Guest Post: Bernanke’s Unstoppable, Self Reinforcing Feedback-Loop

Tyler Durden's picture
Submitted by Davos Sherman Okst
Bernanke’s Unstoppable, Self Reinforcing Feedback-Loop
Our economic death spiral into the Second Great Depression

Wracked up by both parties over many decades our debt has evolved
into a yearly deficit that can no longer be serviced with tax revenue
and borrowing.

To avoid default Ben Bernanke chose to monetize
the un-payable portion of our deficit. Each month about 100 billion
dollars are created out of thin air to cover our government’s bills.

This has set forth an unstoppable, self reinforcing, feedback-loop whereby:

  1. Debt
    monetization (printing money out of thin air to cover the portion of
    governments spending not satisfied by tax revenue and borrowing) reduces
    the value of the dollar.
  2. The debt monetization triggers dollars to flow out of bonds and into commodities.
  3. This increases demand, commodity prices rise.
  4. As commodities make their way into the supply chains businesses and consumers realize higher prices.
  5. Since
    globalization has caused wages to stagnate at 1970 levels, and with 23%
    unemployment, businesses try to eat increases, this in turn reduces
    hiring, causes layoffs and kills expansion.
  6. Consumers reduce
    their purchases, case in point: Wal-Mart is losing market share to the
    Dollar Store - that right there spells retail health (read: it’s
  7. Nations whose citizens spend 32%-52% of their entire budget on food are especially affected.
  8. In
    those nations where citizens spend 32%-52% of total their income on
    food; food riots erupt, social unrest breaks out, governments topple.
  9. Geographically
    speaking, many of these nations are in the Middle East where about a
    third of the world's oil supply comes from - so oil production is
    adversely affected, the price of oil increases. Drastically increases.
    The empire must then send in troops and warships to protect oil assets
    from being wiped off the map.
  10. Oil is an integral part of
    everything from farming to manufacturing to transportation, therfore the
    prices of all goods and services rise.
  11. This of course creates
    more stress on our economy, which drives tax revenues down, whic creates
    a greater deficit, which causes idtiot Ben to lean on the print button
    and monetize even more debt.
  12. Like an infinite loop in some
    errant computer code we go back to #1 above and iterate back through
    this unstoppable, self reinforcing, negatively-insane-Ben Bernanke-code
    that we call a negative self reinforcing feedback loop.

Bernanke's Crimes Against Humanity

Exporting Higher Food Prices to Poor Nations:

price of grain and many other foor comodities are set in US Dollars.
Creating more dollars reduces the dollars purchasing power. Creating
more dollars makes investors flee securities and rush to hard assets,
like grain, corn, soy, oil, cotton, coffee, sugar and so on.

Tunisia on December 17, 2010 a 26-year-old man who tried to supported
his family by selling fruits and vegetables doused himself in paint
thinner and set himself on fire in front of a local municipal office.

had confiscated his produce cart, the cart he needed to earn a living
in order to feed his family. With rising prices he coldn't afford a
permit. They also beat him when he objected. Local officials then
refused listen to him.

His desperation highlighted the public's
frustration over living standards and increasingly higher food prices
which accounted for 32.4% of their entire earnings.

A month later the ruler of Tunisia was gone, its government collapsed.

Now it is Libya’s turn.

In Lybia 37.2% of a families budget goes to food.

Many other oil producing nations have citizens who face the same income to food budget ratios. Map of many of the countries that are experiencing protests.

bond sales have been anemic. Money is flowing out of securities and
into commodities. Bernanke’s plan to have Quantitative Easing reduce
interest rates has so far been a failure because of these outflows.
That was Bernanke's first mistake.

Rising commodity prices, which for the most part peg global food prices was his second misstake.

if you count: Bear Stearns, the housing bubble, subprime contageon,
unemployment contageon and recesion contageon they are respectively
Bernanke's 6th and 7th blunders. Add to that the fact that he is
following the steps that Greenspan used to explain how Great Depression One was created
and it soon becomes apparant that Ben Bernanke is, without a doubt, the
worlds biggest economic imbicile and shouldn't be allowed to balance a
checkbook - let alone run the world's (now thanks to him and Greenspan)
third largest economy.

Bernanke couldn't find cause and effect in a
dictionary. He is an economic moron, and a master of global disaster.
The only bigger fools are our leaders who:

  1. Haven't fired him.
  2. Still listen to him.

we have 2008 redux. Commodity prices and oil prices are headed up.
Will they crash or will the dollar crash? If commodity prices and oil
prices crash again this time I’ll be surprised if money flows into
securities again. The dollar is no longer looked at as secure now that
Bernanke is monetizing the debt.

The gig is up, the game is almost over.

High Frequency Algorithmic Trading (insider trading) became responsible
for 70% of stock trades I tossed the term “stock market” out of my
vocabulary and replaced it with “rigged casino.”

When Bernanke
began monetizing insane amounts of money the term “Bond Vigilantes” got
tossed into that same trash heap. “Bond Vigilantes” are like ants with
Bernanke counterfeiting over a trillion a year.

There are no more Bond Vigilantes.

Ben Bernanke IS the bond market and so far he hasn't even stepped in enough to keep yields down, but he'll have to.

It is not the smartest or the fittest that survive, it is those who notice change first.

Ben Bernanke cannot
stop Quantitative Easing. Stopping the monetization of debt means that
the United States of America defaults on its obligations. That’s
right, the government stops sending out Social Security payments,
government workers stop getting checks, companies who do business with
the government stop getting paid, Medicare stops - well, you get the

The other fallacy is that we can make cuts and balance
this mess. When 23% of the deficit is debt service and 57% goes to
keeping grandma eating. With those two facts in mind, we quickly realize
that the deficit can’t be cut. Not without default and total

Debt is monetized when the Fed creates money with a
computer and credits the Treasury Department for the Bonds it
“purchased”. The treasury takes this “money” and pays the government's
bills so it can stay open. So those thinking there is no velocity may
want to think that through again.

With 23% unemployment and with
43 million Americans on Food Stamps and a 1.5 trillion dollar deficit
the Fed can not let interest rates rise. Rising interest rates would
create massive deficit pain and inflict more debt servicing nightmares.
There will be no Paul Volckler's this time. Bernanke will – en-masse –
drive bond prices back up and rates back down by creating massive fake
demand for bonds at auction when interest rates get too out of hand.

he does that the value of our dollar will really tank, investors will
step up their continued flight to safety by purchasing commodities and
commodity prices will increase even more. Higher oil prices will likely
cause investors to flee the stock market, but with thin volume and 70%
HFAT who knows what the rigged casino will do. They’ve made a sincere
joke of the market, which for people in retirement with funds chained to
the rigged house — well this is nothing but a sorrowful situation.

Saudi’s king is buying time on his remaining years – he’s 87 - by handing money out. Like the fine ZeroHedge piece said:

for Saudi, Bahrain tried this and failed. Also, once you start down
this path, there is no turning back, as people demand more and more.”

China is faced with its Jasmine protest.

the other central banks, our leaders and the leaders of the rest of the
world still have time to exit this endless loop. Just about every
country is broke and needs to re-value their dollar and let the people,
the local and state and federal governments get out of debt.

concern I have is that other countries may exit the loop by announcing a
new world reserve currency, which may be composed of one or several
[other] currencies - all but ours - or with ours being a fraction of the
total reserve.

"If" (please read: When) the United States loses
the reserve currency its printing and current debt levels will equate to
an ugly and very weak exchange rate. In short, food priced in some
other currency will leave us looking like Libya.

You can go back
through thousands of years of economic history and realize one fact: No
country has ever printed their way to prosperity, all who have tried
have wound up in hyperinflation, war or demise. How a guy can teach
himself calculis, get into Harvard, become a professor at Princeton and
NOT understand that - well it totally defies logic. The idiot was asked
about the one time in our history that we had no debt. (Please don't
think we balanced the budget during the Clinton years - for you can't
debt (apply IOU's in the Social Security Trust Fund) as income.) Andrew
Jackson balanced the budget and wiped away our debt by using non debt
based money. Bernanke was asked about this during a recent hearing and
he scoffed at it - his merit? Because it happened before the Civil War.

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trav7777's picture

they do not consider growth limits in finite systems in economics

Mad Max's picture

Mainstream economics is looking about as legitimate as wizardry at this time.  Less so, actually.  Wizards get better costumes too.

Devout Republican's picture

I'm sure all can agree on the facts of the article.  But what if he stops printing?  Then what happens?

the rookie cynic's picture

Screwed either way. Stopping now would cause a sudden crash, but the middle class might make it. Continued printing will lead to two-tier society of rich, globally focused elites and the rest of us poor bastards. Emphasis on poor. Middle class is getting killed of by inflation, falling wages, unemployment, and taxes.

Calculated_Risk's picture

I rolled a 20!!! Double damage on the magic money spell bitchez!!!!

Temporalist's picture

It seems to me that proposing a non-debt based money is still printing money to solve the problem isn't it?

Judge Judy Scheinlok's picture


.gov's earn through taxation, commerce, and outright theft. Time for us to go steal some gold and natural resources from these shitstain countries who do not bow and cower.

Then .gov is going to need you to turn in your metals. You will get a tax credit, redeemable over a 20 year period.

Guy Fawkes Mulder's picture

It seems to me that proposing a non-debt based money is still printing money to solve the problem isn't it?

The control of money became a sine qua non tool for the power hungry a long time ago.

Q: Is it better to be rich or wise?

A: It is better to be rich, for the wise are always knocking on the doors of the rich.

-Ancient Philosophical Anecdote

We should have come up with a money system that serves a sustainable world for us to live in, but the power-hungry are not interested in making a sustainable world for us — they are interesting in making one sustainable for them.

So the power-hungry money controllers reward the "wise" academics for ignoring the role of debt-based money in the ponzeconomy(), much as they pay the media for ignoring it. The best agents of the power-hungry in academia and media are the unwitting agents who, "like everyone else" at the end of the day, do the work because they "need the money".

And here we are now at the terrific collision of energy, economy, and money — the masses totally unprepared — and we have no wide consensus on what to use for money. Silver and lead, I suppose, will be the default answers.

The power-hungry have ever used "silver or lead", "plata o plodo" as the default answer for bending men to their will.

And you can bet that the power hungry have a loosely scripted plan to keep themselves in control of the money in any financial event. After all, they can promote it on the masses via the media.

Will some day the people literally beg to be chipped with RFID links to their money, as predicted by Peter Joseph?

I think perhaps yes.

newworldorder's picture

Very well stated.

Some additional thoughts here. The current debt based financial system was designed as a self perpetuating process to extract inflation wealth from the masses for the benefit of the banksters and for the politicos to run government operations without asking for additional money from the voters.  

I am convinced that no-one wanted to kill the golden goose. The complexity of modern banking through the use of derivatives and the size of the international financial system unleashed the criminal and animal spirits among the cartel. Over time they stole so much from the productive segments that there really is not much left for their profits or to run government needs.

Matt Taibi's vampire squid is a really good analogy, not only for the blood it drains from the host, but also in how it weakens the host over time.

Question is: Can the system be changed in time or are we all doomed?

Guy Fawkes Mulder's picture

I return the "very well stated" compliment.

I'm pessimistic from before I awake until after I go to sleep, so even though I too want to change the system in time, I "know" we are all doomed.

Vampire squids are called vampires not because they draw blood but because they can disappear like a vampire. And that is the money-masters' #1 trick. They move away from the light with reflex speed.

I still have no golden advice for readers to save themselves from the night and from the vampires, but I do recommend the comic book link below (find a link from me below in this thread).

Temporalist's picture

Here is another ancient philosophical anecdote and answers why the wise would be knocking:

"A fool and his money are soon parted." - Thomas Tusser

cranky-old-geezer's picture

It seems to me that proposing a non-debt based money is still printing money to solve the problem isn't it?

This is actually a very good question.  I can't imagine why you were junked.

In the mind of a rational person, a money system begins with something that stores value and is easily exchangeable for something of equal value.

Obviously gold and silver have historically been viewed as the basis of a money system.

Currency, paper money, came into being as a claim on stored gold and / or silver in a bank. A paper claim on gold and / or silver is more transportable and easier to use in a practical sense.

That's the point.  Paper currency began as a claim on gold and / or silver stored at a bank issuing said paper currency.  The paper has no intrinsic value. It is a claim on something of value, i.e. gold and / or silver stored in a bank (typically).

When the Fed was created, it was given authority to print Federal Reserve Notes (FRN) and they were declared legal tender as money. 

But they're not a claim on anything of value.  You can't take them to the Federal Reserve Bank and exchange them for physical gold and / or silver, so they're worthless.  Just a piece of paper with fancy green printing.  They don't represent anything of value. 

Since FRNs aren't a claim on anything of real value, the Fed can print them till they run out of paper and ink, flooding the economy with them ...which they're doing now.

The federal government could shut down the Fed, dissolve it, declare FRNs no longer legal tender, and print its own currency.  But it needs to be a claim on something of real value, hence the need for gold and / or silver backing, which we had until 1970 when Nixon eliminated that gold / silver backing, instantly making the currency worthless.


RockyRacoon's picture

A nice, clear synopsis.   Thank you.

Temporalist's picture

I want to point out that "a non-debt based" money may imply an asset backed money but that isn't what was explicity said nor does it have to mean that.  If it were "an asset backed" money that would speak for itself.  To me a "non-debt based" currency could mean something outside of the fractional reserve banking system.  An example might be Disney Dollars, but they are backed by FRNs so they are indirectly debt based (I thought this was comical incidentally "Disney Dollars are a form of corporate scrip or tokens or currency used at Disney theme parks, the Disney Store, and at one time certain parts of Castaway Cay, the Disney cruise-line's private island. It is worth dollar for dollar.  Being backed up by real money").

NotApplicable's picture

Yet another article talking of Bernanke's "mistakes."

The Bernank's job is to destroy the unwanted competition to the ruling class known as wealth they do yet control. He, just like Greenspin, have been successful beyond their wildest dreams.

See, if they do not destroy, or otherwise steal this wealth, then it provides us with the ability to survive without their "solutions."

Anyone who does not understand this operates from an immature perspective, and is wholly a part of the problem.

RockyRacoon's picture

Agreed.   The damage being done is inexcusable and even criminal.

As I posted in another article:

on Thu, 03/03/2011 - 23:03

Nassim Taleb on Charlie Rose last night:  He says that economists can be wrong until people suffer for their errors.   I believe we are at that point.  The entire converstion is worth a listen (yeah, even if you skip Charlie's persistent interruptions and proving that he already knows what you are going to say).

"The risk that banks hold is like dynamite in the basement."

Taleb was outraged at Friedman's book, The Earth is Flat.

Pick up the conversation at 16:20 for the real core idea.

apberusdisvet's picture

It's not just BB; we also need to go after the puppet masters.  Stoning at the foot of the Linclon Memorial might be appropriate.

10kby2k's picture

Its all western civilization..up to their ears in debt and easy (crack whores are harder than the central bankers) monetary policy. The only westernized country dodging this (so far) are the aussies because they have metal.

tony bonn's picture

the chairshit of the frb has blood on his hands...he is an evil evil person serving the mammon loving rockefellers, soros, buffets, rothschilds, british royal family and other scum impersonating leaders...

duncecap rack's picture

How long can he keep all the balls in the air? Is the jig up this year?

carbonmutant's picture

Don't worry the White House has a plan.

The Second Great Depression won't start until the next administration.

10kby2k's picture

And O'Bommy is hoping the next administration is him. They can't keep this propped up 5+ more years.

carbonmutant's picture

This administration is strictly "Hit and Run"

tmftdoyle's picture

I would like to hear beI would like to hear one congressman/women ask the good doctor to opine on the impact policies of the 1920's had in creating his pet decade. My bet is that he has no thoughts. Oh by the way, fed policies can't impact food costs in egypt because the dollar has been weak!

6 String's picture

Well said, I share all your frustrations as most of us here, do.


6 String's picture

P.S. Days like this in the market will go down as pure bull shit chapters.

10kby2k's picture

it smells like nasdaq 1999

6 String's picture

Well, that remains to be seen. Only because enough money printing can send the Dow to 100,000. It's particulary a bullshit day becuase the decoupling with PM's today. I mean, seriously, if stocks ramp, and we know its only because of massive doses of liquity injections, then there shouldn't ever been extreme decoupling days like this....

On the other hand, that's the "free market" for ya, right? Totally disillusioned market euphoria that the verticals debts and monetary monetization will NEVER come home to roost.

Ah...well, yes. The pendulum swins--between gree, fear, and stupidity. Invest accordingly.

10kby2k's picture

It flashed its hand semi-decoupling yesterday. The oil/PM/stock relationship completely decoupled today.  If the Fed can get residential real estate on board we can party like its 1999 or 2007.  Just ONE more big party, then i'll go into rehab.

6 String's picture

Perfectly said, 10K. Not everyone apparently knows this whole thing is a farce. The captial allocators, the brain dead and brain washed, think they're geniouses right now.

"See, I knew that baby would fly!" The fly on the wall heard.

10kby2k's picture

And PM's are not immune.  They are a back up plan if the whole system craters (having the physical--to cushion the blow during a crisis).  The Fed doesn't like the PM mocks what they are trying to sell and appeals to their enemies. I would not be surprised to see gold reserves sold or some other assault by government to negate profiteering from their planned mistakes. PM's don't really contribute to the wealth effect. Watch out for those are playing their game.

cxl9's picture

The Fed should monetize foreclosed/abandoned houses and bulldoze them. Grow the money supply, reduce housing inventory, stimulate labor demand, raise home prices, etc., etc. Couldn't be any worse than what they're doing now. Eventually we'll get back to housing market equilibrium again and it's off to the races one more time..

10kby2k's picture


The Feds goal is to create inflation so that the cost of building a home goes through the roof and thus raises the depressed stock of used homes. Zero new home building (we are just about there) is the target.  They don't care if the value of your currency has eroded 50%, just as long as they can get you out from underwater (underwater homeowners are serious revolution recruits).

cxl9's picture

Well, I wish they would get on with it. I'm about $100K underwater on a house in Washington state that I would like to get out of. Bought at the top tick of the market for use as my primary residence at the time (not speculation). I always said I would be the last person to purposely default on my mortgage. But this might be the month.

10kby2k's picture

Hope you have a no recourse state.  You can walk away and they cannot chase you for the balance underwater.  Fuck em...just walk.  Its crap for your credit, but so common its not that big of a deal.

lieutenantjohnchard's picture

what's there to disagree with? 100% accurate.

KidHorn's picture

What's stated here is exactly correct. Whatever the FED chooses to call it, QE3 or its equivalent has to be done. The alternative will be the end of our economy.

SpeakerFTD's picture

Funny how they taught us in the school that Andrew Jackson is one of the worst presidents ever. 

"I killed the bank!"  were apparently his last words as a dying man.

Sounds to me like he was the best president of all time.

Dr. Porkchop's picture
 Mischief springs from the power which the moneyed interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges... which are employed altogether for their benefit.

                                           -Andrew Jackson

Cursive's picture

"History is decided by those who write it."

 - paraphrase of Richard Nixon

Dr. Porkchop's picture

The phrase 'rigged casino' is a bit redundant, let's just use the term casino.


The sad part is, that I don't even believe that the collapse of the current system will free the people of the machinations of elites. I'd like to think that a great awakening of the people will occur, but I don't know.


New strongmen will arise out of the rubble, with promises to restore a broken and shattered people to their former glory (all we have to do first is take care of the internal enemies who are preventing this metamorphisis, so the narrative will go). After all, Nazism wasn't possible until after the trauma of the Great War and then a shattered economy. Healthy societies don't incubate and promote Hitlers or Stalins, and I don't believe any Hitler or Stalin would ever succeed without the backing of the elites.

The shattered ego of America will be ripe for molestation by every charlatan and confidence man who can paint a pretty picture of a return to her former glory.

ronin12's picture

There are a bunch of videos on Youtube talking about some sort of "great awakening" happening in 2012.

TJWP's picture

See what you need to do, aside from getting your gold and silver, is take some of that worthess paper and convert it into bullets, and guns to shoot those bullets. Then YOU too can be that strongman. Afterall, gold and silver are great for bartering, but who will barter with you when they can just take what you have with their guns. I believe a perfect example of this is the police.

SparkyvonBellagio's picture

Dear benny - PHUCK YOU!

Unless the USA is currently being held hostage by Aliens from the planet PrintEmIfYouveGotem you are by far the Dumbest MotherPhucker ever birthed.

Could it be aliens benny? Seriously that is the only possible reason you'd sell out this Country for a bag of TV time and for the financial demise of 99% of the citizens. Do you enjoy seeing yourself on the teevee? We don't, your FUGLY mug literally looks like a skanky overgrown 70's bush from bad porn.

I have to ask you.... got crabs?

Hope QI 574722  (Quantitative Infestation 574722 finally makes you shave that thing)



ps Have a nice day you Phucking Cawksucker! 

franzpick's picture

Listening to Ben 'n Tim's obfuscations is toxic and probably a demonstration of how language is used to disguise thought;  If some day we hear one of them explain how a collapse of the U$D was the natural result of their long-term plan to establish the $ as the world's reverse currency, with all the trade, debt and other benefits, I won't even flinch.

gigeze787's picture


'Bernanke's Perpetual Economic Auto-Ejaculation'

JR's picture

The principles that Andrew Jackson stood for concerning the nation’s finances are foundations we now sorely need. Several points Jackson made in vetoing the Second Bank of the U.S. (a central bank) in 1816 show his wisdom. They are as follows:

It concentrated the nation’s financial strength in a single institution.

It exposed the government to control by foreign interests (Israel).

It exercised too much control over members of Congress.

Banks are controlled by a few select families.

Banks have a long history of instigating wars between nations, forcing them to borrow funding to pay for them.

It served mainly to make the rich richer.

Bernanke scoffs at Jackson because the Fed rejects the Constitution’s limitations on money creation. In Thomas Jefferson’s words:

“In questions of power, then, let no more be said of confidence in man, but bind him down from mischief by the chains of the Constitution.”

The Founders granted the power to “coin money” as the medium of exchange and “to regulate the value thereof” to Congress to create what Jame Madison explained was “uniformity in the value” of both domestic and foreign coin.

The U.S. Constitution lists no grant of power to Congress to print paper money or emit “bills of credit.”

Bernanke’s revised history of America begins in 1913 with the creation of Paul Warburg’s central bank.

When the Federal Reserve Banks were opened for business on November 16, 1914, Warburg said:“This date may be considered as the Fourth of July in the economic history of the United States.”

And so it has been... for the private bankers who own the Federal Reserve System ... and their friends.


jointhewave's picture

This is hilarious...Watch the video 'Chairman Ben Bernanke - National Recovery Hero!' at (

Amish Hacker's picture

Of all the silly things said by economists, "ending QE" has to be the silliest. It's going to be QE to infinity, inflate or die, right up to the moment of detonation.

This is not a political opinion, but a mathematical certainty.