Ben Bernanke's voodoo

Photo by Shawn Thew/EPA file

I just got done reading this Q&A with Ben Bernanke. In it, Bernanke wastes no time blaming a lack of Fed intervention as the cause of the Great Depression. Bernanke also conflates Roosevelt's homicide of the gold standard with "pressure relief." You know, like a massage in a nice warm hot-tub. Why not blame mothers and apple pie for the Great Depression, too?

If Bernanke studied the Great Depression, then he certainly didn't learn any lessons. To suggest that the gold standard precipitated the 1929 recession and subsequent Great Depression requires either complete and total cognitive deficiency, or else intellectual dishonesty. Roosevelt's abolishment of the gold standard in 1933 was but a formal declaration of policy practiced since the genesis of the Federal Reserve. Hey, Ben, ever heard of World War I? In abolishing the gold standard, Roosevelt formally abolished the free market and made possible the welfare-warfare state.

It was deviating from the gold standard - not following it - that precipitated the boom-bust of the 1920's. Every boom-bust period in our history was precipitated by inflationary credit expansion. Perhaps Bernanke ought to try reading some Condy Raguet. During the 1930's, the Fed did try to reflate and did hold interest rates artificially low. That is what turned what would have been a quick recession into a prolonged depression. Is Ben Bernanke really this misinformed?

What is credit? The trading of future wealth for present wealth. Future wealth comes from.....capital, not a printing press. Interest is the rate of exchange between future and present goods. Particularly, the rate of interest is the discount rate of future goods against present goods. People want to act in the present. Present goods are more valuable than are future goods. You would rather have an apple today, than an apple 10 years from now. Does Ben Bernanke not understand this?

When the Federal Reserve creates "liquidity," this artificially suppresses interest rates. The inflationary orgy of the last several years made real interest rates negative. There is no right way to run negative rates of interest, without a serious decline in the standard of living. Does Ben Bernanke not understand this?

By artificially lowering interest rates, things looked profitable that weren't. Malinvestment and malconsumption took place. We burned through capital and savings. We are broke, bankrupt, insolvent. This is why the loan market hasn't been lending. We do not suffer from a credit crunch, but from a savings crunch. Savings can't be created on a printing press.

Does Bernanke really believe that a problem created by inflation and artificially low interest rates can be cured by the same?

With the scarcity of savings, where does Ben Bernanke suppose the market would set interest rates if free from his dirty, rotten interference? So why does Ben Bernanke want to interfere with the market, unless he is some kind of Marxist, trying to push along the biggest sub-prime borrower of all: the United States government? Hey, Ben, put down your Das Kapital.

If we let the market set interest rates, the government's insolvency would be exposed. The entire game right now: concealing the insolvency.

The more Bernanke inflates and Congressmembers spend, the worse the problem becomes. We are still burning through what remains of diminishing capital and savings. We are living through a slow-motion run on real wealth. Thus, unless we turn back to a free market, it is not a question of if there will be food shortages, but when. Thank God the loan market hasn't started lending again, or else calamity will befall us much sooner. Ben Bernanke, Henry Paulson, Congressmembers, and McBama are turning this into a humanitarian crisis.

What needs to be done? First, Ben Bernanke needs to stop inflating and try reading some Murray Rothbard and Ludwig von Mises. Let the market bring interest rates where it may. Second, politicians everywhere and anywhere need to cut spending. We need to let the free market function and return to liberty. Minimum wage laws need to be repealed, or else there is going to mass unemployment, and an erosion of real wages as a result. Hey, volunteer work is legal, right?

Raising interest rates and returning to a free market would make the United States a haven for capital. So General Motors might be owned by foreigners. Hey, that is what you get from creeping communism.

Why won't the politicians do this? Many of them do not understand what is going on, and Ben Bernanke's rhetoric certainly adds to the confusion. Rather than taking a holistic approach (i.e., pursuing net-benefit policies), politicians look for quick-fixes. They need to understand that the present course they are bringing us all down only buys a little bit more time for those in power. There can't be a government without an economy.

If government spending is cut and Bernanke stopped creating "liquidity," certainly people would find themselves out of work. Nominal incomes would fall, but so, too, would prices, thus creating positive real rates of return. Furthermore, we are already losing jobs, and present policy will only prevent new jobs from being created. There is no way Bernanke can keep malinvestment intact. To even attempt to keep malinvestment intact would require hyperinflation.

Government spending and inflation do not create wealth. Bernanke & Co. are only siphoning wealth away from producers, making them that much less profitable. Thus, if government is cut and Bernanke stops inflating, wealth will be transferred back into the hands of savers and producers. What remains of productive and profitable enterprise will become more profitable. People will be able to get jobs again. What remains of the productive free market will lead us into a recovery.

People are about to figure out that the government can't operate not only beyond its means, but beyond the means of the entire country; debase the currency; hold interest rates artificially low, AND PROTECT THEIR RETIREMENT.

When Ben Bernanke blames the Great Depression on a lack of inflation, then we can take that as a direct threat to out-inflate Eccles. Bernanke's history revisionism is going to engender disaster. This is going to be a whopper of a depression that is going to impact us in ways we can't imagine.

Thanks a lot, Greenspan. Thanks a lot, Bernanke. Thanks a lot, Congress. When they finally get done bankrupting the entire system and are finally out of work, I hope they spend the rest of their days repenting.

My prediction: the next phony bubble will be in agriculture/commodities/foodstuffs. If grocery stores remain packed in the midst of job losses, you know something can't be right. There will be runs on grocery stores, prices will skyrocket. Will the central planners then figure out that Bernanke's "liquidity" did this and that interest rates need to be higher? Or will they impose price controls, or nationalize farms?