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Source link: http://archive.mises.org/10544/the-duplicity-of-ben-bernanke/

The Duplicity of Ben Bernanke

August 28, 2009 by

Ben Bernanke has expressly acted in direct contradiction to every one of his stated goals as Federal Reserve Chairman. Most egregiously, he has overseen the most expansionist monetary regime in American history. His previous academic legacy had been as an ardent scholar of the Great Depression. Let’s hope that his actions do not throw us into the midst of another one. FULL ARTICLE by David Howden

{ 9 comments }

Inquisitor August 28, 2009 at 12:15 pm

That’s Dr Gono, if you will!

A. Viirlaid August 28, 2009 at 2:39 pm

“Let’s hope that his actions do not throw us into the midst of another one.”

My prediction (and that of some other pundits) —> Poor Ben Bernanke is GUARANTEEING us another Great Depression.

Please see “Bernanke to Stay Put” at

http://dailyreckoning.com/bernanke-to-stay-put/

John Dvorak August 28, 2009 at 3:17 pm

Minor correction: Ben Bernanke was not Fed Chairman yet when he made his famous “Helicopter Ben” speech…he was only on the Fed board of governors at the time.

Walt D. August 28, 2009 at 4:02 pm

Inquisitor
Thank you for your post. I thought that Gideon Gono had resigned last year. Apparently not. Paul Krugman apparently convinced President Robert Mugabe that Zimbabwe’s economic problems were due to the central government not providing enough stimulus and Dr. Gono was kept on.

Mrhuh August 29, 2009 at 12:44 am

Scary stuff. Escpecially from a man who claims to not want to oversee the second Great Depression. The sad thing is that he got his ideas for the Great Depression from Miltion Friedman’s “A Monetary History of the United States”. I doubt that he’s heard of Murray N. Rothbard’s “America’s Great Depression”. Someone should send him a copy, it might help some.

mike August 30, 2009 at 10:03 am

http://www.youtube.com/watch?v=e3zo7zjYk2E

I strongly believe we need a federal reserve audit. The recent stock market action suggests to me the federal reserve is intervening in a free and open market. I believe the biggest beneficiary of this TRILLION DOLLAR stock market move in a couple of weeks was Goldman Sachs. Goldman Sachs sells derivatives in our equity markets its apparent that Goldman Sachs Has Total Control Over our stock market using the unlimited capital available from the federal reserve. I believe Goldman Sachs doesn’t have the best interest of our markets. They are misusing the federal reserve to manipulate the stock market and making huge 100 BILLION DOLLAR profits THIS IS ILLEGAL people expect our government to obey the laws just like citizen. Also this manipulation without regards for cost continues to put our government and the people more and more in debt

JUST THE FACT GOLDMAN SACHS HAS HAD SUCH IMPOSSIBLE SUCCESS AT TRADING IS ALL THE PROOF OUR GOVERNMENT NEEDS TO KNOW TO PROVE MANIPULATION!!!!!!

AUDIT THE FEDERAL RESERVE

http://www.auditthefed.com/

Imagine controlling the Federal Reserve portfolio of commodities and equities. TO DO WITH AS YOU PLEASE!!!!!!!

aaniko August 30, 2009 at 4:49 pm

It seems, if you look into Bernanke’s eye, he is not a willing participant in Obama’s radical transformation of our economic system. Were he the person who really studied the Great Depression and wanted to steer clear of it, he would not be fastracking the country into an economic whirpool. It’s just a matter of time until all small banks will have failed and we only have the too large to fail banks left. The people will be completely broke, will have lost their homes and soon will be working for Obama’s radical left government. We’ll all be renting houses from the government and all of us will be in human bondage. And Benanke, like all of Obama’s minions will be wealthy and laughing all the way to their too large to fail banks.

Ron Derven August 30, 2009 at 9:23 pm

If this is an expansionist policy, why has the retail sector and small business in general been cut off from credit? A drive through previously thiving retail sections reveals empty stores, empty parking lots. where is the expansion?

Ron D

A. Viirlaid August 31, 2009 at 4:09 pm

Ben Bernanke is not the only reason for this Second Great Depression — the beginning of which we now find ourselves in.

Recovery? If only!

That would be my most heartfelt wish — but from what I know and understand, IMHO it ain’t gonna happen, simply because it CANNOT happen.

Wishing and dreaming are not going to make it so. The entropy of the system is firmly against us. This cannot be overcome, no matter what. Living standards will fall.

The fault is not entirely in how The FED is reacting to the current situation. This situation has been decades in the making. That is where most of the fault lies.

That is to say, the other major player is our FRBS = Fractional Reserve Banking System. It is as much to blame as The FED and other Central Banks and of course our move away from any semblance of a controlled money system. All of this past history and our own historical amnesia have led to a resultant lack of respect for the risks entailed by borrowing. Our Financial Morals have decayed, if you like.

Savings in a FRBS simply can NOT firmly undergird Borrowing because of the Money Multiplier Effect.

We almost encourage borrowing because the system depends on it — the more the better. Retail Banks only profit by lending more. Of course they cannot just create money. They need deposits. But those deposits themselves are most often other people’s borrowed money. Often the borrowers are many levels removed from the original savers.

That is the systemic weakness that Ben Bernanke can never overcome. In fact, by printing more money he simply exacerbates the infection.

In the sense described above, the FRBS is, of course, a Ponzi Scheme.

It works and works phenomenally well, for a while.
That is, it works until it doesn’t.

It works because of the money-multiplier effect.
And it fails for the same reason.

When it fails, it fails because there is not the same amount of saved money in ‘storage’, as is the TOTAL amount of paper-receipts floating around in the economy.

Why is the original saved money of such importance? Because, after all, Central Banks can print as much paper money as they want.

It is important because it is what the Economic System has as a True Measure of what can be brought to bear in creating new wealth. There is no phony wealth created with newly-printed additional paper money when we have Savings equal Borrowing.

The original Saving is what represents the actual true consumption that is deferred by the original saver.

When we ‘multiply’ this deferred consumption by something that is not actually deferred we are introducing a ‘counterfeit’ deferred consumption.

ONLY the original deferred consumption can be safely used as a loan to make use of that deferred consumption — otherwise we are using phony resources to employ in the economy. In other words if I save 30K and don’t buy a car, you can borrow it from me (via a bank) to do so.

There is nothing wrong in using banks as financial intermediaries of course, but the danger is when my savings of 30K allow 10 other people to borrow 300K in total and buy 10 cars in total.

That will work only for a while — maybe even 3 decades — but then, watch out. The piper wants payment, and unless we are willing to kill the piper or drive him out of town, there can be no more ‘saving’ and borrowing.

When it came to GM’s creditors for example, the President was willing to ‘kill’ the lenders because there was no other viable option, in the Administration’s opinion — ethics (or legalities for Bond Holders) be damned.

We left gold behind as a ‘Barbaric Relic’ a long time ago. This is to our mutual loss, although not readily acknowledged as such.

Central Banks do damage today by further, artificially, pumping up the Money Supply already pumped-up by the FRBS (Fractional Reserve Banking System).

It can only end badly. And it almost always does, roughly once each generation or two. All it takes is for the current generation to grow up during good times, to forget the risks associated with borrowing.

These borrowing risks manifest in deadly fashion only after such a period of time because the loans are never really called upon to be paid back until ‘times get bad’.

And ‘Times Do Get Bad’ when the Economic System can no longer productively absorb More Debt.

This always happens, sooner or later, because the Amount of Total Debt exceeds that magic inflection point, the Total Ability of Society to Effectively Service the Level of Total Debt.

That is, if each new dollar of Loaned Money creates Less Than One Dollar’s Worth of Productive Output, the system careens toward Collapse.

We are in that situation today IMHO.

Market Rebound? Economic Recovery? Keep Dreaming!

Our ability to again get back to Good Times can only be achieved when we can service our Total Debt effectively.

And, barring some Gift from God like Free Energy from Cold Fusion, the only way to get back to effectively servicing our debt, is to reduce it, relative to our ability to create output with which to feed that Debt Monster.

And Mr. Debt Monster is most assuredly ravenous!

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