The Conceit of Ben Bernanke
- Does Bernanke think he is God?
- Lies, half-truths and red herrings
- Total nonsense
“Federal Reserve Chairman Ben Bernanke took his message into American homes Sunday evening, defending the central bank's bond-buying program and pledging his "100%" confidence he could prevent runaway inflation.”
That’s from an article written yesterday in the Wall Street Journal.
It’s referring to Mr. Bernanke’s appearance on 60 Minutes last night, when he tried to reassure us that his policies are not inflationary. In fact, according to him, inflation is not in the cards at all. He’s 100% confident on the matter.
100%!
No room for even 1% of doubt, or apprehension, in the Fed Chairman’s mind for the likelihood of inflation.
Deciphering these types of comments is difficult.
The problem isn’t that Ben Bernanke talks over our heads with his arcane banker vocabulary - where you say “quantitative easing” instead of “printing money.”
The problem isn’t even really the idea that being a Central banker is all that complicated. It certainly doesn’t have to be.
The problem is that Bernanke, and other central bankers cram so many lies, half-truths, obfuscations and red herrings into every single sentence they utter that making sense out of their words is like trying to sort out fact from fiction in a 10 car pileup - with 10 drunken drivers!
Some of it might be kind of true. But most of it is either irrelevant or just plain old garden variety horse-hockey. Each statement is a minefield of uncertainties. We know that Ben carefully crafts everything he says in order to keep the economy’s plates spinning.
What do I mean exactly? Well, take his “100% confidence” that we won’t experience inflation.
It begs the question: haven’t we already lived through a decade or more of it? Is he saying we won’t have anymore? If he is saying that inflation will now cease, how could he possibly be 100% confident?
Some other gems from the Chairman:
“We've been very, very clear that we will not allow inflation to rise above 2% or less.”
Again, it’s another non-statement. They can goal-seek their inflation level to be whatever they want, especially since the Federal Government AND the Federal Reserve each have their own carefully selected inflation metrics that scrub out anything that they either don’t like or is currently out of their control.
If they make up the rules of inflation as they go along, there’s really no way to trust anything they have to say on the topic.
But his next comment was a real showstopper:
"We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time."
Raising interest rates, at this point, would make our already top-heavy debt loads even more expensive to service. Where does Bernanke think the Treasury will get the money to service that debt if (when) interest rates rise?
There are two places:
1. They won’t. They’ll default on the debt. As I wrote last week, it’s already in the cards for Europe: “...the EU announced that any further debt problems in Ireland will likely result in default for privately held Irish bonds.
So, outright default is not just a phrase being whispered in fringe circles. It’s a policy option for central bankers in Europe.”
2. They’ll have it funded by the Fed. That’s already happening, and it’s what Bernanke calls “quantitative easing.” The Fed buys Treasuries with dollars that Ben Bernanke conjures deep inside the mainframe of Federal Reserve computers. He’s literally funding this country’s debt with money that doesn’t exist.
Both of these situations are disastrous for the dollar. But the second scenario will only get worse the longer we let Bernanke get away with it.
And there’s no way to know when the plates will stop spinning. That uncertainty and presumed dollar weakness is driving commodities higher. Investing in commodities is the last resort for investors. The broad market, the real estate market, bonds, CDs, and money markets are filled with too many unknowns.
What is known: the world demand for oil, coal, uranium, lumber, natural gas, corn, wheat, gold, silver, potassium, etc. etc. will remain steady.
Invest in these certainties, and I believe you will prosper.
Unlike Ben Bernanke, I’m not 100% certain! To be 100% certain about something as huge, fickle and uncontrollable as world currency markets is a hubristic statement, even for the world’s most powerful banker.
But I’m more certain that Bernanke’s policies will end poorly for folks holding dollars. So I’m trading in mine for real stuff: commodities and commodity securities that can’t simply be summoned from a computer at a central banker’s whim.
Good investing,
Kevin McElroy
Editor
Resource Prospector
