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Source link: http://archive.mises.org/14509/bernankes-solutions-are-the-problem/

Bernanke’s Solutions Are the Problem

November 5, 2010 by

The worst of Bernanke’s statements came in 2006, near the zenith of the housing bubble, a time when exotic mortgage manipulations were in their “prime.” This was the era of the subprime mortgage, the interest-only mortgage, the no-documentation loan, and the heyday of mortgage-backed securities. FULL ARTICLE by Mark Thornton

{ 31 comments }

Dave November 5, 2010 at 9:51 am

Bernanke is either totaly incompetant or fully complicit in the destruction of the western economies. It is impossible for him not to see what is happening.

Jim November 7, 2010 at 11:04 am

What he is, is yet another academic bureaucrat who is convinced that he and his fellow PhD’s are smarter than everyone else, and so it follows that a command and control model is actually superior to the free markets, because, as the author put so well, Bernanke

“… was unusually bold in describing the Fed’s access and ability to use information and data concerning financial markets.”

They are smarter than us. He’ll never be able to reconcile what’s going on in the real world with this perception of how the universe works.

czelaya November 5, 2010 at 11:00 am

News flash:

Ben Barnanke just ordered 100+ Boeing CH-47 Chinook helicopters. With another 300 orders on standy by. They are being fitted with high powered bill dispensers, shovels, and harnesses.

He was quoted saying, “They will now see the true power of Helicopter Ben”!

Walt D. November 5, 2010 at 11:24 am

Hey – I’m old enough to remember the last time Jerry Brown was governor of California. We had med-fly infestation and he actually ordered aerial spraying. Who said that Jerry Brown has no relevant experience? He can get together with Ben Bernanke and show him how to drop $100 bills from the air – insecticide, $100 bills, whatever?

Mason November 5, 2010 at 12:16 pm

Wow, the naked hubris of Bernanke in those “master of the universe” statements from ’07 just floors me. Yet still, wide swaths of the intelligentsia really believe that Wise Wizard Bernanke “saved” us from Financiapocalypse. Astounding.

agdrummer November 5, 2010 at 12:17 pm

Actually, if He were to actually drop money from helicopters to the masses and not to bankers it would Stimulate the economy. If the Fed had given an income tax rebate to all tax paying citizens equal to the amount of tarp the economy would look differant.

Dave Albin November 5, 2010 at 2:27 pm

Maybe in the very short term only. When the money was all spent, you would then see a mini (or massive, depending on the amount of money) correction (I.e., a bust cycle) with decreased purchases, layoffs, etc. Giving a tax cut is great until the resulting increases in tax revenues from the private sector are blown on new government spending.

Daniel November 5, 2010 at 7:14 pm

Refering to Bernanke using the pronoun “He” with a capital “H”?

WTF is wrong with you?

A Public Servant's Blackberry November 5, 2010 at 5:57 pm

Yet more wit and wisdom from ‘gentle’ Ben. This is seriously disastrous. As has been alluded to, when you have other centrally planned economies like Germany and China criticizing the U.S. for it’s latest efforts to ‘stimulate’, that is a sign to be worried, as even those countries know the limits of masturbation. Unfortunately, America will ‘stimulate’ itself to impotence.

Ohhh Henry November 5, 2010 at 9:04 pm

I just watched a bit of the youtube Ben Bernanke was wrong. Look at the strange, sleepy look in his eyes. The lids are drooping and he has a kind of spasmodic, jerky movement to his head. Almost like he’s been drugged or brainwashed. He knows he’s speaking pure rubbish, but he mechanically drones on giving facts and figures allegedly supporting his views but which mean nothing. Like a POW in a propaganda film.

Are there any blank periods in Bernanke’s CV where he went away to thinktanks or private retreats which were potentially not on the up and up? Was he a longtime participant in CFR or Bilderberg type programs, or a beneficiary of special sabbatical study-retreats? As a youngster did he go away on long backpacking trips with companions and contacts who have never been identified?

Look at the president – his life is practically one, long, blank period from the day his parents first met until the time he entered the US senate. He doesn’t have the same ticks as Bernanke, but he is notoriously unable to function whenever his teleprompter freezes. The president is evidently unaware of what he is saying and cannot continue the train of thought because he doesn’t seem to be thinking at all.

Call me paranoid if you wish. I’m not saying that Bernanke or the Presinitz are definitely brainwashed puppets, but they both have strange ticks when speaking publicly which indicate that they are not intellectually or psychologically tuned to their own message. While fear of speaking in public is common and has many effects on the average person (such as ticks and stage fright), it is extremely surprising to see this in either a university professor or a professional politician. Highly unlikely, I would think, especially for those who are allegedly at the supreme pinnacle of their respective professions. Either they were deliberately brainwashed, or they have unconsciously brainwashed themselves while attempting to wrap their brains around the lies that must be told in order to toadlick those in power.

Vedpushpa November 5, 2010 at 9:25 pm

The apprehended collapse of the US economy and Bernanke’s individual contributions to it sound very logical. As the article has mentioned Bernanke’s virtual ignoring of the history – amounting to the loss of ‘probabilities and possibilities of the situation’ and going along with just the current mainstream economic parameters is quite like ‘groping in dark’.
Togo making national economic policies based on exchange rate rather than the intrinsic value of the currency is as irrational as printing currency notes without necessarily basing it on the bullion reserve of a nation.
And of course any national economic concern that does not taking an audited account of the consequential social and the political values proper cannot sustain itself.
{I would be thankful to if anyone finding my observations incorrect should tell me so -for I am am a trained social anthropologist and not an economist]

vedapushpa
Bangalore – India

KAZ November 6, 2010 at 10:59 am

Deflation and depression not linked?

Who on earth is making this claim?

http://butnowyouknow.wordpress.com/those-who-fail-to-learn-from-history/history-of-economic-downturns-in-the-us/

Look closely…deflation, caused by a shift in the money/demand ratio caused by the economy growing faster than money supply, was the cause of one depression or panic after another, during the entire fiat gold standard period, from 1873-1933.

This is not only inevitable, but as Friedrich Hayek pointed out, is at least as harmful as inflation.

In fact, considering the greater severity and length of the depressions during the fiat gold standard and bimetallic period, it’s actually WORSE than inflation.

For example, the typical “recession” during the inflationary period (1946-2004) had a maximum length of two years. The typical depression, during the deflationary periods before and after that span, had a minimum length of two years.

Government forcing a monopoly gold currency is actually slightly worse than the (already very bad) forcing of a paper currency whose supply is loosely regulated by “open market process” the way the Fed has done since the fiat gold standard ended in 1933.

REAL Austrian economics recognizes this, and its key thinkers, like Hayek, support a free market in money, NOT a fiat gold standard a-la Rothbard’s faux Austrianism.

Ohhh Henry November 6, 2010 at 11:24 am

Deflation worse than inflation? Maybe for debtors and leveraged speculators, but not for workers, savers and those holding productive investments.

I don’t care what you think Hayek said, you should get away from meaningless statistics like “length of recession” and use logic, like any good Austrian. Counterfeiting money can only benefit the counterfeiters and their cronies, the ones who have immediate access to the new money with which they can buy up other people’s labor and assets before the inflation is detected.

Nothing truly good can come from any government intervention (it is their innate human nature that they only know how to benefit themselves with their overwhelming power), but a forced gold standard is better than a forced “nothing” standard because in the first case there is at least a solid, physical yardstick for measuring prices. Throwing away the yardstick naturally leads to the situation we are in right now – where debtors, speculators in unproductive assets and counterfeiters are kings and the prudent and thrifty are driven to ruin (and then more than likely sent off to war to be killed).

gene November 7, 2010 at 4:16 pm

unless you “throw away” everything, including gold.

unforced value would be the most stable, whatever people decided to use as value and currency.

KAZ November 8, 2010 at 10:54 pm

The problem here is that you don’t understand even the basics of monetary theory, ergo are missing the fact that there’s nothing “counterfeit” about changing the volume of money, any more than Intuit is counterfeiting when they print more of their Quicken accounting software.

Money is an accounting tool, like Quicken. It has its own intrinsic value, like Quicken. It does not need to be exchangeable for some equal value of a commodity, any more than Quicken does.

The day that nobody will buy Quicken unless they can be guaranteed of turning it in for its purchase price in gold, I will take the ridiculous, primitivist, socialist barter theory of money that Rothbard espouses seriously.

Real Austrians knew better.

ThreeTrees November 7, 2010 at 4:26 pm

All I’m getting from your link is that supply shocks are disruptive, especially when they are money supply shocks in a fractional reserve system whether it be a gold or fiat money standard. My response to your assertions is as follows: “Duh”. I am not at all surprised to see the hands of government in causing those disruptions over and over again.

Hayek’s own period of production triangles and their interactions with the loanable funds market and the construct of the production possibility frontier invalidate your assertions that an increase in the money supply by leveraging debt over and over again creates sustainable growth.

KAZ November 8, 2010 at 10:59 pm

Three, the socialist claim that we should ban fractional reserve banking is as indefensible as the socialist claim that we should impose a fiat gold standard.

Fractional reserve banking is no more fraud or theft than insurance companies or mutual funds. In fact, they serve an overlapping purpose with mutual funds. In effect, a bank invests your money for you, but unlike a mutual fund it guarantees instant liquidity, in exchange for your rate of return being minimal. Essentially, you get free banking services, perhaps the most important service in your economic life, as your interest benefit.

Dagnytg November 6, 2010 at 4:01 pm

Kaz,

I’m not here to debate the gold vs. free banking argument, though I believe that money should be more than a medium of exchange and an asset class unto itself…I suppose I have a foot in the gold camp. Though the anarchist in me agrees with the free bankers.

Needless to say…

If we use the timeline from the link you presented, it becomes apparent that no matter what kind of standard we use…we’re screwed. So, lets accept as fact, from an institutional standpoint, we cannot successfully manage money.

Therefore, if it is humanly impossible to maintain monetary stability (zero inflation/deflation) the question becomes which is the most ethical and moral economic environment to embrace? Inflation or deflation?

I’ll will quote myself from a previous post.

“Deflation values work…inflation values speculation…it’s really that simple.”

Ohhh Henry gives a much more eloquent and intense explanation so I will try not to repeat.

Let me just say, socioeconomic consequences of monetary inflation have devastating outcomes for a society with the brunt of it felt by the poor and elderly. It should also be noted that deflation has a bottom (nothing finite assumes zero value) where as inflation has no top. It seems to me, as a society, we should error on the side of deflation. How we attain that is open to discussion.

KAZ November 8, 2010 at 10:56 pm

If we use the timeline from the link you presented, it becomes apparent that no matter what kind of standard we use…we’re screwed. So, lets accept as fact, from an institutional standpoint, we cannot successfully manage money.

I pretty much see that as a given.

That’s why we need what Hayek and the other actual Austrians advocated…a free market in money, instead of fiat gold OR fiat paper…although fiat paper is the lesser of those two evils, it’s still evil.

Therefore, if it is humanly impossible to maintain monetary stability (zero inflation/deflation) the question becomes which is the most ethical and moral economic environment to embrace? Inflation or deflation?

That’s a false dichotomy. It assumes that these are the only options. The answer, as I stated a moment ago, is to stop putting all of our eggs in one coercive basket, and let the free market produce a solution.

Dagnytg November 10, 2010 at 4:55 am

Kaz,

I appreciate the response, but your acceptance of my original premise and your denial of my conclusion are not consistent.

I don’t believe my conclusion is a “false dichotomy”. There are few historical examples of stable monetary value. If you agree with “from an institutional standpoint, we cannot successfully manage money.” Then how can you believe we can manage money any better in an AnCap society?

In your response to ThreeTrees, you state that fractional reserve banking is a viable alternative. If in an AnCap society banks pursue this mode of business, (as most of them will…how else can they make any money) then inevitably we end up right back where we are today. Nothing changes.

As an anarcho-libertarian, I’m not arguing for or against free banking. I’m undecided. (Similar to the IP issue) But I am arguing a different conclusion using your analysis. You can’t accept my original premise and then use hope (hope of the free market) to deny its conclusion.

PS>Kaz, there are only three options. Inflation, deflation, and stable monetary value…the third choice seems to be humanly impossible…therefore, we should error on the side of deflation.

Thomas McGovern November 6, 2010 at 4:10 pm

Getting ahead of the curve, let’s rename “Helicopter” Ben Bernanke “Weimar” Ben Bernanke.

Regarding US government and Fed management of the economy, if it’s a good thing when the economy is bad, think how good it would be when the economy is good. The logical thing to do is to have the US government and the Fed manage the economy all of the time.

“The American people will never knowingly adopt socialism, but under the name of liberalism they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened.” Norman Thomas

Bruce Koerber November 6, 2010 at 8:04 pm

Apoplithorismosphobia Plagues Bernanke – He’s Sick!!!

It is a great service to us all to have the thorough investigative work of Mark Thornton about the background and motivations of Ben Bernanke. It is a very revealing phenomenon to see how prestigious institutions and highly-touted career paths are actually pseudo-education and cesspools of quackery.

Bernanke’s great ‘academic’ distinction came because he pursued an unsubstantiated deviation from the erroneous diagnosis of the positivists regarding the Great Depression. And he locked himself into that silly and pea-brained doctrine to puff up his ego and to ambitiously pursue his goal to be a money launderer.

Price November 7, 2010 at 8:42 am

The time for analysis of what’s happening is over. Its clear that each one of us has to defend ourselves financially, or become toast.

Special tip to young people who are reading this: bring forward your inheritances now and do something reasonable with the capital. Your parents and grandparents are economic idiots and will become financial failures, if they aren’t there already. Don’t trust them to be able to handle your inheritances.

I’m 56 years old. My family’s net worth, not including rental real estate, went up over 6% (USD) last week.

Are you prepared?

Dagnytg November 7, 2010 at 5:36 pm

Your parents and grandparents are economic idiots and will become financial failures, if they aren’t there already. Don’t trust them…

And this conclusion is based on…?

PRice November 8, 2010 at 11:26 am

What country are you living in?

Regardless of your country, ask your parents and grandparents what they think about the world’ champion debtor, the U.S., declaring economic war on all of their creditors. Ask them to elaborate on what consequences they can see, and what may impact your family. Tell us here what they say.

If you’re in the U.S., I’ll give you a few more questions you can ask your parents and grandparents.

Dagnytg November 10, 2010 at 5:01 pm

Price,

With all due respect, if you’re going to make a blind statement like “everyone’s idiot” please have the courtesy to support your claims. This is what people do on this site. It’s a thinking persons site…not a yahoo message board.

By the way, in the case of my grandfathers-both of lived around the turn of the century, lived through the depression, two world wars, and managed to be very successful in spite of the fact that neither of them had a college education. I don’t think I would call them idiots.

anonymous rodney November 7, 2010 at 9:57 pm

With the incoming Congress, is there hope that Ron Paul’s push to “audit the Fed” will gain momentum?

Will the public finally get a glimpse into the sordid operations of this counterfeit money machine – and finally push to “end the Fed.”

I am afraid that Wall Street Banksters will push back against such populist moves – with more than their arsenal of counterfeit dollars.

Kolya November 8, 2010 at 1:33 am

Some of you might enjoy this – http://www.youtube.com/watch?v=StbxgDD9Fts.

You can disagree with Bernanke’s policies, but the vitriol against him personally isnt justified. He’s not out to screw the little guy to benefit himself. If he was, he’d be driving something much nicer than a Ford Focus.

Fallon November 8, 2010 at 2:53 am

You and I do not know his motives. But power is said to be a drug. Bernanke knows that the consequences of his actions are severed from accountability. In many ways, the seeming incivility of the Fed’s victims is a consequence of victimization. (What can the powerless do but throw stones at tanks?)

The slave has more than just a policy dispute with his master.

The thing is, civility might better be served if Bernanke was dragged outside and stomped on by an impassioned mob. Though this crude Jacobin explosion would eventually backfire in a horrific way. That’s why it is doubly important to undermine the ideological basis of fiat money. The system does not merely need to end, but what comes in its place must be grounded in civility.

George Meredith MD November 8, 2010 at 11:06 pm

Bernanke and Sebelius and Fiat Dollars

Geithner and Bernanke (both members of Hillary’s shadow government) plan to continue their insane orgy of spending and looting our economy for their cronies and special interests pals. Bernanke’s move to flood the world market with another $600 billion in fiat money will further depress the value of the dollar. And bring massive inflation and cause unemployment to sharply rise, not fall. Read what economist Robert Higgs says about Obama, Geithner, Bernanke, Greenspan and the puppeteers that control these swindlers.

Instead, to lower unemployment (9.5%) and underemployment (18%), we could do, oh so easily, by:

• Repealing Obamacare, post haste….why spend a trillion dollars to buy health care for the 32 million Americans who are currently receiving it for free right now?

• Give current Medicaid and Medicare recipients vouchers and let them purchase whatever health insurance fits their needs…this would cut the cost of these corrupt programs by an amazing 70%. Enforceable deductibles and co-pays would return Medicare and Medicaid patients to the real world medical marketplace! And would simultaneously cut the cost of commercial health insurance by 50%.

• Issue a federal mandate that would allow patients to cross state lines, in order to purchase more competitive health insurance….in other words, break up those BCBS monopolies, like the BCBS scam that Kathleen Sebelius and her trial lawyer cronies ran in Kansas, for years and years.

• Scrap the wind farm and gasohol programs that our corrupt politicians and their flim flam puppeteers have forced down our throats. These programs are not, and never will be, cost effective. Just another Obama pipe dream that will never pan out.

• Tell OPEC where to get off by imposing an adjustable energy import tax. The less you charge us, the less we tax your products. And vice versa.

• Structure gasoline and diesel road taxes so as to encourage the use of our abundant natural gas resources for surface transportation.

• Remove all unions from all mass transit in America. Tell these people that efficient, privately run mass transit, free of unions, is a matter of national survival.

• Get the hell out of Iraq and Afghanistan right now! And begin the public trials of those politicians who corruptly got us into these hell holes.

Do these things and bingo, our economy rights itself almost overnight. But continue to follow Greenspan, Geithner and Bernanke….continue as these swindlers have been leading us, and we will continue our ever accelerating national slide into the dark abyss.

To learn more about Sebelius’ role in Hillary’s corrupt shadow government go to http://www.sebeliuscoverups.com or just search:
George Meredith MD Comments

George Meredith MD
Virginia Beach

George Meredith MD December 4, 2010 at 10:55 pm

The Deficit Commission, Bernanke and Sebelius

Little Timmy Geithner and Uncle Ben Bernanke (both members of Hillary Clinton’s and George Soros’ shadow government) plan to continue their insane orgy of spending and looting our economy for their cronies and special interests pals. Bernanke’s move to flood the world market with another $600 billion in fiat money will further depress the value of the dollar. And bring massive inflation and cause unemployment to sharply rise, not fall. Read what economist Robert Higgs says about Obama, Geithner, Bernanke, Robert Rubin and Greenspan. And about the puppeteer, George Soros, who controls these swindlers.

Instead, to revitalize our crashing economy, we must sacrifice the sacred cows. The sacred cows being the phony war oh drugs, the phony wars in Iraq and Afghanistan and the oh so corrupt Medicare and Medicaid health insurance programs. Failing to promptly sacrifice these sacred cows, will doom this once great nation to a perpetual second class state. Raising taxes, through whatever mechanism, and or printing fiat dollars will not salvage this nation.

Therefore to return to our former standard of living, we must, post haste:

• Repealing Obamacare, immediately….why spend a trillion dollars to buy health care for the 32 million Americans who are currently receiving it for free right now?

• Give current Medicaid and Medicare recipients vouchers and let them purchase whatever health insurance fits their needs…this would cut the cost of these corrupt programs by an amazing 70%. Enforceable, meaningful deductibles and co-pays would return Medicare and Medicaid patients to the real world medical marketplace! And would simultaneously cut the cost of commercial health insurance for the rest of us by 50%.

• Conduct an auction and sell off all government hospitals….Army, Navy, Air Force, VA, USPHS, CDC and NIH. Then present the involved patients with vouchers, so that they can seek medical care where ever they wish. Private hospital corporations would buy these facilities and run them as they should be run. Patients would be required to pay deductibles and co-pays, just like the rest of us!

• Issue a federal mandate that would allow patients to cross state lines, in order to purchase more competitive health insurance….in other words, break up those cozy BCBS monopolies. Like the BCBS scam that Kathleen Sebelius and her trial lawyer cronies ran in Kansas, for years and years.

• Scrap the wind farm and gasohol programs that our corrupt politicians and their flim flam puppeteers have forced down our throats. These programs are not, and never will be, cost effective. Just another corrupt political pipe dream that will never pan out.

• Scrap the phony trillion dollar Medicare prescription drug program. This was a tradeoff by Bush and Cheney, aimed at getting old folks’ Brownie points, so that Bush et al not be put on trial for treason vis a vis the phony was in Iraq. Let the seniors buy the safer, much less expensive generic drugs.

• Tell OPEC where to get off by imposing an adjustable energy import tax. The less you charge us, the less we tax your products. And vice versa.

• Structure gasoline and diesel road taxes so as to encourage the use of our abundant natural gas resources for surface transportation.

• Remove all unions from all mass transit in America. Tell these people that efficient, privately run mass transit, free of unions, is a matter of national survival.

• Get the hell out of Iraq and Afghanistan right now! Station these troops stateside until they can find work in the private sector. And begin the public trials of those politicians who corruptly got us into these hell holes.

• Call a halt to the phony war on drugs and the corrupt judicial-prison industry that it supports. Make those government judges, lawyers, DEA, Sheriff’s Deputies, FBI, USMS, local and federal judicial employees who are involved in this phony war on drugs…why, make them go out and get real jobs.

• We must stop this insane prohibition of opiates that empowers the most corrupt of us. Do this and crime in America would plummet by 80%. But then we will have to listen to the American drug kingpins Bush, Clinton, Stephens Jackson, Don Tyson, George Soros, Steven Bresky (and Obama)…why, then we will have to listen to their puppets whine! To learn more about the drug kingpins who run this country go to http://www.stopseaboard.net

Do these things and bingo, our economy rights itself almost overnight. But continue to follow Soros, Greenspan, Geithner and Bernanke….continue as these swindlers have been leading us, and we will continue our ever accelerating national slide into the dark abyss.

To be sure, as suggested by these so called deficit commissions, the answer is not to further squeeze grandma’s money market funds and CDs. Nor grandpa’s little social security check.

Geithner, Bernanke, Soros and Greenspan have managed to raid pension funds, IRAs and university endowments to the point that they are worth only half what they were worth two years ago. In order to bail out their cronies at Goldman Sacs, AIG, Bank of America, Merrill Lynch and others. Just look at their crony Robert Rubin…why, he made $100 million shorting Fannie and Freddie, when all the while, Rubin was telling his clients to buy same. This thing reeks of the currency manipulation of Germany’s Weimar Republic by the Rothchilds and their cronies, circa 1923.

And now Bernanke is cranking out $600 billion fiat dollars on some delusion that such a move will trigger US exports….. Americans, get your wheel borrows ready!

To learn more about Sebelius’ role in the Soros-Hillary corrupt shadow government go to http://www.sebeliuscoverups.com or just search: George Meredith MD Comments

We must have “Action This DAY!”

George Meredith MD
Virginia Beach

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