Ben Bernanke and the Federal Reserve -- Cranking it out

Ben, you want to express to us just how bad of shape the economy is really in. I thought we were in a recovery? How does a recovery equal the economy being in such bad shape? This does not compute!

We understand how bad the economy is. It is you who does not. I guess you want to express to us how fragile the economy is for the Haves, because the Have Nots completely understand Common Sense Economics.

Unemployment is not going down, because you and your bankster buddies have sent our jobs to the Third World. You say it will take years to get the unemployment rate back down to normal levels -- I'm sure that you are talking about U-3 and not U-6. As Scott Pelley states, "We have lost 8 million jobs from the peak."

This is a structural problem that is caused by imbalances in Economic and Trade agreements, which were created by bad policies that only reward the people at the top of the economic food chain. I think you understand this, but you are ingratiated to the elitists who put you in your puppet position at the Federal Reserve. So let's carry on with the interview and more charades.

Bernanke says at the rate we are going that it could take 4 or 5 years before we get back to a more normal rate of 5% or 6% (U-3). I almost think that he hopes that the Old School Manufacturing people would disappear, because it is clear that he has no solution to getting these people back into the labor force.

Pelley then goes into the situation with the Financial Institutions who are making billions, yet keeping a lid on lending. Lending to small businesses declined in the third quarter. Bernanke laughably blames this on the small businesses, 'They aren't seeking the credit.'

Pelley hits it on the head. "Is this a case of banks who took risks that ruined the economy being unwilling to take risks to support the recovery?" Look at the Moral Hazard associated with the banks. They are enjoying fruit from the mess they created, while many are forced to endure the rot and decay left in the wake of this economic collapse that the tool Bernanke won't even admit to.

Then we get to the crux of the matter where the Fed wants to sell the public on the idea of Quantitative Easing 2 (QE2). Chairman Bernanke is in the midst of monetizing $600 billion in debt by directing the Federal Reserve to purchase treasuries. No ifs, ands, or buts; this devalues the dollar and lets the inflation genie out of the bottle.

Don Quixote Bernanke is fighting the battle of the 1930s economic collapse. He believes that inflation is low and we are getting to the point of deflation. Honestly, does this man have any common sense? Is he in touch with reality? Yeah wages are going to fall, because of trade policy that has the American worker competing against Chinese slave labor! Not because there are too few dollars chasing too many goods. There is plenty of money in the system. There isn't enough breadth. People without jobs or worried about losing their jobs or not getting raises to keep up with rising prices cannot afford to spend freely. This is the reason why the economy has tightened. Many people have come back to reality and practicality. A few Billionaires on Wall Street can't sustain a legitimate economy.

Bernanke says that the Fed is not printing money, the amount of money in circulation is not changing, and that the Money Supply is not changing. Below is a graph of the Money Supply. Tell me, are they printing money?


It is obvious to see that the Federal Reserve has been involved in the process of printing (digitizing) money. Look at the parabolic "hockey stick" curve. Look at how the recovery coincided with the jump in the money supply. The growth that we have seen has been from inflation.

Retail sales were up .8% from October and up 7.8% from a year ago for the three-month period through November (Shopping Spree Fuels Surge - Wall Street Journal - 12/15/2010). That would be great news on its face until one looks at the Producer Price Index, which a separate report showed increased more than expected last month. The 0.8% gain was pushed higher by rising energy and food costs, but the Labor Department data indicated underlying wholesale inflation remained tame (Retail Sales, Producer Prices Increase - Wall Street Journal - 12/14/2010).

Retail Prices matching Producer Prices means that we have inflation. The retailers are pushing the prices through to the consumer and the consumer has no choice, but to pay. Food and fuel are necessities and that is where we are seeing real inflation.

The Fed is buying treasuries, which are dollars. Have you ever seen a treasury note? It looks like a big dollar bond:

The Federal Reserve is lending money to the Treasury and in return they receive these notes that they are paid interest on. The U.S. government in turn creates digits of currency on their computers (printing money). The Treasury then issues the money to the public through the banks. The problem is that the Federal Reserve is the Banks. In essence the Banks are lending themselves money and they aren't issuing the credit to the people. They are keeping it themselves and investing to create and consolidate wealth for themselves. They are not fulfilling their role to perform the "Public Good." This is the fatal flaw in the Federal Reserve Central Banking System. The Foxes have complete control of the Hen House and they are devouring everything including the house itself.

At this time the Fed has no interest in the interest rate earned. They are interested in money generation, which devalues the currency, but gives them greater control over the total money supply. They are consolidating the economy in Wall Street's interest, which gives them greater influence over the nation's policy directives.

We won't have a Double Dip Recession, because we are in a Depression. This is not a Deflationary Depression like in the 1930s, when the country basically operated off of a cash and barter system. This is an inflationary depression created from spiraling debt. People in the 1930s were not in deep debt. Today we are in deep debt.

Wall Street Gives Uncle Sam Too Much Credit - (Forbes - Michael Pento - 12/13/2010) - Household debt as a percentage of GDP is 91%. According to the Federal Reserve’s Flow of Funds Report, total non-financial debt reached an all-time high of $35.8 trillion in the third quarter of 2010. In fact, household debt, business debt, and government debt increased at a 4.2% annual rate last quarter.

To put that record level of nominal debt into perspective: in 1980, the total non-financial debt-to-GDP ratio was 144%. In the height of the credit boom, at the end of 2007, that figure was 226%. Today, the figure stands at a mind-blowing 243%! So you can forget about all that deleveraging talk. The US is in fact still leveraging up, both in nominal terms and as a percentage of GDP.

Bernanke states that the Housing market is already weak and it can't get much weaker. In my opinion it can get a lot weaker. I think part of this charade is an artificial facade that has been placed on Real Estate. The Real Estate market is being manipulated and not allowed to find its own equilibrium. I think the government is attempting to inflate nominal prices back to pre-crash levels as a manner of saving face. And yes I do believe that the government has displayed a level of hubris over the last few years to follow through with such a shallow philosophy. I think that the banks believe that they can eventually find an equilibrium between nominal prices of available inventory and the Troubled Asset Shadow Inventory. Then they will slowly attempt to release the shadow inventory back into the market. That means that those who have conservatively taken care of their property won't see a real appreciation in their home value for generations.

Remember that your Congressmen and Senators supported President Bush's decision to first put this man into this position as Chairman of the Federal Reserve and then President Obama's decision to renominate and reappoint him to the same position after the meltdown in 2008. Does Mr. Bernanke instill confidence in you?

Bernanke states that the Federal Reserve needs to be able to make policy without regard to short term political concerns. How can we be so sure that no politics play a role in decision making policies? The Fed definitely picked winners and losers two years ago when allowing Bear Stearns and Lehman Brothers to fail, while propping up AIG and Goldman Sachs. Look at the 21,000 transactions that the Fed invested in over the last two years -- $3.3 trillion at low to no interest. Ask Mom and Pop if they could have used that money!

I want people to understand and this is the Gospel. The Fed is the Mega-Banks and the Mega-Banks are the Fed. Bernanke works for the banks. He does not work for us. He is a Keynesian, which means he believes in loose monetary policy. He is not accountable and he answers to no one. The Fed is the fourth branch of Government and with no Checks and Balances. If Ben Bernanke wants to crank up the presses and spend us into oblivion, who is going to stop him?