The Miseducation of Ben Shalom Bernanke

smartknowledgeu's picture

Since world leaders and economists continually display a
lack of even the most rudimentary of understanding about the unsound nature of
our monetary system, I’ve decided to write them a “Monetary Policy for Dummies”
to help them understand why the policies and solutions they constantly advocate
amount to legalized theft that destroys the wealth of the nations. For example, Dr. Ken Mayland, President of Clearview
Economics, LLC, and previously the Chief Economist for First Pennsylvania Bank and
KeyCorp, recently advocated a voluntary paycut of 10% for all Americans as his
“solution” to the US unemployment problem. Here is his statement below:


"In that vein, let me put forth the ClearView Economics plan
to get the nation quickly back to full employment.  The current unemployment rate is 9.5%. That amounts to 14.6
million persons who want to work that cannot find jobs. But there is also
serious underemployment. I don't accept the U-6 unemployment calculation as
being fully representative of all the truly unemployed, but let's allow another
3% to account for all the underemployment.  [sarcasm] how mighty noble of you, Dr. Mayland! [/sarcasm] That
brings the total unemployed to 19.2 million persons…So here's the plan.  EVERYBODY -- from the president down to
the chambermaid -- takes a 10% cut in compensation! This freed-up compensation
expense is then used to re-employ the 8% (12.3 million) of the unemployed.
Net-net, the nation's compensation bill has remained unchanged, and the
unemployment rate is now 4.5%! Voila!”

That’s your solution, Dr. Mayland? I mean really? Dr.
Mayland’s absurd contentions serve to reinforce my contention that Ivy League
educations are nothing more than hype, the greatest intrinsic value of which is
presented from networking opportunities versus the actual knowledge, or lack
thereof, gained through attendance (Dr. Mayland graduated from MIT and earned
his PhD from my alma mater, the University of Pennsylvania).  To begin, instead of using an arbitrary
3% to produce a false 12.5% U-6 unemployment rate, why not use a credible
source like Shadowstats’s U-6 unemployment rate of nearly 17%? Better yet, why
not include the faction of unemployed long-term discouraged workers, since for
all intents and purposes, they are unemployed, and use an all inclusive
unemployment & underemployment rate of nearly 22%? Maybe if Dr. Mayland
started with real unemployment statistics, he could have formulated a viable
solution that does not involve the deployment of a financial weapon of mass
destruction against a nation’s citizens.




As evidenced by the latest adjusted monetary base chart from
the St. Louis Feds above, the Fed’s have created a parabolic spike in monetary
base during the last couple of years as part of their “solution” to our current
global monetary crisis.  Though
this explosion in monetary base has not yet translated into an explosion in  the monetary supply, eventually, the
massive spike in monetary base we see above will yield massive spikes in
monetary supply. Why do I believe this? It is only a matter of time before
American banks will be forced to seek the multiplier effect of the fractional
reserve banking system as their solution to counter the enormous losses that
they currently are hiding in their marked-to-fantasy commercial and residential
RE portfolio values, courtesy of a paid and bought-off Financial Accounting
Standards Board. This is not a matter of if, but when. Lying about asset
valuations can delay bankruptcy but it is an impossible solution to insolvency.
The big banks WILL have to substantially expand the monetary supply and create
a massive supply of new loans using the principles of fractional reserve banking
in an attempt to generate revenue that can offset the enormous REAL losses that
they are currently concealing in their RE portfolios. View the Max Keiser, Bill
Black interview below for a brief synopsis of the real trouble America’s
largest banks really face today despite the "all is well" appearance they have manufactured through rigged earnings statements and ongoing
multi-million executive bonus payouts.





Today, inflationary and deflationary forces exist in the US
economy and have collided in the worst possible mixture for American
citizens.  Deflationary housing
markets have reduced the equity Americans can pull out of our homes in our
greatest time of struggle and financial need while inflationary food and energy
prices consume greater and greater portions of our monthly income every month. Even
though the US Central Bank’s current open market operations and their
concurrent stock market ramp up
(which has been well documented here on Zero Hedge)
will likely cause a short-term US (and European) stock market rally, the
eventual result of artificial stock-market ramping that belies free market
fundamentals will be a stock market crash. And when the next stock market
crashes strike, those invested in stock markets will lose another considerable
chunk of their wealth - AGAIN.


It is a myth that inflation cannot exist in a capital sector
that is experiencing deflation. Enormously distorted market prices and obscene market inefficiencies occur when Central Banks encourage malinvestment by enforcing abnormally long periods of artificially low interest rate periods.  When these distorted market prices return to prices more indicative of a free market, economists state that deflation is occurring. If the US housing
market rose 60% above where a free market would have set prices due to Central
Bank monetary policies and then plunges 30%, everyone assumes that there are
zero inflationary forces at work within the housing markets. This is not
necessarily true. Central Banks can still employ inflationary monetary forces
and deflation can still come out on top. For example, if the US dollar is
inflated by 10% in a year when housing prices plunge 30%, the 30% is the net
effect of the 10% inflation in US dollars and the 40% deflation in housing
prices. Central Banking monetary policies inflict simultaneous inflation and
deflation at times in the economy  that work hand in hand with one another to destroy as much
wealth of a nation’s citizens as possible. And this is what makes Dr. Mayland’s
proposed “solution particularly malicious. The NET effect of
inflationary/deflationary forces are inflationary in some sectors while
deflationary in others, but wealth-destroying across ALL sectors.

When inflationary forces spread to more and more sectors of
consumption, as it eventually will when bankers’ self-preservation instincts
trigger lending in earnest, the standard of living for every American will be
cut even more as a devaluing dollar will decrease its purchasing power. So Dr.
Mayland’s solution to cut everyone’s salaries by10% will lead to a much higher
cut in REAL purchasing power and cause every American to struggle at a greater
rate just to survive. I wonder if Spanish citizens will latch on to Dr.
Mayland’s solution to their massive unemployment problem and take a voluntary,
self-inflicted 15% paycut? The only result Dr. Mayland may foster with his
unemployment “solution” is the start of the next revolution.


But such citizen threatening moves aren’t relegated to
American bankers. In Japan, Prime Minister Naota Kan stated that he is meeting
with the Bank of Japan this week to consider a greater expansion of the Yen
monetary supply because a strong yen and poor stock market performance has
threatened to “derail the economic turnaround.” Is it not just a tad counterintuitive
that a strong currency would be “bad” for the economy? It’s counterintuitive
because it is not true. Mr. Kan, like Dr. Mayland, seems to be unable to
recognize that a weak, devaluing yen is terrible for all Japanese citizens. Any
short-term benefits of an economic stimulus created merely by shoving trillions
of a currency down the economy’s throat are more than negated by the concurrent
destruction of a nation’s wealth that results from such an approach. Sure,
Japanese exporters that do not understand monetary valuations may believe that
devaluing the Yen by 5% is of benefit to them because, perhaps at current
levels, their exports may drop by 4%. And the Japanese government will
eventually have to consider the conundrum of having their imports slapped with
restrictive tariffs by foreign governments that desire to protect their
domestic industries from being overrun by a flood of cheap Japanese imports.  But this is exactly what stupid
monetary policies that uphold the use of unsound, “fake” money achieves – a
game of financial Russian roulette among sovereign nations in which every
nation is afraid of pulling the trigger that may yield the bullet that will
kill their economy. And that bullet, quite ironically, is a stronger currency
(relative to the weaker currencies of other large economies).


However, the silver bullet that can kill the entire game of
financial Russian roulette is  the
implementation of sound money that is sound because it is backed not by the
empty worthless promises of bankers and governments, but by precious metals
with real intrinsic value. Given that Japanese PM Yukio Hatoyama resigned little
more than two months ago, and his replacement, Naota Kan immediately issues a
statement about the necessity of maintaining a weak Yen, one thing in the
financial landscape remains crystal clear. Though the faces of political
leadership may change in Japan, Australia, the United States and the UK, their
masters and loyalties remain to the bankers and not the people.  Any American that still continues to
believe that Obama has served his or her fiscal interests to a higher degree
than his predecessors George W. Bush, William Jefferson Clinton or George Bush Sr. should seek
immediately be remanded to a class in Austrian economics not only for his or
her immediate enlightenment but as an antidote to the path of financial suicide
to which he or she remains committed.


In closing, it is clear that despite the lack of
understanding of our global monetary system by our leaders, Central Bankers
remain crystal clear about the end game of their quantitative easing programs.
Just 24 hours after a Malaysian state announced that they would accept Islamic
gold dinars and silver dirhams as an alternate currency for business transactions
and the initial sale of USD $630,000 of these coins on August 12, 2010, the
Malaysian Central Bank declared the use of these very gold and silver coins as
illegal. Turns out that even Malaysian Central Bankers are students of Alan
Greenspan’s writings and realized the validity in his following statement: “In
the absence of a gold standard, there is no way [for the public] to protect
[its] savings from confiscation through inflation. There is no safe store of
value. If there were, the government would have to make its holding
  Local Malaysian
governments figured out a way to enable the public to protect its savings
through the issuance of gold and silver coins. Enter the Malaysian Central Bank
and its declaration that gold and silver coins are illegal forms of currency in order to protect its, and not the people's, interests. Wash,
rinse, repeat. Watch the world’s wealth sink into oblivion, leaving
wealth-destroying monetary policies unopposed for decades into the future
thanks to the miseducation of Dr. Mayland and men of his ilk.



About the author: JS Kim is the Chief Investment Strategist and Managing Director for SmartKnowledgeU, a fiercely independent investment research & wealth consulting firm that seeks to help citizens build wealth by helping them understand, and therefore protect themselves against, the destructive monetary policies of bankers and governments.









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Nevermind's picture

No offense, but who thinks the "smartest guy in the room" gives a rat's patootie what the Great Unwashed (especially without Ph.D's in Economics) think?

knukles's picture

The smartest guy in the room doesn't give a rat's ass about what anybody but he himself, sole miner, refiner, fabricator, assembler, grader, sorter, distributor and prince arbiter of rat's ass supply and demand thinks of anybody for the rest of us are merely a rag tag collection of worthless, unworthy, unwashed and uneducated rat's asses meant to be treated like the worthless rat's asses, we are. 

Sociopathic Fucktards.

MrBoompi's picture

I have a better idea.


Let's force every unemployed person to work for FREE.  Voila!  Zero unemployment!  No increase in total compensation!

Amsterdammer's picture

Ambrose Evans-Pritchard estimated M3 declining at a

10% annualized rate, a figure the Fed does not dare

to publish anymore

Dean Baker:: Bernanke: Wall Street's servant

Chemba's picture

I think the one most lacking in an understanding of our monetary system may be the author.

excess reserves are lent out when there are sound borrowers that demand credit.  "sound" borrowers are few and far between and they are not demanding credit.  so, the notion that these excess reserves will be lent out and "inflationary" in the relevant future is far-fetched.

as to "sound money" based on precious metals, well, were this 1810 instead of 2010 I suppose the author would have a valid point.  But since this is 2010, he seems not to have a valid point.

boomer's picture

That's a good point about credit demand.  I think most of the smaller banks would like to issue credit, but finding borrowers who aren't deadbeats is next to impossible.  Credit worthy folks are just not interested, they're smart enough to try to de-leverage and baten down the hatches for what is sure to come.  Ben and Timmy can shove as much fiat into the banks as they want, it isn't going to change the situation.  The regimes real agenda is to get as much cash as they can into the banks so they can buy treasuries to heal their balance sheets. Its just a way for the banking pukes to try and keep their corrupt organizations going.

Kayman's picture

Hard evidence confirms money is not getting lent out to the real economy. And hard evidence confirms Ben has bought up worthless paper "assets/ nothings" from the TBTF criminals and loaned the TBTF criminals trillions at zero cost, no collateral.

So, Ben has stolen from the middle class taxpayer and transferred the money to banking criminals to reward themselves bonuses for being so clever (at robbery).

My only question is HOW LONG CAN THIS CONTINUE ?


Hunch Trader's picture

"Local Malaysian governments figured out a way to enable the public to protect its savings through the issuance of gold and silver coins."


This is quite far from the truth, gold in many forms (coins, bars, jewelry with cheap work cost) is freely available in Malaysia. Anybody who wants gold in Malaysia (or pretty much anywhere in Asia), can get it very easily.

It's just painful that it's presented as a good, value storing investment with charts from the past 10 years. Start the charts from 1985 and examine next 15 years and a very different picture arises. $850 in 1985 was much more money than the same $850 in 2000, not to compare it with $300.


dcb's picture

don't forget they exclude food and energy so you know where to park your money so the fed doesn't count it as inflation

dcb's picture

"we will help you by making you poorer"


I make fun of Krugman on his blog all the time for this.

realitybiter's picture

I thought we were all watching "America In Idle"


Try outs are starting again!

This season's contest - looks like the one to watch will be the Uber-libs that defend Obama to the death (of their disposable income, pensions, liberty, and life).  They are particularly talented at disparaging Tea Partyers (love to call them names like racists, and some reference to nut dipping, aka teabagging).

Of course, the union zombies are always competitive, as well as the neocons who can't spend enough on war and could give a rip about all public policy as long as taxes remain apparently low.

Wake up idjuts. If you read ZH you are not rich. At least not like your masters. We either come together and overthrow them, or die. Kill the parasites through starvation. Quit enabling. Put down the smartphone and think. Think. Are you better off now then you were three decades ago? More freedom or less? More optimistic about the future or less? Think.

boomer's picture

There's no way out!!  This regime has been purposely dumbing down the general population and sedating them with entitlements for the last 30 years.  This was all part of there long range plan that is now coming to fruition.  The general population is to fat and stupid to understand what is happening to them.  How else do you think this travesty could continue?


OK, enough, what time does "Dancing with the Stars" come on?

RockyRacoon's picture

Reminds one of the domesticated cow.  Fat, lazy, happy, and kept for eventual slaughter.

Milked periodically, fed whatever induces the most production.

No way one of them could survive in the wild for more than a couple of days, if lucky.

bobola's picture

I have recently been reading John Gatto’s essays and speeches.  If what he says is correct, the ultra wealthy have created the public school system as we know it, an endless supply or conditioned semi-educated work force to keep their profits flowing.    


Also read the Norman Dodd, G. Griffin interview transcript, where he said virtually the same thing in a quote from a Ford Foundation leader. 


The ultra wealthy are using the Fed like it was a piggy bank, borrowing billions at near or 0%.


We are living in very interesting times…….  

sgt_doom's picture

Exactly so!  How many times a month do I encounter people who believe themselves "free thinkers" or "liberals" because they listen to the same canned blather on NPR from the likes of shills from the American Enterprise Institute (hedge fund lobby), the Heritage Foundation (neocons for Wall Street), Peterson Institute (neocons for the ultra-rich), Cato Institute.....

realitybiter's picture

Princeton, Harvard, Yale Club /universities, "PHYC U" are one massive WMD.  Get it.  Forbid your children from attending.  Don't hire their graduates or elect them to any office.  I'm sorry for the few that are good that went there, but save yourselves and go to your local community college and pick up another degree and new alma mater.  Besides diesel mechanics will likely be much more valuable in the future than Harvard economics.


What can we do?  How do we create the "revolution bitchez"?  Only one way.  We are the host and they are the parasite.  Our labor and the resulting taxes are the lifeblood to the parasite.  We don't have to die to kill the parasite, just get sick.  It is the only way.  Looking at tax receipts, it appears this process is underway.

Vampyroteuthis infernalis's picture

I finished my Ph D in engineering a few years back. Let me tell you one thing about modern US universities, one of their main purposes is indoctrination. If you are to survive in the academic climate, you WILL adhere to the standard politically correct, racist, ignorant political ideology on campuses. If you even question it, they will make your life miserable. I am a living example. F*ck academics. They are leading the US on the road to hell.

Widowmaker's picture

"the policies and solutions they constantly advocate amount to legalized theft that destroys the wealth of the nations."

The End.

crashguru's picture

What can a country, whose favorite export goods are boobs, bombs and beer do other than print money. The US is very lucky in so far that it still can print the reserve currency, imagine BSB would have to get foreign currency the old fashioned way ... 

Bartanist's picture

Excellent read!

Obviously Dr. Mayland has no clue how businesses work in a capitalistic society.

If management was able to get everyone to take a 10% cut in wages, the LAST place the money would go is to hire new people. In a capitalistic society human capital is something to be eliminated not employed ... unless you absolutely need the people or they are your best friend's kid.

Maybe when we transition to complete socialism and wage, price and employment controls are enacted will we see a place for Dr Mayland's fantasy... even so it does not address the bigger problem which is the value drain from the US. Every net exported dollar is a dilution on the currency, since it must still be replaced with a newly printed dollar for the domestic system to function.

The real question as implied by others is: "Is Bernanke and Co. really so inept, or is the plan more sinister and everything is progressing perfectly?" Watching Bernanke testify before Congress gives one the impression he is bored because he is giving irrelevant answers to the wrong questions... and he may think he is the only one who knows it.

hbjork1's picture

IMO, Bernanke likes the job and doesn't know what else to do.  

Dwelling with (and being) a member of the engineering fraternity, I can observe that engineers tend to become tools of their tools.  If we have become valuable in society because of particular knowledge bases and skills or visions for using them, there is a tendency to try to apply them to things outside of their useful or productive scope.  I see this in the medical fraternity where some MDs have memorized the book and others are systems analysts.  It is always good to have a “second opinion”.  Patient attorneys know the law but sometimes can’t write an acceptable patent because they don’t understand the technology.  In the Kearns windshield wiper case, lawyers could not defend the Ford patient position because they didn’t understand the technology.  Kearns didn’t really have a case because the technology he claimed had already been in use for years.

The GM head attorney was George Frost, who did understand and was able to explain it to the jury.  GM prevailed in their trial.  George was a guy who would go to the opera and read in the dark with his little flashlight.  Today he is living in a waterfront development down in Sarasota.  If his eyesight hasn't failed i am sure he is still studying.

Why did one deep pockets company get it right and another get it wrong?   

Bernanke has come through a rigorous educational process that made his opinions, decisions and expressed observations valuable within society.  “Who can do it better than I?”   And there is also the political reality.  “What else could an a different FED  chairman do without causing turmoil?”  “This policy should work; maybe we just haven’t tried it long enough.”

Walt Kelley had it right all along.  “We have met the enemy and he is us.”



RockyRacoon's picture

And, to add to your points, what would those jobs be?  Picking up trash along the interstate highways?  Has it occurred to anyone that a large part of the "jobs" that were lost were jobs that should never have existed in the first place?  And then that leads us to the fact that we have more people than an efficient market can support.  China anyone?

Kayman's picture

Sorry Rocky

We could support a lot more jobs if the banking criminals, the corrupt corporates, and the political prostitutes didn't outsource them to China.

Foxconn (Apples subcontractor in China) has announced they intend to hire 400,000 more workers this year.

This country has committed employment suicide.  Ultimately the seeds of our destruction were planted when Walmart stopped selling 100% American made products.

On a platform of rising debts and falling middle class employment, no money printer (credit creator) can do anything but buy a short term delay for the political elite.

RockyRacoon's picture

I'll agree to your position, but with one caveat:  The U. S. can support all the employment that you suggest -- at certain payroll levels.  At the current pay grades there is no way.  That means a lowering of living standards.  I'm OK with all that, by the way.  Whatever it takes.  My original comment assumed current pay/benefits.  No way we could reach full employment again at the past levels, with current pay, without going right back into the Ponzi.

Kayman's picture


If you are unemployed, you already have lowered your living standards.  And if you are employed and have to pay the taxes to support the unemployed (plus the government workers living off the unemployment "system") then you, too, have a lower standard of living.

I'd call you darling, but you might slap me.

MarketTruth's picture

"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

The above was said by Alan Greenspan, 'Gold and Economic Freedom' in 1966.


"Given the very high level of reserve balances currently in the banking system, the Federal Reserve has ample time to consider the best long-run framework for policy implementation. The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system" -- Federal Reserve February 10, 2010

Tenma13's picture

not really relavant

Tenma13's picture

Hey all,


 Reading his made me think of some family I have in Zimbabwe. 

They gave me a framed set of notes for Christmas. Starts out at Z$1 and goes to $Z100 Billion. The funny (not for them) thing is their are periodic resets in the printing where someone just decides to go back to 1Z$ and then the fuckers rip ride back up to a billion! They used to have a copper strip in the notes as a sign to folks that they were legal tender etc, but the value of the copper strip was more than any of the notes, so they had to stop as people were ripping them out and selling them. 

 Now, no one use the local money to trade; its all dollar notes and gold/silver pieces, which I am told has stabilised things somewhat- got told a wicked story about money traders on the boarder with South Africa who get assorted things of real value, ie food etc and trade them for gold pieces which are then introduced into Zimbabwe underground economy; which is not really underground, but rather the real one. Up is down, right is wrong, black is white type set up.  

For the way they were talking it seems there is a massive disconnect between the people and the government. Not in the blatant moronic fiscal policies the government in-acts, but rather that the people to survive have decided just to ignore the government and create their own system that works, while avoiding the men with guns, who may or may not repo the farms. In a way the government is like a occupying force.... Not one that is violent, ala UK/US in the mid-east, but was just there, like a pothole in the road; its a pain in the ass to drive through, but its there, and one can do anything about it, so you just drive though it and get on with your life. Strange. 


 The part I couldn't get my head round was why not tool up and take it to them, as the country has gone from the bread basket of Africa, to a basket case state. It seems that the spectre of colonialism was still getting play, and folks were so focused on living from day to day, that they didn't have time to revolt. Not really happy with this explanation, and I didn't get time enough to quiz them while they were in the UK/ didn't want to keep asking about peoples fd'up situations. 


 Anyway, sort of relevant. :)

Sudden Debt's picture

They used to have a copper strip in the notes as a sign to folks that they were legal tender etc, but the value of the copper strip was more than any of the notes

Before the Euro, the 1 France franc was worth more in metal then 1 franc to. That's why they constantly had to make new once.

In Belgium you had the 10 Belgium franc that was made out of nicle and was worth twice the value. It didn't took long before they all went out of circulation. Funny thing was: the mint bought back the nickle from the melters who melted the coins at twice the value :)

After that there was a new law: You could only ask for about 1250euro to todays money in 10 frank coins and you had to have a VAT number to prove you needed them for business. Privat people couldn't ask for them anymore.

As a kid, I used to collect them, and now these coins are concidered collector items :)


Tenma13's picture

Wow, find this concept of 'real value' fascinating! We have indicators, and experts, but real value is sometime so difficult to pin down. 

$Z 100 Trillion gets you nothing, but $2.50 on ebay which would buy medicine incountry!



ED's picture

Surely the jokes on us. They know exactly what they're doing, straight face and all.

Mark Beck's picture


The FED promotes, what I call, Plausibility of Purpose.

This is just a front to placate the masses.

If you look at the situation pragmatically, you realize that the FED can obligate all Americans through money creation, by decisions made on its own without the peoples consent, and is not audited. Add to this the implied guarentee that the FED will always monetize up until the point of sovereign collapse, and you have maximized the potential for political corruption and theft.

Really you can't make this stuff up.

The FED's primary goal is the transfer of wealth to the financial elite. Nothing more.

The FED has direct control over, in basic terms, the Fed Funds rate, Discount window overnight rate, swaps, and the power to create money. How does this translate into full employment and price stability? One word, indirectly.

Rates can influence credit, but it is indirect, and too costly in terms of benefits to tax payers. However, if you are a bank, the FEDs control of rates, guarantees profits on the spread.


Some things I find really amusing. For example, the FED promotes itself to be "self funding", in the context of its strengths, in light of the fact it can create money. Too funny. It pays itself with money it created, through no labor of its own in comparison to the implied labor obligation it just created.

The problem here is that sound money was a corner stone of the american system. An essential ingrediant for national prosperity, which no longer exists.

The FED is not needed. It is an unneccesary cost.


Today for the politicians, the FED has the most power over the nation in the history of its existence. Without the FED today, the US would be forced to default. The only fight left is the struggle for limited real revenue generated through labor. The fight for limited tax receipts both at the state and federal level.

The sad realization is the politicians will not act until crisis. This is all that is left to them. The evidence is clear, their contribution, disservice.

Mark Beck

Assetman's picture

Yep.  What I find hard to fathom is that most American are STILL not in on the joke.

Every move the Fed makes is done with the intention of saving the financial system.  Forget the "full employment" and "contain inflation" mandates... it only makes good press and placates the masses.  Most times those objectives are congruent (when failure isn't generally rewarded).  In modern times, these objective are at odds.

We've gotten to 18 months of ZIRP and close to $2 trillion in QE, and it hasn't moved the needle in overall employment.  One has to wonder... why?  And, of course, bank profits have gone up as well... even though many still aren't lending.  That QE induced "liquidity" isn't being used to run through the economy, but is being laundered within the finanical system, so that banks can make 3% on free money.  And, of course, it's being used to buy bad finanical assets and exchanged for Timmy notes.

So... why should investors believe that the NEXT round of QE is going to work... when the FIRST round didn't work, per Ben Shalom's stated intentions?  Those who know the joke, know... IT WON'T WORK, becuase it's not designed to save the economy.  It's designed to: (1) preserve the financial system; (2) provide an artificial prop to asset prices; and.... now... (3) to assist our U.S. Treasury to finance even MORE debt buy lowering the cost curve at extended durations.  It's simply not designed to help you.

We are very likely going to get another round of QE near the end of the year(this latest iteration is balance sheet neutral, folks).  The next round will be sufficiently large (at the very least $1 trillion) to draw attention and will induce some semblance of hope toward the masses.  People need to get it into their think skulls that... QE is NOT designed to help you.  It's designed to help Goldman Sachs... and the government leaders who continue to think that rewarding failure is sound policy.

The cold hard reality is that Fed could force the banks to create sufficient money velocity TODAY by providing banks incentives to make loans and exponentially pull that money into the general economy.  I think such a move would be foolish (inflation and even more bad loans), but it could happen tomorrow.  The other reality is that the Fed wouldn't force this issue, becuase they know it would likely result in hiding even more losses on loans that will go bad.

Interestingly enough, the endgame is playing out before our very eyes.  It's called deleveraging.  And the private sector has done a pretty good job of it over the past 2 years.  The government, not surprisingly, took on more debt... and will likely take on the FNM/FRE obligations.  They shouldn't really take on anymore.  The Fed is left buying Treasury debt, because quite frankly, no one else will... besides subsidized banks borrowing at 0%.

What are we heading for then?  If the endgame has been deleveraging, eventually the government and the rest of the financial system its been trying to protect will be forced to do so as well.  Unfortunately, they are dragging as many investors into this vortex as possible by propping up fixed assets and creating artificial demand for longer dated Treasuries.  Eventually, the rest of the world will lose faith in the USD, and we will face a massive reset, a restructuring, if you will.  It's a terrible path our leaders have taken, but no one is likely to stop it... well, unless we start seeing massive demonstrations in the streets sometime soon.

sgt_doom's picture

Highly intelligent comments, Assetman.

Since it is not profitable to create more jobs, when one realizes the reality that the multinationals, or bank-oil cartel if you will, are actually running the country, and it isn't a sovereign nation, although there are still plenty of fools who believe otherwise, than unemployment will continues to rise (real unemployment somewhere in the vicinity of 28% to 31%) until the final quarter of 2012.

Nasty endgame for the vast majority, but highly profitable for a select few....

MarketFox's picture

What is interesting is that the Bernanke Academs have no clue as to how consistent money flows to the government originate...via small businesses....

Of course the focus has to be on this segment because of its importance to the overall economic system....

What has happened is that the US became big company..."oligopolistically reliant"....and the Princeton Harvard Yale Ilk sold out US labor....because of enhanced personal economics....

The US government polys live off of whatever the most popular current propoganda talk is...just flailing about under the guise of the oligopolists...


The damages have already been done...and will take some form of restructuring away from the Princeton Harvard Yale Club Roladexes "More for Me" way of thinking....


The Princeton Harvard Yale Club took away from the middle class...lost their dough...and are going back to steal even more from what is left of the middle class...


The auto networking "not skills" Princeton Harvard Yale Club tickets are now losing their value after this economic catastrophy....and the US needs to send this club to a different domain....after putting many of their heads on poles....



Or else leave it up to the likes of the "BRILLIANT" Larry Summers ...Bernanke ILK...


This will be the only way to HIT THE RESET BUTTON....


Start the next system with a no greater than 10% allowance....with no individual income or corporate taxes....

What will happen is this....

The US stock will go to a $1....and then to $1000....

Bob Sponge's picture

I think the reset button the power elite (bankers) likely have in mind is a switch to a one-world currency and/or one-world government. I think they are very smart and have likely written a How to Rule the World for Dummies and are working on executing it. They can print money, so power is the final frontier. Will they succeed? We need to take action to stop them.