The loud, national sigh we heard this week was America gratefully, but suspiciously, acknowledging Ben Bernanke’s claims that, well, it’s over. The Fed Chair is satisfied that the recession is in a turn around mode, or at least stabilizing. Covering his backdoor, he added that America can look forward to a sluggish recovery. Just in case anyone missed it, he added, with all the vigor and compassion of a snail, “Unemployment will stay high for some time. It’s not going to feel like a very strong economy.”â€¨â€¨
You cannot get more confident than that, can you? With that level of insight you can now go out and make major decisions for your own future, such as, whether or not to buy a house, upgrade your car, perhaps even fly to Europe on the wings of hope. No? This is the kind of foggy thinking and direction we have come to expect from the independent organization that controls America’s most important economic element – America’s money. Did he define an exit strategy for the money being fed into the system? Did he even describe where, or how, that money is doing anyone any good? Not so much. â€¨â€¨
Bernanke is the same expert who only last year told Congress wonderful fairytales about housing, the markets, and the economy just as the bubble was beginning its implosion. This is the also the Bernanke who, along with Geithner, in a desperate moment of panic made a deal with J.P. Morgan, taking on $30 billion of toxic derivatives from Bear Stearns. Even former Fed Chairman Paul Volcker thought the deal impelled the Fed to, “extend to the very edge of its lawful and implied powers.” What an incredible understatement. The agreement viewable here, was not a loan as claimed, but an outright purchase of an ephemeral mountain of garbage. It was in effect a gift. Did anyone in Congress jump on this breach of law? Of course not. No one would dare question The Fed. Did anyone explain why Lehman was sent over into the abyss, but not Bear? Don’t ask. You don’t want to know. You also won’t be told how it was possible that giant firms including A.I.G., were allowed to gamble with complex derivatives that their own executives didn’t understand. The crumbs leave a trail from Wall Street, all the way to Congress. â€¨â€¨
You will note that the first signature on the hastily created agreement (linked above) is Tim Geithner’s. You can judge for yourself with a little analysis of Tim’s “signature,” what help such a massive ego (IMHO), will bring to your neighborhood. While you’re at it, also check out Morgan CEO James Dimon’s scribble on the signature line. Let me know what you think he’s all about. Looking at that signature, I doubt anyone really knows, but in the meantime, understand that he has more influence on your life than most of your friends do. These are some of the egos that were so overwhelmed with arrogance, and so confident in self intelligence, that there was nothing that the economic super-bubble would throw at them which couldn’t be handled. As the world economy melted about their ankles, all they could do was panic, and in turn panic everyone around them.â€¨â€¨
Bernanke, Geithner and their buddies are effectively in charge of taking good care of the largest members of the banking industry. This does not include your pocket book, or your wellbeing. Although Greenspan was vilified, and slapped into anonymity for having completely missed the housing bubble, Bernanke was right there with him promoting almost non-existent interest rates, downplaying obvious dangers of the bloated borrowing, and belittling concerns of inflation. The fact that no one in America was saving a dime since there was no Interest incentive to do so, didn’t seem to matter. In fact, it still does not seem to matter to Bernanke. How much are You getting on your savings account? How’s your borrowing capacity coming along? Getting any good business loans at cheap interest rates lately? Wall Street will make money if you spend, if you churn, but not so much if you build equity in those resources that matter most to You or if you invest in yourself. â€¨â€¨
When you listen to The Fed Chairman and his claim that he can tighten policy as needed to head off inflationary pressures, based on past record, you can now bet against him. Beyond applying common sense to his present prognostications, his track record suggests that he will not be able to reign-in inflationary pressures. You can assume that with the fast expanding money supply, inflation is returning for a visit that may be reminiscent of the late ‘70s. The amounts flying into the money supply are enormous, and making the assumption that The Fed will be able to “repurchase,” or retract the process, is to assume the improbable. When Bernanke says things like, “I don’t regret anything we’ve done,” heed the arrogance in the context of the domain which is his sovereignty. Most importantly take everything else he says with a grain of salt, and let’s remember that he’s referring to such things as taking taxpayer money/debt for the bailing of institutions that should have been left to flail in the currents of the options available to them in law.
Are we to believe anything Bernanke, or his pal Tim, tell us? Nothing he did or said in the past was either rational, intelligent, or truthful. Alright, so it’s easy to beat up on him. Oh, but wait, he’s still in charge of The Fed. Along with Geithner, he remains in complete control of all things monetary in America. Why? Because neither the President nor Congress have either the knowledge or the backbone to question The Fed and its friends on Wall Street. They certainly don’t have the intellectual or emotional capacity to implement any serious change at the top of the money food chain where it is most needed. â€¨â€¨
It is unclear what has misfired in the President’s acumen when we hear yesterday from Bernanke that Obama wants to give The Fed new supervisory powers to oversee the financial system. Isn’t that just what you wanted to hear? The same Fed and Bernanke who have been so intuitive, diligent and ingenious over the past decade will be given more power? They don’t report to anyone now, if they’re not in the mood, so how will more influence be of advantage to the overburdened taxpayers, exactly? How about calling for the observance and application of existing laws, or implementing current oversight capabilities before expanding and swelling expensive government bureaucracies? How about appealing to Washington politicians for some demonstration that they understand why taxpayers have elected them? How about demanding a little transparency? Apply the controls available, without inventing new ones, and refrain from creating a Nation dependent on its government (through politicized cronyism) for financial success. Prosperity has no address on that road.
James Raider writes The Pacific Gate Post