and about the country. It’s basically digital dough-making. And if there’s any risk of bodily injury, it’s probably a carpal tunnel complaint.
Ted, we’re well past the days of printing those gold-green embossed bonds with etchings of Ms. Columbia with spear and shield, or the American bald eagle, arranged in a heroic pose amidst industrial factory gears, wheat threshing machines, or steam locomotives, to persuade the bondholder that their treasury bond is as good as gold. Getting away from paper bonds saves the taxpayers money.
Actually, getting away from paper altogether, whether bonds or cash, is a big savings. It costs banks money to handle cash, and so they’d rather you use plastic or the computer, and they will reward you for making the switch.
Ted:
Aha, I get it. The vanishing of “cash.” So, what you’re saying is that money is….well, not at all the tangible thing it once was, like the 90% silver Walking Liberty half dollar coin that I carry in my wallet, to remind me of when money was…well, something tangible. Kind of makes you wonder what money is. I can imagine that many of my fellow Americans can get confused when they use a debit card to buy groceries or gas. Is that money, or debt? And if there’s no real money, like gold and silver coins, how do you repay your debt, when a bill for the gas and groceries arrives?
Ben:
You can pay by computer, or by writing a check, or you can use a federal reserve tender note, called “cash,” with pictures of long-deceased Presidents and a former Treasury Secretary, to pay your bills, although, as I said above, using paper instruments is less convenient than going through a server farm.
Ted:
Well, I guess I’m a bit confused about what money really is nowadays. Is a $20 bill with Jackson’s mug simply a paper-printout of something stored on a computer? And who or what stands behind Jackson? Where does the buck, or the $20 buck, finally stop?
Ben:
We can back it up with another liquidity infusion, or other policy support.
Ted:
Policy support? Liquidity infusion? You mean, more keyboard strokes to get the server farm ramped up with a new series of “0’s” and “1’s”? That strikes me as very different from the pre-1971 era, when your staffers would have checked the ledgers to determine if enough gold bullion was available to back up redemptions of paper dollars coming back from Europe.
Ben, somebody recently asked you what a dollar was worth. It’s value was set down in the U.S. Constitution as a set amount of silver (approx. 0.77 ounces by weight). Your answer, as I recall, was that a dollar is worth whatever a dollar will buy. By the way, does anybody still read the Constitution for guidance on how to govern in America?
It appears, Ben, that the dollar buys many fewer Swiss Francs as we speak today than it bought a couple of years ago, not to mention Japanese Yen.
Now let’s see if I got this right: isn’t price stability a key function of the Federal Reserve? If dollars, whatever in fact “dollars” really are, swing up and down against the Yen, the SFranc, the Euro or whatever – other fiat currencies that, like our dollar, exist mainly in cyberspace (excepting the fiat-paper printouts that circulate around) -- would you score that as a failure of Fed policy?
And what about the big swings in the prices for gas, groceries or, Ben, the cost to taxpayers of having U.S. Treasury officials and Fed staffers fly business class to meetings in Davos, Switzerland or Jackson Hole, Wyoming where they hobnob with other financial industry heavy weights?
Ben:
Agreed. Price stability is one of the Fed’s key responsibilities, and we monitor price signals for signs of rising inflation. I was asked recently at a briefing how we would handle a sudden increase in inflation. I explained that we can boost interest rates in 15 to 30 minutes, to put a brake on inflation.
Ted:
Right. You did say that, but that was before you decided you would hold interest rates at near Zero for two more years. How can you commit to holding interest rates constant and also guarantee that you will put the brakes on rising inflation?
Ben:
Ted, don’t worry about that. The price increases over the past couple of years that you have witnessed have been and will continue to be transitory. They will have to be transitory because of our policy decision to keep interest rates at Zero for two more years.
Ted:
That’s your forecast? Sounds like Alice-in-Wonderland Mad-Hatter logic to me.
Are you using the same crystal ball that you used back in 2007, the crystal ball that led you to assert that the sub-prime real estate crisis was well contained?
You don’t have to answer that. We all make mistakes, right Ben? But another item of interest: you’ve leveraged the FED’s balance sheet up to 50+ to one. How does that behavior by the FED set a good example for the investment banking community, which got into trouble with just 30-to-1 balance sheet leverage?
And just one more final question: your decision to keep interest rates at Zero for two more years was made very shortly after your meeting with President Obama. Did Obama tell you: “Ben, I can’t get Congress to free up more funds to get stimulus spending going again. Sorry, but you’re going to have to do more heavy lifting over there at the Fed. Oh, and by the way, with these deficits that are building up, it would sure help to keep the government’s interest costs as low as possible. I’m sure you’ve been in touch with Tim over at the Treasury about that.”
Is that how your conversation with the President went?
Ben:
This is outrageous. Are you suggesting that the Fed is not independent….that we coordinate closely with U.S. Treasury officials and the Oval Office to make sure cheap money continues to flow to the federal government, including Fannie Mae and Freddy Mac?
Ted:
Yes, Ben. I am suggesting that. And, guess what? Many other Americans have the same feeling about you and your digital-server-farm-money-creating operation….”money” that is created out of thin air, backed by the “full faith and credit of the U.S. Government.” Call it “cloud” computing currency.
Geez, Geithner must be red in the face flying to China to persuade them that their Treasury bills and bonds are “safe.” Good as…..um, gold?
One last item: out there on the campaign trail, there’s a former boy scout who doesn’t like the way you’ve been mucking around with our “money” (or what’s left of it, whatever it is; saying that a dollar is “worth whatever it will buy” is a kind of squishy definition of the thing).
If this former boy scout succeeds in chasing that erstwhile community organizer from the Oval Office, I guess you’ll soon be singing a different song.
Or maybe not. Maybe you’ll continue debasing the dollar, transferring money from our senior citizens, via the “financial repression” of negative interest rates, over to the banks and the federal government, and screaming while you engage in this dollar debasement, “Hey, we’re the Fed. We’re INDEPENDENT and we deeply resent any effort to influence our actions.”
Independent? Yeah, right. Ben, you and I, along with a growing number of Americans, know that’s just a bunch of bullsh….(think sun-baked Texas Longhorn rump pancakes!)
Roy Coleman| 8.28.11 @ 6:58AM
"When you then consider the effects of the U.S. Dollar on the remaining 6.6 billion people on this planet, the idea becomes unimaginable."
With that you encapsulate your own and your country's problem Victor, denial. Imagine this, out here in the real world we saw the US 'wealth' shift in the 80s from honest production to the 'virtual' goodies of your speculative 'financial' industries. Ben fiddles while the $ burns....
R.I.P. "The American Century"
E T | 8.28.11 @ 8:08AM
Yeah , the self-deception that is denial.
As Millman said, in the chaos of their conquest, its up to the vandals (and the vandals only) to rule