Read the Thursday Afternoon Wrap-Up for 7/18/2013 and the Friday Morning Commentary for 7/19/2013
It’s been seven-and-a-half years since I became the world’s most powerful man; and thankfully, it’s almost over. Yes, it’s empowering to control the world’s reserve currency – at least, what’s left of its purchasing power. Not to mention, to be repeatedly lauded as “Hero” and “Man of the Year” each time I turn up the printing press…
…and thankfully, 99% of the world ignores “alternative media” articles like Miles Franklin’s “Ranting Andy”; who better described my so-called “heroic” actions here…
“BERNANKE THE HERO”
Not that I haven’t tried my darndest to do what’s best; which I assure you, I did. Alan Greenspan taught me everything he knew about overtly and covertly increasing the money supply; and more importantly, how to disguise such actions via innumerable methods. Getting rid of M3 was a no-brainer – LOL, just one month after I took office – but covert methods such as the ECB “swap facility” took a bit more stealth. Fortunately, the opaqueness of Fed data is legendary; and since the MSM neither cares nor understands our operations, it was quite a bit easier to pull off than anticipated. However, DARN that Zero Hedge for going where those who should, won’t…
Fed Dollar Swap Lines with Europe Soar to $1.9 Billion, Most Since June 2010
Honestly, I truly thought the theories I developed in academia would work; particularly regarding the causes of the Depression. In my old age, I’ll attribute such failures to naivety; but honestly, how could I have expected less with zero practical experience. Sir Alan may have been misguided himself; but at least he once trod the business world; and since he is an admitted disciple of Ayn Rand, clearly understands money far more than myself…
Gold and Economic Freedom – Alan Greenspan, 1966
Things seemed so easy when I got the nod from W. in early 2006; as the post “tech-wreck” crash was far in the past. Yes, the dollar index had been declining for some time; but America appeared prosperous, and the universal belief in a new era of sustainable growth seemed realistic. Unfortunately, I hadn’t grasped the enormity of what Alan did in the ensuing years; in “kicking the can” from the historic 2000-02 bubble implosion to an even bigger, more destructive collapse just six years later.
In hindsight, how could I have been stupid enough to believe money printing yields economic recovery? Clearly, the “DIMINISHING RETURNS” of such schemes appear rapidly; and over time, the concomitant debt buildup makes it impossible to return to normalcy – particularly when my printing press is unrestrained. I mean, seriously, all one needs to look at is the plain old Fed Funds rate; and it becomes crystal clear that such manipulation both causes and prolongs asset bubbles.
Unlike myself – for example – Alan inherited a “crisis” immediately after taking the Fed chairmanship in 1987; in fact, just two months later when the stock market crashed. After modestly easing policy to calm the markets, he held to his TRUE instincts by actually raising Fed Funds to nearly 10% – to offset incipient inflation fears – in 1988 and 1989. However, that was when he realized what Bill Clinton and all high-powered government figures eventually understand – myself included; i.e., he wasn’t in charge. Sadly, the bankers now run things; which are EXACTLY where Bush One got his marching orders in 1989 – to LOWER INTEREST RATES. Yes, despite the Dow having an unprecedented surge in 1988 through the middle of 1989; Alan was ordered to take rates down the second the markets showed signs – albeit, mild ones – of weakness in mid-1989…
Sure, those “signs” proved prescient, as the economy promptly tanked. However, in taking Fed Funds from 10% to 3% – not coincidentally, reaching bottom just in time for the 1992 presidential election – the seeds were sown for the 1990s tech bubble. In fact, Al never took Fed Funds above 5%, despite an unparalleled stock market surge; which even he acknowledged in December 1996, when he stated that “irrational exuberance” appeared to have taken hold of equities….
Unfortunately, he never acted on his instincts by materially raising rates; and thus, as the markets exploded to unheard of valuations, he sat idly until the very end – holding off on further rate increases until the first quarter of 2000; ironically, catalyzing the bubble’s bursting.
However, by then he was completely absorbed by the power of the office – and fully cognizant of his obligation to appease the bankers that owned him…
…and thus, a new – MUCH more powerful easing cycle commenced; with Fed Funds being held at roughly 1% from mid-2002 through late 2004. Unfortunately – just like in the late 1990s, the ensuing tightening came too little, too late. Al took rates back up to a still historically low 4% by the time I took office in early 2006; but by then, an HISTORIC real estate bubble had been created. In fact, it wasn’t just his easy money policies that fostered such a monstrosity, but explicit support of adjustable rate mortgages and derivatives; thus, implicitly rubber-stamping a veritable ORGY of reckless financial engineering and shoddy lending practices…
I was so idealistic when I took the Chairmanship in 2006; as what I’ve described in hindsight was not yet a gleam in my haughty, arrogant, Princeton-trained mind. Alan taught me that easy money fixes everything; but unfortunately, not the long-term consequences of such actions – particularly in an age when high-paying, highly productive manufacturing jobs were fleeing to points East. From the time he took office in 1987 until retiring in 2006, the national debt had surged from $2.5 trillion to $9.0 trillion; and even the (now “managed”) CPI had risen by 35%. Thus, my margin of error was much less than his, as the inevitable economic meltdown commenced in mid-2008.
Neither did he – or I – realize loose money was not just a U.S. phenomenon, but a decidedly GLOBAL one. You see, when the gold standard was abandoned in 1971, it was an alarm bell to the ENTIRE WORLD that the Fed intended to ramp up the printing presses. In order to maintain manufacturing “competitiveness,” they did the same; via a demented sort of “little brother” mentality. In other words, they thought, if printing money is good enough for SUPERPOWER America, it’s good enough for us, too.
When the confluence of global bubbles met in 2008, I of course lowered rates again – more aggressively than even Alan could imagine. I did not yet realize fiat money is a Ponzi scheme – that MUST grow larger to survive; but what was I to do? My MASTERS at the banks and the White House needed me; and damned if I was going to go down in history as the Chairman that did nothing when the economy – and markets – imploded. Plus, as you know, I truly believed the cause of the Depression was insufficient credit creation; and thus, this was the perfect opportunity to test my “Helicopter” theory…
Bernanke Helicopter Speech – 10y later
By the end of 2008, I had already taken rates down to 0%; which sadly, is where they remain today – nearly five years later. It’s become painfully apparent that this is where they’ll forever stay; and even I admitted such last week when – despite my continuing Fedspeak re: potential QE “tapering” – I still stated Fed Funds would likely remain at 0% until at least 2015…
Again, what else can I do? The GLOBAL economy is now in freefall; and here in the States, even world-class data manipulation can’t hide the fact that REAL inflation remains around 9%…
…as that darn “Ranting Andy” pointed out earlier this year…
“DELUSIONS OF A FED CHAIRMAN”
…while manufacturing jobs are at a record low and food stamps and disability records high; as real wages continue to plummet into the abyss. Such stagflation will only worsen as Obamacare comes on stream next year – and the taxes to pay for it; and – MY GOD – I hadn’t even realized that years of trillion dollar deficits had rocketed the national debt to $17 trillion; with no end in sight, a completely irresponsible Congress, and not even a “debt ceiling” to fall back on. At this rate, we’ll pass $20 trillion by the end of Barrack’s presidency; and thus, you can see why rates can NEVER be allowed to rise – certainly not as long as my printing press still works…
But alas, it WON’T always work; as per that annoying “Ranting Andy” again, all 599 fiat currencies that preceded the current dollar have failed; ostensibly, for the same reason – unfettered MONEY PRINTING…
Research shows ALL Paper Money Systems Failed
Not that I need him to tell me the obvious; but sadly, it was decidedly NOT obvious when I took office in February 2006. Thankfully, my term is nearly up – so let Larry Summers or Janet Yellen take the heat for having the “Big One” occur on their watch. Oh well, as Katy Perry states in Wide Awake, “I wish I’d known then, what I know now.”
