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Source link: http://archive.mises.org/16933/the-end-of-bernankes-end-game/

The End of Bernanke’s “End Game”

May 13, 2011 by

Bernanke has opened the Fed’s checkbook in an unprecedented fashion. He claims to be “saving” the financial system, in reality he is destroying it. FULL ARTICLE by William L. Anderson

{ 25 comments }

David B May 13, 2011 at 8:21 am

Can you provide a link to the full size chart? I apologize if it is there and I missed it. I couldn’t make out anything on that chart. Too small.

Thanks in advance.

Joe M May 14, 2011 at 4:39 pm

I found the way to view the chart and you are able to make out everything on the chart.
1. In Google type in: Atlanta Federal Reserve Growth of Securitization Markets (hit enter)
2. From the search results choose: [ppt]Presentation-Federal Reserve Bank of Atlanta (Should be the first listed)
3. This is a Power Point presentation. Scroll down until you see the chart as shown in this article.

Bogart May 13, 2011 at 10:01 am

And the worst part is that Ben has 100% confidence that he can unravel this at exact time by doing exactly the correct things. Now how can Ben be so confident judging the complexities of the USA economy when no weather person in the world is that confident about their job.

Louis S. May 13, 2011 at 10:29 am

Could you please post a link to the full size chart (Figure 1)? The image obviously was reduced in size and it is impossible to make out any detail…

Thanks!

Joe M May 14, 2011 at 4:41 pm

See above Louis.

Paul F. May 13, 2011 at 11:33 am

As other readers have commented, it would be nice to be able to read the chart.

I still haven’t figured out if Ben really knows what’s going on, like his predecessor did, and simply wants to carry on the illusion, or whether he really believes in this madness. But then I just need to return to the Fed’s real purpose for its existence: to protect both Wall Street and the ability of the State to spend more than it takes in.

Joe M May 14, 2011 at 4:42 pm

Paul,
See above on how to get access to the chart.

tfr May 13, 2011 at 11:36 am

Well, things are about to get interesting. Commodities are crashing as we speak… I dunno, anticipation of the end of QE2 next month? The stock markets are teetering. It’s unclear yet whether they will go up or down, but with the inflation prop about to be yanked from under them, my guess is down. The dollar is rocketing up at the same rapid pace that commodities are crashing down.

J. Murray May 13, 2011 at 11:49 am

One week swings are insufficient to determine trends.

Eric May 13, 2011 at 2:10 pm

On Commodities crashing:
————-

I realize that when 2 things occur at the same time this does not mean causality, however….

Silver and commodities had risen greatly in the past month, before they corrected. And they corrected when the US celebrated the death of the great Orwellian bogey man, Emanuel (bin laden) Goldstein.

Nobody seems to be talking about this. Could it be that the bull market in commodities turned down when they did because of the “fear” that the US might actually step back from the war on terror as the prez promised before he got elected?

If he did, this might cut the deficits in half, which might mean things aren’t as bad as they seem? Hence, commodities might have been a bit overheated, and so they corrected.

On the other hand, I view this as a buying opportunity, and doubled-down on my silver holdings. We’ll see if I’m right or wrong by summer I think – that’s when the CEO of wal mart said to expect hikes in the prices at his stores (because of the lag time associated with his rising costs).

On the Krug:
————
I think that Krugman is setting up a scenario whereby he can blame the failure of his policies on the lack of “confidence” of the consumer, and thus put the ultimate blame on the crash of the dollar on the Austrians. After all, it was they that whipped up the fear of inflation.

In Krugman’s world, if you believe something hard enough it comes true. And if it doesn’t, it simply means you didn’t believe in him enough. That is, after all, his basic thesis, as far as I can understand his logic. Sort of like testing witches to see if they float.

J. Murray May 13, 2011 at 8:40 pm

In other words, Peter Pan economics.

Anders Mikkelsen May 13, 2011 at 1:02 pm

One of the key things the Keynesians don’t mention is that resources will be employed at some price. If the price goes down it will be employed. This goes for labor and capital. One things Keynesians don’t usually admit in public is that their policies will force down the real prices, they’re essentially trying to trick everyone. However this causes distortions because many resources are employed at the current price – yet it is the unemployed resources that need to be dealt with – yet Keynesian policies deal in aggregates and they’ll affect fully employed resources and underemployed ones. If government spending is going towards fully employed resources it isn’t going to do anything but bid up to the price of resources already at capacity (another way to look at is that it is re-allocating fully employed resources in a different and uneconomic direction.) It won’t necessarily do anything to help underemployed resources. Austrian economics suggests the problem be solved by letting underemployed resources cut their prices in nominal terms until the market clears.

Sean May 13, 2011 at 1:30 pm

Indeed. Well said. Of course, the government’s so-called goal of full employment (of resources)—if indeed this is even the government’s goal, which to me seems highly doubtful…a topic for a separate discussion however—can never be achieved using a centralized mechanism. How Keynesians misunderstand the essential cause & effect fundamentals of free markets (i.e. based on individual intitiative and expertise, etc. and the consequent necessity of decentralized decision making) escapes me entirely. Unless, of course, Keynesians’ interests aren’t aligned with the common good. Mr. Krugman is very intelligent. How can he perpetually misunderstand very basic and simple economic fundamentals? I don’t know. What am I missing?

Paul F. May 15, 2011 at 7:44 pm

In terms of Krugman’s alleged intelligence, you must remember that economics is a “soft” science which tries to explain exchanges between human beings. It isn’t an exact science, as evidenced by the drastically different remedies proposed by Keynesians vs. the Austrian School. Krugman’s worldview is from a liberal standpoint from which he feels the government’s role is to provide social services such as Social Security, Medicare, Medicaid, unemployment insurance, etc. to people of less means, that Bush’s tax cuts benefitted only the rich and are evil and will do much more harm than Social Security will, and that the U.S. should go further into debt to help retrain the unemployed and generate new jobs. Both Hitler and Obama were/are intelligent men, it’s that their world views of the role of government are simply different from yours and mine which make their actions seem so despicable. Krugman truly believes that his proposed policies are good for middle and lower class Americans. This doesn’t make him stupid, it just means his world view doesn’t line up with ours. In a sense, Krugman has scales on his eyes which prevents him from seeing the truth (he is blind to enlightenment, if you will).

Freedom Fighter May 13, 2011 at 1:43 pm

“He claims to be “saving” the financial system, in reality he is destroying it.”

He’s saving his friends and their financial assets at the expenses of us all.

The financial system is still collapsing but at least his friends are saved.

Kyle May 13, 2011 at 11:01 pm

What I am having trouble figuring out is if these people are stupid enough to believe in Keynesian economics, or they are radicals bent on destroying capitalism. I’m aware that Keynes was a Fabian socialist, but not so sure that is commonly known in economic, particularly bureaucratic, circles. Anyone know any Keynesian subscribers in government and their sincere views on capitalism?

economics9698 May 14, 2011 at 11:22 am

People believe in Keynesian because it gets them a nice government job.

mikey May 15, 2011 at 2:35 pm

Pay me enough money and I’ll go around spouting lies too.

economics9698 May 14, 2011 at 4:15 am

It is so amusing to see the Keynesian’s at work. Orange County, Florida had a economic summit about tourism and local business input to our local politicians about better government service. And sure enough the local Keynesian gives his rosy assessment of growth and “recovery” to the local politicians. During the break I confronted him about possible inflation, and as if on cue he was completely oblivious to any such possibility. It really is remarkable how completely clueless and economic illiterate Keynesian’s are. Why do we teach this crap?

FYI: PPI up 22.1% from February to March and 22.3% from March to April. Clueless.

andy May 14, 2011 at 7:45 am

incorrect. Jim Rogers currently holds dollars. obviously not watching enough YouTube.

Mike in MI May 28, 2011 at 6:18 pm

Where is Jim Rogers these days?
I miss him.

And where is M3?

Dana M. May 14, 2011 at 1:17 pm

If the Fed’s mandate is to create jobs and price stability, Bernanke has failed miserably. QE2 has not created jobs. It has not re-inflated home prices and it has not inverted our balance of trade. Indeed, thanks to “temporary” non-core food and fuel inflation, our trade deficit has only gotten worse. Bubbles? We can’t even see to put one foot in front of the other for all the bubbles in this economy! Meanwhile, 40 million people in America are on food stamps, 25% of retirees have no form of survival outside of Social Security, 85% of college grads are moving back in with their parents and 9% of the workforce is on extended unemployment benefits. Social transfer payments have never been higher. Meanwhile JP Morgan’s Michael C. Is writing Eye on the Market reports to his ultra-high net worth clients entitled “Logan’s Run”, the premise of which is that this party will end in some sort of gruesome population correction akin to the plot of a very bad movie. It’s as if we are secretly hoping for Bernanke’s machinations to “please, please work just one more time”, cuz we all know the alternative is a Soylent Green scenario we dare not speak of publicly.

Paul F. May 15, 2011 at 8:08 pm

I believe the Fed’s actual mandate is fourfold:
1. Create conditions so that banks can leverage foolishly and make a lot of money
2. Bail the banks out at tax payer expense when things don’t go so well
3. Transfer wealth from citizens to the State through the hidden tax of inflation
4. Allow the State to spend recklessly

I don’t think creating jobs and maintaining price stability is part of their actual mandate.

Joe M May 15, 2011 at 11:25 pm

Read the below article. It should whet your appetites:
http://www.hussmanfunds.com/wmc/wmc110411.htm
Excellent take on what is next with Uncle Ben.

economics9698 May 28, 2011 at 8:54 pm

Excellent report.

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