I've never had a headline of the day, but Junior Deputy Accountant wins the Interwebs with "Bernanke on 60 Minutes: I Did Not Have Sexual Relations With That Free Money", wherein we learn that Ben is 100% confident that he can prevent runaway inflation. He insists that the economy is in bigger danger of deflation and that inflation is under 2%.
Srsly. You just have to wonder about a guy who reads his econometric data and doesn't cross check it with the real world. Inflation is here. Ben - go grocery shopping. Buy your own gasoline. Pay a bill. Inflation is here now. I've written on this many times, as have many others.
"The Bernank" and the other central bankers around the world have failed at every step of the way because they're using bad theory. Dumping money into a broken system just makes it a broken system with lots of money in it. It is already causing inflation, and exporting inflation to China - which isn't going over well. Governments can't resist the lure of money that doesn't have to be limited by some scarce commodity (think gold). They always want more money: to buy votes, or to go on foreign adventures. If you're limited to a standard, you have to be disciplined.
Oh, and they're not "printing money". They're not going to affect the monetary supply. They're just buying Treasuries with their own money, that's all. Must see TV:
Now let me go off into my own wild, crazy idea. I believe that Ben, at the behest of Fed.gov, is deliberately crashing the dollar - to correct our trade imbalance with China. We have pestered China to not peg their currency to ours and let it float up in value, as it should. They have told us where to stick that. So if we can't raise their currency, we can crash ours. Sort of a giant game of chicken to see who gives up first.
And as other countries (along with China) follow suit we get competitive currency devaluation - the modern equivalent of protective tariffs - and trade wars. It then becomes a global race to the bottom and the winner loses, at least the people in the winner's country lose. Ben doesn't see it because he's not looking at what its doing to the domestic economy, from the .gov/international perspective what he's doing makes sense. It really looks like they're willing to sacrifice us all for the sake of papering over the spectacular losses from the economic bubbles and all their side bets. Socialism in banking = privatize profits, socialize losses = too big to fail. And the stink of it all is that they claim to be doing it for "our own good." Sure they are, in a short-term-gain/long-term-loss kind of way...
ReplyDeleteThomas Jefferson was right, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."
Amen!
China's currency automatically devalues at the same rate we do, until they de-couple themselves from our dollar. We see small signs of this - the recent agreement to do all business with Russia in their own currencies, and their statement (last spring?) that they were going to loosen the peg and allow their currency to float more. As the country song goes, how about, "a little less talk and lot more action".
ReplyDeleteClearly, they don't want to revalue their currency upward.
You're exactly right with your overall analysis. And Jefferson was so amazingly right on so many things, the guy was genius.