Ben Bernanke

The two on the right are the correct views.

Upper right--short run

Lower right--long run

Ben Bernanke, Hero? No.

According to Roger Lowenstein:

The left hates him. The right hates him even more. But Ben Bernanke saved the economy—and has navigated masterfully through the most trying of times.

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Bernanke the Keynesian

He answered that clearly during his testimony today, when he said:

As is often the case, the ability and willingness of households to spend will be
an important determinant of the pace at which the economy expands in coming
quarters.

Only a Keynesian believes that consumption drives the economy rather than production.

Consumers are buying iPhones ONLY because Steve Jobs and his team designed and manufactured them. No production, no consumption.

Ben Bernanke and Housing Prices

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Operation Twist

The WSJ writes:

The Federal Reserve-as-economic-savior school took a beating yesterday, after the Fed's Open Market Committee announced its latest policy gambit to avoid a recession. Stocks promptly sold off on the Fed's comments that it now sees "significant downside risks" to the economy, and perhaps also as reality dawned that the reprise of 1961's Operation Twist is more gesture than salvation.

The Fed announced that through June 2012 it will buy $400 billion in Treasury bonds at the long end of the market—with six- to 30-year maturities—and sell an equal amount of securities of three years' duration or less. The point, said the FOMC statement, is to put further "downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."...

The larger point is that the economy's problems aren't rooted in the supply and price of money. They result from the damage done to business confidence and investment by fiscal and regulatory policy, and that's where the solutions must come. Investors on Wall Street and politicians in Washington want to believe that the Fed can make up for years of policy mistakes. The sooner they realize it can't, the sooner they'll have no choice but to correct the mistakes.

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Cartoon: Bernanke's Printing Press

"The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."

Ben Bernanke November 21, 2002

Peter Schiff on Bernanke's Gold Comments

Bernanke further disputes the facts by claiming that the only reason people are buying gold is to hedge against uncertainty, or "tail risks" as he calls them. My advice to the Chairman is to ask the people who are actually buying it. As someone who has been buying gold myself for a decade, I can assure him that my gold buying has nothing to do with "uncertainty." In fact, it's just the opposite. I am buying gold because of what is certain, not what is uncertain. I am certain that Mr. Bernanke's incompetence will destroy the value of the dollar and unleash runaway inflation.

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Cartoon: The Economy

Ron Paul v. The Fed

Bernanke's Speech on the Economy

Here is the transcript.

At the same time, the longer-run health of the economy requires that the Federal Reserve be vigilant in preserving its hard-won credibility for maintaining price stability.

My thoughts: Ha!! Credibility for maintaining price stability? The dollar has lost over 95% of its purchasing power since the Fed was created. That is called failure!!


Mish Shedlock provides some usefully commentary.

Bernanke did everything possible to mitigate his role and the Fed's role in this crisis. His unmitigated gall comes through loud and clear with this bald-faced lie:

"The Federal Reserve's actions in recent years have doubtless helped stabilize the financial system, ease credit and financial conditions, guard against deflation, and promote economic recovery. All of this has been accomplished, I should note, at no net cost to the federal budget or to the U.S. taxpayer."

For starters, were it not for the complete ineptitude of the Greenspan and Bernanke Fed the US would not be in this mess in the first place. Second, there most assuredly is a cost to the Fed's policies.

Prices are higher, wages are not. Banks were bailed out at taxpayer expense. The Fed pays interest on reserves. That interest comes from taxpayers. The Fed's balance sheet is loaded to the gills with garbage from Fannie Mae and Freddie Mac. The Fed is not at risk on that garbage because Congress approved unlimited backing for GSE debt. That unlimited backing is over $300 billion and counting. Those losses are not all on the Fed's balance sheet of course. However let's not ignore the Fed's role in getting Congress to pass that blatantly stupid bill.

Let's also not forget the Fed cheerleading fiscal stupidity in Congress, not wanting Congress to do anything about monstrous deficits now. Keynesian and Monetarist clowns never want to do anything now. They always want to do it at the "appropriate" time, which in practice means never.

Most importantly I would like to point out the very real cost of those on fixed income, attempting to get by with higher food prices, higher gasoline prices, etc. I dare Ben Bernanke to face senior citizens and tell them there is no cost associated with interest rates at 0%.

In case you missed it please read Hello Ben Bernanke, Meet "Stephanie". That post is about the plight of those on fixed incomes struggling to get by with rising costs and CD rates at 1%.

Finally, there is an unseen cost to the stupidity of Bernanke's policies. That unseen cost is the cost associated with fostering still more speculation in the financial markets. There is another bubble in the stock market, another bubble in junk bonds, and another bubble in commodities.

We have yet to feel the ramifications when those bubble pop, and they will. Bernanke cannot see those bubbles for the same reason he could not see the bubble in housing, the bubble in credit, the rapidly rising unemployment rate, and countless other things he missed.

Bernanke is a complete fool, trapped in academic wonderland, completely oblivious as to how the real world works. To top it off, Bernanke has the gall to knowingly lie about the real world effects of his blatant stupidity.

Ben Bernanke, you are disgusting.

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Silver Could Eclipse $450, Gold $12,000

With gold over $1,500 and silver around the $35 level, today King World News interviewed one of the top strategists in the world, Robin Griffiths of Cazenove...

When asked if his $350 target was a realistic price level for silver Griffiths stated, “That is absolutely not unrealistic. If you adjust the old all-time high for inflation...that gives you $450 for silver. Then you add in the fact that they are printing money, you can take it higher than that without any difficulty at all.”

When asked about gold specifically Griffiths remarked, “The run-up to the peak in markets like gold is between now and 2015. I think it will all be over by 2015, a lot of it depends on how aggressively paper monies get printed from here on in. I think $3,000 is an absolute minimum target. I can believe in targets certainly above $5,000 and it’s theoretically possible to go to $12,000, that’s dollars an ounce for gold.

If Mr. Bernanke stays on his current agenda I think those higher numbers will be what you will see. We’re looking at the trashing of the dollar. As Marx pointed out, it’s the most assured way of destroying your economy.

There’s a book called ‘The Road to Serfdom’ by Hayek, pointing out that when a country is in debt, getting deeper into debt as Lord Keynes said, ‘Doesn’t work.’ All it does it make the problem worse and it takes longer to solve.

We’re moving away from the dollar being the main reserve currency on the planet...We’re going to move into an era where world trade is done in mixes of renmenbi, rupees and baskets, and the baskets of currencies will need to be weighted by something can’t be printed like gold.”

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Greenspan v Bernanke

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Doug Casey on Ben Bernanke

He's either a knave or a fool – possibly both. But the odds are he's just an educated fool, an archetypical, clinical example of one. Either way, it's bad news for the U.S. and global economies...

Cutting taxes is always good for any economy, and so is minimizing red tape, with the U.S. tax code being among the worst masses of red tape in existence. But the kind of seismic shifts needed – like eliminating capital gains taxes entirely, and income taxes as well – are not politically viable. It does no good to make marginal improvements to a system that is fundamentally flawed and broken. Bernanke is proposing a band-aid where amputation is needed...

He may just have a complete lack of honesty. And absolutely a complete lack of understanding of economics, finance, history, and monetary theory – a shameful but perhaps predictable state for someone who's lived his whole life in an ivory tower. The man has been wrong about everything he's ever said about the U.S. economy...

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Bernanke's 60 Minutes Interview

Sunday night’s interview was a shameless softballing by the timid reporter, Scott Pelley.

Mr. Pelley should have asked challenging questions. Why aren’t Fed policies helping to create jobs? When you say the Fed doesn’t “print” money, aren’t you being disingenuous since you create money by the stroke of a keyboard? You say the risk of not acting during the crisis in 2008 would have caused another Great Depression as a result of a financial collapse. Do you have any reasonable evidence of that? What basis do you have for saying we would have 25% unemployment without the Fed’s $3.3 trillion “rescue.” Why are interest rates rising instead of declining as a result of your QE2 policy? If you believe your policies have helped the economy, why haven’t they worked so far? Etcetera …

I probably disagree with almost everything Dr. Bernanke says in the 60 Minutes interview. It just amazes me that Chairman Bernanke could sit there and say the things he said in light of the Fed’s track record. He is totally incapable of admitting that the Fed is the source of our problems not our solutions.

This king has no clothes.

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Analysis of the Fed

The Fed's predictive history is so horrible at this point, its bankers so manifestly incompetent, its results so dismal, that there are not many ways to defend it at the moment. This is one of the reasons that as an elite promotion it has probably run its course. When modern central banking was "new" – early in the 20th century – there was little anyone could do to combat the "common sense" of building a bank of last resort. But now there is a substantive track record behind this concept, one that allows us to say (regardless of the larger economic illiteracy) that it simply doesn't work...

Central banking doesn't work. No one, not even the smartest person in the world, not even Ben Bernanke, can fix the value and quantity of money for the larger marketplace. Articles like this one in the Washington Post – well written and perceptive as they are – cannot hide this fundamental point. And thanks to the Internet, we have the intellectual resources to formulate for ourselves what is wrong and to try and put it right. We would humbly suggest, as we often do, a free-market money system, hopefully built on free banking, gold and silver, Real Bills and market-competition. Let the best money solutions win. What's so hard about that?

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How the Fed Keeps Feeding the Financial Crisis

Bill Bonner writes:

Wow! Is this fun, or what? We are so lucky, we can scarcely believe it. We’re getting to live through something most people only read about in the history books…a monetary meltdown.

Last week, our own central bank – the US Federal Reserve – announced that it would print up another $600 billion. This will bring the total to $2.3 trillion added in just a bit over 24 months.

Is this crazy? Is it foolish? Is it stupid? Yes! It is all of those things and more – vain, pigheaded, destructive, reckless…

…supply your own adjective!

Intervention on this scale is risky. So, you might expect that the Fed has some sort of computer program – trusted, reliable, tested and proven – that tells it exactly how much money to put into the system via its QE program…and when.

Well, if you think that, you’re dreaming. The Fed has no such computer program. No formula. Not even a theory that will hold up to inspection.

The whole thing is just a willful, dangerous gamble.

And we’re just happy that it is happening now…when we’re still alive to appreciate it.

It’s not everyone who gets to see a genuine, real-life example of hyperinflation…depression…money panic…and currency suicide. We’re going to see them all. At least, we think so…

But we know the risk of a crash is high. Investors are buying stocks as speculations. The Fed’s hot money is not really going to improve the economy. Everyone but Ben Bernanke knows that. Investors are just speculating that it will push up the stock market. They’re gambling too – just like the Fed.

And maybe it will. But it will be temporary. Because the only thing that can push up the stock market in a reliable way is real growth. And you don’t get real growth by running the printing press. If you did, Zimbabwe would be growing faster than China.

No, dear reader, hot money produces hot action in the market. Speculative fever. Bubbles.

…And crashes, of course.

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Economic Collapse?

The world seems on course for another crisis in 2012. The same people who caused the last crisis are still in charge. They'll get us into another.

Andy Xie

Federal Reserve Chairman Ben Bernanke with ex-chair Alan Greenspan. Greenspan presided over one of the largest periods of growth in US history. But it proved unsustainable. Now, he is warning that America must pay down its substantial debt. On average, the US national debt has been growing by $3.2 billion per day since 2006.

What is now even more disturbing about our future is that it is quickly becoming conventional wisdom that, not only do we need another inflated asset class to generate American-style prosperity, but that it’s the central bank’s job to make that happen.

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Sparks Meets with Greenspan and Bernanke

QE2: $600 Billion

The Federal Reserve cannot solve all the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector.

-Ben S. Bernanke, chairman of the Federal Reserve Board of Governors

This is what life after “QE2” looks like:

• Record gold prices
• Stocks back at pre-Lehman levels
• And a dollar cruising toward its 2008 lows.

Everything is rallying…in terms of depreciating dollars. Mission accomplished. Ben Bernanke needs George W. Bush’s ol’ “shock and awe” flak jacket.

In case mainstream media coverage made you glaze over, here’s the quick and dirty of the Federal Reserve’s fateful decision…

• The Fed will buy $600 billion in Treasuries over the next 8 months
• The mortgage securities the Fed bought during QE1 now reaching maturity will continue to be rolled over into Treasuries, as they have been since August. That’s another $275 billion, give or take
• There was also the caveat that more of this could be in the works if unemployment stays high and inflation (as defined by core CPI) stays low.

Hmmn… If the federal budget deficit is supposed to run $1.2 trillion during fiscal 2011 (that’s the consensus guess)…and the Fed will purchase $875 billion in Treasuries over the next eight months (that’s two-thirds of a year)…

This is yet another reason we don’t expect the House Republicans to convert to the gospel of fiscal responsibility any more than they did last time they were in the majority: They can indulge in demon spending unto oblivion…and the Fed will have their back...

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Bill Bonner writes:

The Fed announced a $600 billion purchase program, from here until June. Even in dollars, that’s a lot of money to throw into a market. The stated purpose is to lower interest rates even further…trying to coax business into hiring and consumers into spending.

Will it work? Will it create real prosperity…growth…and wealth? Ha. Ha. Nope. No chance.

How can we be so sure? Well, theory and practice. In theory, it makes no sense. Real jobs require real investment by real investors, entrepreneurs and businesspeople. It takes time. Skill. Luck. Giving the banks more money (which is what happens with QE) merely destabilizes serious producers. They don’t know what to expect. Cheap money forever? Will inflation increase? What should interest rates be? They don’t know. So, they wait…and watch…and the slump gets worse. Besides, the economy is correcting for a reason. Any interference is bound to be a mistake.

The lessons from experience are even more damning. There is no instance in all of history when printing press money actually turned around a correction. And if you really could make people better off by printing money, Zimbabweans would be the world’s richest and most prosperous citizens. Followed by the Argentines; they’ve got 25% inflation right now.

Nope; it isn’t going to work. And even if it seems to be working…it will actually be making people worse off.

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Bill Gross writes:

The dollar is in danger of losing 20% of its value over the next few years if the Federal Reserve continues unconventional monetary easing, Bill Gross, the manager of the world's largest mutual fund, said on Monday.

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Bernanke, the Fed, and the Dollar

Joel Bowman writes:

All eyes, meanwhile, are on US Fed Chairman Ben Bernanke, who is widely expected to announce his next round of systematic dollar debasement a few days from now – a strategy otherwise known as “quantitative easing,” or “QE” for short. Trepid investors, unsure of what the value of the world’s reserve currency will be a week from now, sit on the sidelines, awaiting their cue from the man with the magic chopper...

Of course, the battle between central bank-created fiat money and its arch nemesis, gold, is not a new tale. Money meddlers have been tussling with the precious metal since the coin clipping days of the Romans. You’d think the bozos would have learned their lesson by now. But, as Bill likes to say, what one generation learns, the next is quick to forget...

“What’s happened since 1971,” the article wonders aloud, “when President Nixon formally broke the link between the dollar and gold? Higher average unemployment, slower growth, greater instability and a decline in the economy’s resilience.”

And that’s not all.

“For the period 1971 through 2009, unemployment averaged 6.2%, a full 1.5 percentage points above the 1947-67 average, and real growth rates averaged less than 3%. We have since experienced the three worst recessions since the end of World War II, with the unemployment rate averaging 8.5% in 1975, 9.7% in 1982, and above 9.5% for the past 14 months. During these 39 years in which the Fed was free to manipulate the value of the dollar, the consumer-price index rose, on average, 4.4% a year. That means that a dollar today buys only about one-sixth of the consumer goods it purchased in 1971.”...

So, what does a central banker do when one round of money printing doesn’t bring about the desired effect? Does he revisit first principles and reexamine the evidence? Or does he double down on his bets, defending his actions with increasingly zealous evangelism? Bernanke gives the world his answer on Wednesday.

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