Printer's Devil

From: HUMAN EVENTS

Ben Bernanke​ orated. Like E.F. Hutton, when the chairman of the Federal Reserve speaks, people listen—even when he isn’t saying much.

At the Jackson Hole, Wyoming address on Friday, Bernanke did say that the economic recovery has “proved disappointing thus far.” We needed the Fed chairman to tell us this? He did not say whether or not the Fed would unleash another round of quantitative easing, bureaucratspeak for the government effectively defaulting on its debts by counterfeiting money to lend to itself.

Referencing the debt-ceiling negotiations, Bernanke lectured that Congress needs “a better process for making fiscal decisions.” He is one to talk. At least when Congress makes trillion-dollar decisions, the public knows about it. We didn’t get the details until last week on the $1.2 trillion the Federal Reserve secretly lent to financial institutions, including $84.5 billion to the Royal Bank of Scotland and $66 billion to Deutsche Bank, during the 2008 crisis. It took a lawsuit from Bloomberg for the Fed to reveal details of an endeavor even larger than the Troubled Asset Relief Program. This is what democracy looks like?

Printing money rewards failure and punishes success. Whether one speaks of Morgan Stanley​ or the federal government, the Fed’s printing-press bailouts have enabled recklessness. With losses socialized by the Fed, financial institutions will continue the risky lending that catalyzed the Great Recession. With debts absorbed by the printing press, the government will continue out-of-control spending without reference to revenues.

People who have accumulated money rather than debts are harmed. Printing an abundance of dollars doesn’t make us rich. It makes our dollars poor.

Supply and demand influence price. Gold, oil, and foodstuffs have experienced significant price rises during Bernanke’s Fed tenure. Is there a gold, petroleum, or milk/bread/meat shortage? No. But the prices have skyrocketed nevertheless. So what’s happening? The simpleton looks at one half of the economic transaction: the commodity. But a more aware observer considers supply and demand as it pertains to currency.

Gold isn’t skyrocketing. The dollar is plummeting. The price of oil isn’t rising. The value of our money is declining. Cows aren’t refusing to give up the milk. The Fed is flooding the market with greenbacks.

A dollar ain’t what it used to be. Today’s dollar has the purchasing power that a nickel had the year of the Federal Reserve’s birth. The Fed’s statistics released Friday showed that M1, one of its measures gauging the money supply, has increased by almost 20 percent in the last two years. And that is on top of a dramatic spike during the 2008 financial crisis. With such periodic violence against the currency, is it any wonder that the Fed has made a dollar less than a dime in its lifetime?

The legislation establishing the Federal Reserve sought “to furnish an elastic currency.” That objective has been too thoroughly accomplished. A relic from a “progressive” era in which technocrats seized power from the people, the Fed offers a multitude of reasons against its existence.

It’s unconstitutional. Article 1, Section 8 of the Constitution empowers Congress to “coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” Like the power to declare war, Congress has abdicated its responsibility in the hopes that voters won’t hold them responsible.

More Fed Easing Seems Likely: What Is Bernanke Thinking?

From: CNBC

Apparently the bar has just gotten lower for Ben Bernanke.

The central bank chairman stunned financial markets Wednesday when he told Congress that the next round of stimulus—much like objects in the rear-view mirror—is closer than it may appear. 

While there were plenty of caveats and continued references to the slowdown being nothing more than a “soft patch” for those 14 million Americans without jobs, that bar for doing even more quantitative easing suddenly doesn’t look so high. 

“Bernanke thinks the answer to everything is money-printing,” says Michael Pento, senior economist at Euro Pacific Capital in New York. “He thinks that’s what saved us from the Great Depression part two and that’s what could have saved us from the Great Depression part one. He’s doing what he said he would do, which is print money.” 

“I can’t fathom the logic,” Pento adds. 

Pento’s voice is a particularly important one on this issue because he’s one of the few economists of any stature who has been unrelenting in predicting a QE3 —or a third round of Fed easing. 

Pento also has been one of the loudest voices warning about inflation dangers, even as the Fed has been working overtime to combat a perceived deflation threat and as most of Pento’s colleagues brush his concerns aside. 

“Look at first quarter GDP and second quarter GDP. They will have a one handle,” Pento said as he watched Bernanke’s speech. (The “one handle” means GDP will be in the 1 percent range.) “It clearly puts Bernanke on the spot. I think he does what he does best, which is counterfeit the US dollar.” 

The central bank chairman posed two scenarios: One in which the economy improves more than expected and requires tighter monetary policy, and another in which unemployment and housing weakness persists and the Fed is wrong about inflation pressures being “transitory.”

That would require more Fed intervention and, hence, QE3.

You can guess which side the market took. 

The Dow industrials surged as soon as Bernanke began his speech, rising about 100 points along the way as the dollar got hammered and gold and silver prices rallied. 

Since Bernanke delivered his seminal remarks at Jackson Hole, Wyo., last August signaling QE2, the dollar has lost nearly 10 percent of its value against the world’s currencies. 

In the meantime, import prices have jumped about 13 percent and inflation has risen 3.6 percent, tamped down primarily by sagging housing and rent costs, which make up 40 percent of the government’s main price gauge. 

The menu Bernanke laid out on Capitol Hill promises more of the same should the Fed come off the sidelines with the last pile of dirt only recently shoveled on QE2’s grave. 

He is considering more asset purchases to lengthen their average duration, providing “more explicit guidance” on how long the Fed balance sheet will remain in its current state, and, perhaps most significantly, cut the interest paid on bank reserves at the Fed, a move aimed at jumpstarting lending. 

“What I find most disturbing is he could lower the interest paid on excess reserves, which would be a huge impetus for commercial banks to make goofy, crazy loans,” Pento says. 

Pento is surprised mostly by the timing—he figured QE3 wouldn’t rear its head until late this year or early in 2012 as Bernanke had indicated “he would be dragged kicking and screaming to QE3, but he would be dragged there.” 

Most other economists who had dismissed the possibility of more easing figured Bernanke would only begin discussing it after a steep drop in the stock market, a rise to double-digit unemployment and signs that deflation again was a threat. 

Is the ‘Age of America’ Really at an End?

From: Pajamas Media

You’ve no doubt read the ghoulish MarketWatch headline: “IMF Bombshell: Age of America near end.” The story goes on to report that “China’s economy will surpass that of America in real terms in 2016 – just five years from now.”

Well — yes and no and how much does it really mean?

China is indeed riding high. While the U.S. has yet to fully recover from a recession which “officially” ended almost two years ago and continues to struggle with 20% underemployment, China’s economy grew by almost ten percent and created more than 15 million new jobs just last year.

Beijing has unashamedly made an economic colony out of much of Africa, while American power is being frittered away through piecemeal attacks in Libya and an overcommitment in Afghanistan.

The yuan is weak because China wants it to be, fueling an export-driving boom that has taken China from a backwater to a major power in 30 years. Meanwhile, the U.S. dollar plummets because nobody in D.C. can implement a policy to make it do anything else — and the resulting inflation threatens us with a double-dip recession.

But there is more to the story.

Measured dollar-for-dollar, China’s GDP is less than half that of the United States’ — it’s only by measuring “Purchasing Power Parity” that the numbers are even close, even all the way out to 2016. Per capita, most Chinese are quite poor, making little more than $4,000 a year. Grade on the PPP curve, and your average Chinese still makes only around $7,500. Per capita GPD in the U.S. is a much-comfier $47,132.

America enjoys other strengths China lacks. “Soft power” might not win wars, but it does help develop and strengthen friendships. China can count its closest friends on the fingers of one hand, with three left over for making rude gestures: North Korea and Burma. If you judge a country by its friends… China comes up short.

In trade, China’s “brand” is probably best summed up as “dirt cheap crap.” That’s not how this country or Japan came up in the world.

The Failure of QE2

From: Don Surber

The Fed bet $900 billion it didn’t have — and it lost.

Good thing China is not the Mafia or someone would kneecap Ben Bernanke.

First, the Xtra Normal cartoon: Quantitative Easing Explained:

In that liberal shorthand that they substitute for critical thinking, this is called QE2.

But unlike the luxury ship that Cunard Lines operated for 39 years, Bernanke’s QE2 sank.

Taking with it, $900 billion.

The idea was to have the Federal Reserve buy $900 billion worth of Washington’s burgeoning debt under a Democratic Congress — up nearly $6 trillion since Democrats took over Congress in 2006 (and Congress has the power of the purse, and not the president) Quantitative Easing was pitched as another savior of the economy after the stimuli of 2008 ($150 billion) and 2009 ($787 billion) failed.

So we flushed nearly $2 trillion down the toilet and unemployment is still 8%-9% — far higher than when the government began trying to stop the inevitable retrenchment of the economy.

The fiscal plan of papering our problems over with $900 billion in new money hurt the economy.

The liberals brought back inflation.

$4 gasoline?

The Disappearing Dollar

From: National Review Online

Congressman Paul Ryan, one of the least insane men in Washington, has a ten-year plan.

President Obama, one of the most insane spenders in Washington, has a twelve-year plan.

After hearing the president’s plan, Standard & Poor’s downgraded the U.S. sovereign-debt outlook to “negative.” Ah, the fine art of understatement. In 1940, after the fall of France and the evacuation from Dunkirk, presumably they downgraded Britain’s outlook to “spot of bother.”

At the world’s first “Presidential Facebook town hall meeting” on Wednesday, even Obama had a hard time taking his “plan” seriously. Sometimes he referred to it as a twelve-year plan, sometimes ten years, sometimes saving four trillion, sometimes saving two trillion. So will the Obama plan save four trillion over twelve years or two trillion over ten?

For the answer let’s go to next week’s first presidential Twitter town hall meeting:
OMG!!! LOL!!!!!!! ROFLMAO!!!!!!!!!

Overly Massive Government!!! Legislating Official Largesse!!!!!!! Requiring Offering Foreign Lenders More American Ownership!!!!!!!!!

The president’s plan is to balance the budget by climbing into his Little Orphan Obammie costume and singing: “The sun’ll come out tomorrow / Bet your bottom dollar that tomorrow there’ll be sun.” We’ve already bet our bottom dollar and it’s looking like total eclipse. But Obammie figures if we can only bet Daddy Warbucks’s bottom dollar, the sun will shine. The “rich” don’t have enough money to plug the gap: As a general principle, whatever the tax rates, the Treasury can never take in more than about 19 percent. Since Obama took office, the government’s spent on average 24.4 percent of GDP. That five-point gap cannot be closed, and it’s the difference between the possibility of a future and the certainty of utter ruin. Hence, outlook “negative.”

By the way, if you were borrowing (as the United States government does) 188 million dollars every hour, would your bank be reassured by a 12-year plan?

That’s 2023. Go back 12 years. That’s 1999. Which, if any, politicians in that year correctly identified the prevailing conditions in the America of 2011? Most of our problems arise from the political class’s blithe assumptions about the future. European welfare systems assumed a mid-20th-century fertility rate to sustain them. They failed to foresee that welfare would become a substitute for family and that Continentals would simply cease breeding. Bismarckian-Rooseveltian pension plans assumed you’d be living off them for the last couple of years of your life. Instead, citizens of developed nations expect to spend the final third of their adult lives enjoying a prolonged taxpayer-funded holiday weekend.