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Ratigan Rips Apart Bernanke's Biased And One-sided Defense Of The Fed; More Perspectives From Sen. Sanders
A follow-on interview by Dylan Ratigan of Senator Sanders confirms what everyone knows, that Bernanke is "part of the problem. The middle class in America is collapsing. We've seen incredible greed and recklessness and illegal behavior on Wall Street. This guy was running the ship and he didn't see it, and he allowed it to happen. Bernanke served in the Bush administration as Chairman of his economic advisors in 2005. The people last year voted for change and it makes no sense to me that President Obama is reappointing somebody who was appointed by Bush, who is a conservative republican, who missed the boat on the most significant economic crisis since the Great Depression. We need a whole new direction in the Fed and in our economic policies. A direction that stands up for change not for the rich, not for the top 1%, not for the giant financial institutions, but for the working class and the middle class of this country, and nobody, but nobody thinks that Ben Bernanke is that person."
And another logical question:
"If the taxpayers of this country have spent $700 billion bailing out Wall Street because they are too big to fail, why is it that 3 out of the 4 largest financial institutions today are bigger than they were before the bailout, why is it ok that 4 large financial institutions write half the mortgages, two thirds of the credit cards, and control 40% of the deposits. The bottom line to me is that the middle class in this country is collapsing. We have seen this trend downward for many many years. We need a new direction. We need President Obama to take this country in a new way,new economic policies and you don't appoint the same old guys if you're going to do that."
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A plague on Comrade Sanders and Rat. And, on the chairman as well. None of them get it. Paging Madame La Farge....
what is your point besides beware of seven layered cakes?
When we consider these playahs are not idiots, we
are left with the conclusion they are poker players
with a bad hand...
http://www.jubileeprosperity.com/
If Larry Summers gets the gig I am going long Horsemen.
Exactly. Who the hell do you think you're going to get if it's not Bernanke? I guess giving Bernanke the flick at least creates precident for sacking poor decision making.
I seem to recall that an experienced fellow named VOLCKER is waiting in the wings, twiddling his thumbs and being ignored by everyone.C
In your dreams..they all know he (Volcker) would fire the lot and knows damn well the fix is in. An honest consumable human former entrepreneur-farmer named Carter appointed him. Look how the flay Jimmy for trying to be real.
Let them eat RMB.
It doesn't matter, the damage is done, America is FAIL....
point of no return ...Obama's plan is becoming clear and the GOP is silent.
You mean complicit.
Precisely. New boss same as the old boss.
Well now,Reality, like a cool drink of water..
Well, Sanders generally considers anyone to the right of him - which is about 90% of the country - to be a "Conservative Republican". But the only things I can find on the web seem to indicate that Chopper Ben is either a "moderate Republican" (http://business.timesonline.co.uk/tol/business/columnists/article3307072...) or that he's "non-ideological" (http://www.guardian.co.uk/business/2006/jun/16/useconomy.usnews1).
And Ben's actions certainly don't seem to fall under any loose definition of "conservative" with regard to economic policy, either. But hey, that's a nice talking-point Bernie's got there, and he's damn well a-gonna use it.
Update: Unless Comrade Bernie is suggesting that BUSH is a "conservative republican" - which is, of course, laughably silly.
I think he's trying to box Bama in to a corner on Bernanke. Defending a Bush appointee certainly won't help "Mr. Change you can believe in". Who really cares if Benny is republican -- he's a total loser.
Possibly. I could certainly believe that. Bernie's a "true believer" socialist, though. He might actually believe Bernanke is a "conservative".
Renomination of Chopper Ben was certainly an odd decision from Mr. HopenChange - but not if he's Mr. GS-Bought-And-Paid-For. But who is the Captain of the SS Titanic-Fed at this point is really not anything that matters anymore, honestly. Just more bread and cicruses, I fear.
Wow - my first ever "junk" flag. Cool!
Guess I pissed-off a Sanders fan.
Hah. I don't get the flags either. Kind of cowardly not to tell you why.
Dude, I don't even see the flags in Firefox, with full scripting allowance. Must be an advertisement :P
Ben has a tiger by the tail
He is damned if he lets the present finacial system collapse
And damned if he saves it
Either way the middle class pays
Getting a new Obama inspired fed will not solve the problem
Having Obama lead us will not save us
We need to turn to Andrew Jackson, Abe Lincoln, & James Garfield
Gold while better than bank issued bonds is liable to be controlled
by the same corrupt banking system --- as it was before
Re: Andrew Jackson and the National Debt
Andrew Jackson 1 In 1832 Jackson ordered the withdrawal of government deposits from the Second bank and instead had them put into safe banks.The Second Banks head, Nicholas Biddle was quite candid about the power and intention of the bank when he openly threatened to cause a depression if the bank was not re-chartered, we quote. "Nothing but widespread suffering will produce any effect on Congress... Our only safety is in pursuing a steady course of firm restriction - and I have no doubt that such a course will ultimately lead to restoration of the currency and the re-charter of the bank."
Nicholas Biddle 1836 By calling in existing loans and refusing to issue new loans he did cause a massive depression, but in 1836 when the charter ran out, the Second Bank ceased to function.
It was then he made these two famous statements: "The Bank is trying to kill me - but I will kill it!" and later "If the American people only understood the rank injustice of our money and banking system - there would be a revolution before morning..."
Andrew Jackson When asked what he felt was the greatest achievement of his career Andrew Jackson replied without hesitation "I killed the bank!" However we will see this was not the end of private financial influence..............................................................................................
The Greenback...Lincoln took Col. Taylor’s advice and funded the war by printing paper notes backed by the credit of the government. These legal-tender U.S. Notes or “Greenbacks” represented receipts for labor and goods delivered to the United States. They were paid to soldiers and suppliers and were tradeable for goods and services of a value equivalent to their service to the community. The Greenbacks aided the Union not only in winning the war but in funding a period of unprecedented economic expansion. Lincoln’s government created the greatest industrial giant the world had yet seen. The steel industry was launched, a continental railroad system was created, a new era of farm machinery and cheap tools was promoted, free higher education was established, government support was provided to all branches of science, the Bureau of Mines was organized, and labor productivity was increased by 50 to 75 percent. The Greenback was not the only currency used to fund these achievements; but they could not have been accomplished without it, and they could not have been accomplished on money borrowed at the usurious rates the bankers were attempting to extort from the North.
Lincoln succeeded in restoring the government’s power to issue the national currency, but his revolutionary monetary policy was opposed by powerful forces. The threat to established interests was captured in an editorial of unknown authorship, said to have been published in The London Times in 1865:
“If that mischievous financial policy which had its origin in the North American Republic during the late war in that country, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”
Lincoln was assassinated in 1865. According to historian W. Cleon Skousen:
“Right after the Civil War there was considerable talk about reviving Lincoln’s brief experiment with the Constitutional monetary system. Had not the European money-trust intervened, it would have no doubt become an established institution
SummaryToday, with trillions of dollars being committed for bailouts and stimulus plans, another objection to Lincoln’s solution is likely to be, “The U.S. government is already printing its own money – and lots of it.” This, however, is a misconception. What the government prints are bonds – its I.O.U.s or debt. If the government did print dollars, instead of borrowing them from a privately-owned central bank that prints them, Uncle Sam would not have an eleven trillion dollar millstone hanging around his neck. As Thomas Edison astutely observed:
“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is that the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way.
It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.”
Edison should have stuck to electronics and stifling the genius of Tesla.
If you can't see the difference between credit and cash, well, you ought to tone down the exposure to electromagnetic fields.
boooyaaaah... 'nough said.
That would work great if we wanted the barter/agriarian type of economy we had then. The US could be another 3rd world nation.
Wasn't JFK assassinated right after trying to put us on a silver standard?
yup. executive order 1110
1963, money backed my silver, silver notes/greebnbacks
he effectively told the oligarchs to !@#$%% themselves and i would have done the same
Andrew Jackson
Abraham Lincoln
James Garfield
John Kennedy
the 4 greatest presidents we ever had
Woah. Lincoln was a dictator. He preserved the Union. Good for him. Abusive husbands follow his example: "But you can't leave, baby. I love you! Get the **** back here!"
Oh, wait, maybe you're just joking.
Just don't show this list to any Native Americans - they've got this grudge thing with Jackson. "I killed the bank...and a whole lot of indians."
The court historians have done their job well with Lincoln, transforming one of history's most loathsome toads into a deity. The neocons worship him because he is the historical embodiment of the "energetic" (unrestrained and unaccountable) executive of their wet dreams. The neolibs, authoritarians in their own right, also have him on a pedestal because they have bought into the whole federal mythology surrounding the "civil war" and Lincoln.
+1
You see, I'm no academic. I've just read **** that ain't pretty.
Mare si boh koo. Vray mon. Pearsoan comb voo muh play boh koo.
Negative. There has been quite a bit of misinterpretation of Exec. Order 1110.
JFK was assassinated right after a number of actions on his part: (1) forcing the insurance industry to sign a Consent Decree (stating that would cease and desist their rampant price fixing, something they've been doing quite a bit of the last several decades), (2) forcing US Steel and GE to back down on their anti-worker, anti-labor practices (and anti-American), (3) sending out two memos to military posts and US State Dept. posts (the first in August of 1963 and the second in October of '63) stating the troop withdrawals from Vietnam were to begin to take place starting in November of '63, (4) pushing foward the Alliance for Progress in Latin America (a program remarkably similar to what Venezuelan President Hugo Chavez initiated after his election to the presidency), (5) moving for a change in tax laws to stop favoring the offshoring of American jobs and manufacturing plants, etc., etc., etc.
Oops! I forget to add that he was moving to end the Oil Depletion Allowance (something the Hunt Brothers truly despised him for) and making changes in the autonomy of the Federal Reserve Bank.
I'm aware of those troop withdrawal memos as I served with lifers in the military, on separate occasions, who actually received and passed on those teletype messages (at Turkey military installation and also the Philippines -- in those days communications were highly labor-intensive!).
Interesting footnote: Three items we were "blessed" with in the year 1913 -- (1) the Federal Reserve System, (2) the federal income tax, and (3) the oil depletion allowance.
The enemy of my enemy is my friend.
Three cheers for Sanders.
These firms bet and lost. Now they don't want to pay up. Too bad. So sad.
Moral Hazard for people, companies and systems.
Bernanke can stay as an interim Chairman while we audit his decisions.
He certainly is rotten at predicting. In fact he's so bad at telling the public what's in store that he should be fired just for that. Unless ... of course ... he really isn't bad at predicting ... he has just been lying.
"Bernanke can stay as an interim Chairman while we audit his decisions."
The only person with ACTUAL bank regulating experience in the last 20 years, Law Professor William K Black points out...
The whole reason you fire the entire management is that they will actively fight, resist and destroy documents against any true audit to uncover fraud. You have to get the old management out of there on the spot.
For a clean audit, Bernanke and all the Goldmanites have to be immediately fired from every Fed bank.
You guys crack me up. So knowledgeable about the technical aspects of relatively simple (admittedly, somewhat abstract for stupid goyim) mechanical market functions such as central banking, etc, but so clueless about core socio-political drivers.
Listen up: We control the bankers, not the other way around. It is WE who created mortgage/finance tax incentives, subsidies and direct gov't programs in order to goose construction activity (ie employment) and consumption pull-forward.
Bankers are/where merely well-paid whores who perform for us our most secret desires: wealth for minimal effort. So, yeah, to the extent that they understand human nature and exploit it to their own benefit, they are culpable. But who is the real master, the john or the hooker?
The tribe are merely facilitators of mass delusion. When the party ends and everyone starts looking for a scape goat, who do they blame? So off they go, driven to a new country/region to help them realize their self-same dreams of easy riches of inflationary expansion.
If the Fed is ever audited, it's all over for the US of A. We know it, they know it. This country is absolutely wed to the very system it created. All social programs, gov't employment and political positions are dependent on the game continuing.
So why did WE create all these programs and incentives? When you understand and answer that question, you'll be that much closer to understanding the entirely of human history.
It won't be over until it's over. And when it's over, it will start all over again. Only the fortunate amongst us get to experience that rare period **after** the dead wood (in this case, numbering literally in the billions) has been cleared away. Only then are real growth & prosperity enjoyed before the dragging anchors are re-attached that necessitate the help of the hooker gang to once again blow an illusion.
I can't stop laughing.
I can see why you're anonymous.....
"But who is the real master, the john or the hooker?"
You left pimp out of the equation. Pimp: a man who is an agent for a prostitute or prostitutes and lives off their earnings. Or in the context you use, Pimp: Financial agent who has positioned themselves to live off the earnings of a productive economy.
"So why did WE create all these programs and incentives?"
We did not. Concentrated wealth uses their power and wealth to change the laws to their advantage and undermine regulation and those institutions that their wealth can not subvert. An oligarchy undermining the institutions of societies for their own narrow gain at the expense of the society who actually works to create the value added wealth, is a continuous process.
Anyone who claims government is responsible for this economic situation is arguing from an invalid position of fallacy. Laws were not passed and regulators were not subverted in a vacuum. It is the concentrated wealth of a corrupt oligarchy that Regeanized government that is responsible. Wall Street got the laws and regulation that Wall Street wanted. Well, that GS an JPM wanted and bought anyway.
Historically you can look at the 108 case assault on the 14th amendment for corporation rights as a person. This assault was accomplished by the amassed wealth of Rockefeller, Morgan and their ilk. Its path dependent outcome is a completely corrupt political campaign finance system where to get elected, all politicians whore themselves out for the corporate and oligarchy money to stay elected. They accomplish this by passing laws and hamstring regulators for oligarchy profit at the public's expense until we are where we are today.
Republic de Banana USA.. with a third world systemic corruption problem.
What are you a fucking 5 year old?
I'm rubber you're glue. Whatever you say bounces of of me and sticks to you!!!!
Are you going to pull our hair and run away now?
You can't promote economic recovery without inflation!!!!! You do not run a fractional reserve economic system to the breaking point (The business cycle) and keep on doing it without INFLATING. You never have and you never will!!!! All scams have to confess at some point.
The natural state of free economies based on saving and
productivity is deflation as goods produced exceed
goods consumed...
http://www.jubileeprosperity.com/
The problem here is OBAMA, no one else! He picked 'em, Bernanke, Summers, Geithner, all of 'em, and he alone bares responsibility for a lost opportunity of just incalulable consequence. And now, peace prize in hand, the idiot is about to escalate the craziness in Afghanistan! Is there one decision that this jerk has made that isn't some kind of unprincipled compromise or sell-out to lobbyist contributors? And what's equally calamitous is that its the Republican Party that stands most to benefit from his incompetence. God help us.
The Bamster is a puppet of Lord Blankfein, J. Dimon and a dozen other MBTC.
He is nothing but a figurehead, taking orders from the real rulers.
If he had his druthers, he'd likely return to being a one termer, and a local community organizer.
He is so far in over his head, he's looking up at the bottom of the ocean.
That's why they gave him the ball. He needs his Daddy to get the money paid to pay his good workers, but first he needs to get them to pay their salaries...not so fast..lesson time. When he sleeps, they tie his shoelaces together..a hell of a race to run.
"3 out of the 4 largest financial institutions today are bigger than they were before the bailout, why is it ok that 4 large financial institutions write half the mortgages, two thirds of the credit cards, and control 40% of the deposits. "
That is a truly astounding fact and there should be a huge public outcry about why the situation is allowed to go on any second longer
But then again the US allowed MS to be a monopoly and MS fought hard against European commission didn't it!
Too big to fail have now morphed into too big to attack
I have to disagree. You provide the key at the end of your opening statement.
If that 40% went to 0% as deposits went to much smaller banks, there would be a a period of chaos and bailouts but the BIGS would be gone.
The transcript seems to leave out where Sen. Sanders, at 5:51 states:
"We have seen that trend downward for many, many years - way before Bernanke. He is not the cause of the problem."
that would be his daddy... greenspan
BTW: Save the greater good justifications. They don't hold water. And ... the greater bad ... aka blackmail ... is the cost of law enforcement and is part of the bill of goods we've been handed.
Tax me for helping the needie. Not one dime for bailouts.
I have cash and I want to buy the distressed properties at true market value not Goldman Losers Inc. And ... if you're going to give out loans I want the loan not Bank of American Handouts.
Bernanke was kept on to be used a scapegoat if the bailout didn't placate the public.
Sort of like Obama? Maybe they'll figure out that whole birth certificate thing and blame the whole mess on him.
Why is anyone surprised by Wall Street's behaviour. The Fed itself enables it by creating moral hazard. Note that only the "too big to fail" firms are implicitly backed by the full faith and credit of the US government's ability to fleece its citizens.
The middle class in America is not collapsing. That's just crap. The middle class is getting richer is all. The only people who worry about it are people who like to keep people "in their place".
The Fed, however, has done everything in its power to bankrupt the nation, to increase instability and to create unimaginable moral hazard. It's a disaster and it and the SEC are at the root of all the behaviour of Wall Street.
Regulators and monetary central planners simply protect the largest players from both competition and the negative consequences of their actions.
The middle class is not getting richer - this is 100% false. They have been getting squeezed since the rise of the reich-wing starting with Reagan.
Actually, the modern squeeze started when the Depository Institutions Deregulation and Monetary Control Act of 1980 was passed and signed by Jimmy Carter. (Though you could argue the real squeeze started in 1913.)
People who still cling to the silly notion that one party is better than the other (or one party is complicit and the other is innocent) are a major part of the problem. As long as you keep wearing your partisan blinders, the beatings shall continue.
Great post.
Thanks for the chuckle.
Signed in '80 eh? Out the door, kinda like the 1999 Clintonian farewell of GLB and the 2000 CFMA? Same coin, two sides, idiot partisans go hungry. +1
Agree with all your points, although Reagan later signed (in 1982) the Depository Institutions Act which further screwed the pooch, as well as signing Executive Order #12615, establishing the Office of Privatization -- which began the meltdown.
Carters' DID and MCA of 1980 principally overturned the anti-usury laws.
More to the point, during the last thirty years we have witnessed the "legalizing" of fraud by the highest economic level, while observing the "criminalization" of everything else.
Thus, any American can be arrested for almost any activity today, whether they realize it or not. We are now living in a velvet police state.
Sanders is a socialist and will label anyone a "conservative" if they are not sporting full hammer and sickle attire. His moonbat counterpart Grayson is the same kind of liberal left loony and 99% of what they propose is terrible.
Why they are fighting against the Fed is actually beyond me and something I raised on my own blog, do they even know what they are doing? They want to destroy the only mechanism that allows Congress to spend without restraint, kill the ability to monetize debt. Do they even comprehend that most of their proposals would be impossible including Grayson's absurd support of PelosiReidObamaCare? I am glad that this is a bi-partisan effort, but I never understood why liberal loons are fighting agains the Fed, an institution that so wondefully illustrates the failures of central planning. Or do they just want to take over it's duties...?
He wants a new bigger better world Fed to lead us
Bush & Paulson were capitalists!? ohh puulleeeze !
Of course not, I think calling Bush a conservative is the biggest mistake Americans made and the result was invariably Obama.
I am not defending the existing corporatist scheme, but merely questioning with a touch of cynicism the interest from Grayson/Sanders to tackle the Fed.
If you are implying that because Paulson/Bush were bad, therefore Grayson/Sanders are fine then you are making the wrong conclusion here.
???
The Fed was designed to protect and serve the wealthy.
It has been an example of very successful central planning
I'm a progressive but you'd probably label me a socialist or even a communist. However, one can be a true socialist or even communist without wanting to give banksters so much power. In fact, I'd say that anyone who wants to give banksters so much power cannot be a true socialist.
Further, socialism does not require one to run deficits, pull forward demand, create bubbles or any of the other things pols (of pretty much any stripe) and the Fed have been doing for the last several decades. I am far to the left of you and I oppose federal deficits and the Fed. I'm sure we'd disagree about how assets should be distributed in a just society. But that doesn't mean we disagree on many monetary and fiscal issues (though I'm sure we disagree on some of them). It seems like you're conflating the distribution of assets with other fiscal and monetary policies.
Socialism may not require to run deficits, but it does require taxation to the point of slavery and because Americans treat taxation similarly to how Europeans treat work we end up in a situation where the Fed is used to make purchases.
There would be no safety nets the like of Medicare, Medicaid and Social Security if not for the Fed - because it would require the government to spend what it makes and once these entitlement programs tilt the other way the government is broke. This would then require massive taxation and taxation is transparent and would yield revolts, so an implicit tax through inflation is the preferred mechanism of achieving the socialist utopian goals of modern American progressives.
In theory, you and I can probably stand united in throwing away the Fed and returning to a commodity based monetary policy - a policy that would soften booms/busts and take away the central planning of interest rates. However we would part ways after the government is forced to drop social safety programs and all it's interference in health care, education and regulation. At least then it would be a real debate between the costs of these programs because with a broken monetary policy none of these discussions matter.
"Socialism may not require to run deficits, but it does require taxation to the point of slavery..."
You are definitely NOT a tax attorney nor do you appear even remotely familiar with the US tax structure.
Ergo, your use of terms is completely nonsensical! The US tax structure was almost completely restructured during the late '70s and throughout the '80s, pointing to debt financing, debt leveraging and yielding the single biggest problem of today:
debt-financed billionaires
As long as there is the nonstop march to destroy the US tax base by corporations' use of transfer pricing (utilizing offshore finance centers as transfer points to transfer out -- via paperwork only -- underpriced goods, to avoid taxation -- while importing overpriced goods, to avoid import taxation), leveraged buyouts to reduce corporation fed taxation (utilizing interest tax deductibility), fraudulently counting every item moved overseas to their offshored factories and production facilities as exports, parking their profits offshore to avoid taxes (GE, Pfizer, and a host of others), and the tax arbitrage deriving from the ongoing securitization/credit derivates mega-scams.
And let us not forget labor arbitrage (the offshoring of American jobs, thus further destroying the tax base).
Catch a clue, dood!
Central planning of goods and services not organically selected by free choice of consumers and not rewarding private enterprise with stewardship rights within environmental limits gave socialism a bad name. Transparency cures that disease.
Bank created credit with double digit leverage limitation works. We have the seeds.
Bi-Partisan??? What was the middle part??
You still buy into the Repub. vs. Dem Liberal vs. Conservative pus bag the media serves up 24/7???
What is the name of your blog?
The new system Obama will enact will be a world govenment
Say goodbye to the constitution --- that protects the US Citizen from the government --- It is the government we need less of
Where does the constitution create the central bank --- It does not
"The new system Obama will enact will be a world govenment."
Puuhhlease! Next time prior to posting, you are required to perform the following socioeconomics homework assignment: read the WTO's Financial Services Agreement!
The WTO is about one world corporation, which is exactly where Obama, and Bush (2), and Clinton, and Bush (1), and Reagan and Carter were/are leading us to.
Period.
The only thing worse than have neo-classical cum keynesian technocrats running monetary policy is having socialist-inflationist-bryanites in charge.
Another false dialectic; we are so screwed.
IMF
World Bank
Fed
GS...The UN is toast
Ratigan continues to be a patriot. i hope he keeps up the truth telling.
The best skeet shooter of fly-away non-answers: an extremely rare journalist. Can you picture him asking, "If you were a tree, what kind would you be?" no thank you baba wawa...may we never go there again.
"We need a whole new direction in the Fed and in our economic policies. A direction that stands up for change not for the rich, not for the top 1%, not for the giant financial institutions, but for the working class and the middle class of this country"
Ahh c'mon! How naive is that statement. This is 2010, and if the last few decades hasn't convinced you that we don't live in this kind on society anymore, nothing will. We live in a hidden oligarchy. They will not relinquish control that easily. Voting will not solve the problem and it doesn't matter who is chairman of the Fed or Sec Treasury. Everybody is bought and owned, Obama included. Geez, I'm Canadian and even I can see that as clear as day!
Funny ZH!
The policy of the Federal Reserve is to fund economic growth via credit expansion, versus via wage growth. Credit-fueled inflation is much easier to control than is wage-driven inflation, as it is much more susceptible to monetary policy measures, i.e. interest rate changes. Credit driven growth is also less sticky than wage driven growth, as credit can be withdrawn much more easily than wages can be reduced.
When credit expansion reaches its limits, growth slows or reverses and debtors default. Unemployment rises. Those who have provided the credit during the expansion - the banks - are adversely affected. When bank assets start to lose value, debt deflation becomes a possibility.
Debt deflation, or collateral deflation, is an anathema to the Fed. It undermines the entire system of credit fueled growth. Hence, the Fed intervenes. Debtors are allowed to default, but creditors are made whole with new money funneled to them via:
1. interest paid on reserves
2. bailouts of bank counterparties (AIG)
3. access to the discount window
4. generous purchases of distressed assets
5. sweetheart M&A deals (Bear Stearns into JPM)
Furthermore, interest rates are suppressed through zero bound monetary policy and debt monetization via purchases of US Treasury debt.
Moral hazard is not problematic in such a system - it is a recognized and accepted by-product! Creditors are seen as the engine of the economy, and will be preserved and protected at all costs.
During a crisis, debtors (credit consumers – i.e. the middle and lower classes) bear the cost of unwinding the excess. Since the growth these debtors have experienced in their "wealth" has not derived from increased wages, but rather from credit, the pain they experience during such an unwind is particularly acute. On the other hand, creditors are redeemed. Meanwhile, taxpayers (aka, government), step in as the consumer of last resort in order to sustain non-deflationary levels of aggregate demand and limit unemployment.
Lather, rinse, repeat....
I believe this quite accurately characterizes Dr. Bernanke and the Fed's approach to the economy since the 1980's.
Is this the economic system that our nation wishes to perpetuate ad infinitum via an unregulated Fed? One in which bankers experience only upside, consumers experience fleeting periods of illusory growth, followed by devastating periods of financial distress, unemployment, and poverty, and our nation's debt burden grows evermore unsustainable? Have we reached the bound where the GDP growth to be obtained by taking on ADDITIONAL debt is unsustainable? Is Dr. Bernanke's assumption that the Fed can limit UST yields as it did in WWII flawed, in that we are now a debtor nation?
+1million!
Nice post, but you fail to address one key point: why is credit and/or wage inflation required to fund economic growth? That is, why isn't economic growth a natural outcome of improving productivity and real wealth accumulation?
I'll answer the question for you in two words: Bell Curve. ZH and other financial blogs go on & on about the evil banker conspiracy and how we are all captured debt slaves. Yet either through ignorance or fear of confronting the essential truth, most people continually miss the biggest picture of all.
The great mass of people are simply not productive enough to afford lifestyles to which they think they should be accustomed. But given the ability to control their collective destiny, at least in the short-term, via the ballot box, democracies ALWAYS succomb to inflationary illusions to appease the people.
Bankers merely facilitate this reality. It isn't the Fed, it ain't Wall St, and it certainly isn't DC that are the core of the problem - it is us, dear Brutus.
Nature abhors stasis - you're either growing or you're dying. It may be unpolitic to say it, but the US (and Rome before it) reached it's peak productivity during its slave owning, Indian killing, women disenfrachised days.
"Modern" man cannot possibly allow such inhumanities to exist, so what we have instead is a system whereby those who possess the least capabilities muster sufficient political power to dictate economic policy for all. Bankers merely capitalize on this reality.
You almost make a bit of sense, but what you are actually doing is attempting to transfer the guilt and responsibility on to the workers.
Always, always the agenda is to ignore all those debt-financed billionaires who are now living the high life, ignoring all those they have consigned to unemployment and poverty or impovershed working conditions.
Won't fly, dood....
In fact, in the 1950's and 60's, economic growth WAS a derived in just this way. The great mass of people in this country are no longer given the opportunity to experience wage and wealth growth as a product of their labors. In order to pacify these great masses, they are periodically given the illusion of wealth through the provision of credit and the opportunity to accumulate debt. However, throughout this process, real wealth flows to, is retained by, and is sequestered by only the providers of credit. The system has been engineered to revere and protect those providers of credit as being the very heart of economic growth and progress. During times of crisis, the battle cry is to get bank lending flowing again, not to establish new industries and enterprises to regain America's former status.
I could not disagree more! Political power in this country flows to those with sufficient financial resources to mount a successful election campaign. Those resources flow from the wealthiest of American citizens and corporate interests - not from the disenfranchised. Watch Robert Redford's The Candidate.
The social contract in this country is broken. You simply cannot have one class of people continuously draining the resources of an entire nation for their own benefit. A day will come when that contract will be repaired, whether through accord, or the sword!
Excellent synopsis. Your question "Have we reached the bound where the GDP growth to be obtained by taking on ADDITIONAL debt is unsustainable?" is addressed by Prof. Antal Fekete in the essay "The Marginal Productivity of Debt":
http://www.financialsense.com/editorials/fekete/2009/0330.html
Exactly - the negative marginal productivity of debt. Dr. Bernanke is so focused in his efforts to not repeat the mistakes of the Fed during GD1 that he has forgotten that we are a much different nation now than then. Bernanke's greatest fear is debt deflation, and his latest strategy to combat it is "orderly" dollar devaluation. Yet, in taking this path, he repeats one of the mistakes of GD1 cited by Galbraith - protectionism. He also tempts the wrath of our foreign creditors as they watch the value of their dollar denominated assets dwindle.
The hubris of an over-ripe empire!
Watching about the 4 cops killed and thinking about the gangsters in the 30's. When do you think this will happen to the meetings of bankers and such?
No comment...
Not soon enough.
But the sad and horrible event that took place regarding the murders of those four police is a logical progression:
Reagan defunds mental health, mentally unbalanced people living on the streets of America over the past twenty years, with jails used as way stations for the mentally ill, and when they, along with the intelligence-challenged seek to strike back at the inequities in life, see the police as the only visible symbol of authority.
They are too crazy, or too stupid, to comprehend who the real enemy is.
Without a system catharsis, there will be two decades of middle class destruction.
...called lost decades.
i'd imagine if Ben is reconfirmed, we'll see the dollar lose 100-200 bps in a matter of minutes.
The US Government owes the Fed a lot of money. The Fed is like Mafia. They collude to the banks and they all make money. They turn debt to the taxpayers. If you or I did it, we will be convicted of the RICO Act.
Here's the plan: Convict the Fed managers of fraudulent collusion; then convict the bigshot bankers. Then as the witnesses tell the TRUTH about ripping off you and I, we, the taxpayers WOULD NOT HAVE TO PAY THE FED BACK! That would reduce debt for the Federal government and then pass a balanced budget law that would be followed. We would have different currency and lower debt and a better economy. And the rippoff cheats would be in prision. And some politicians would be convicted also. If I rippoff someone and I get convicted I have to pay the money back. Has the Fed not ripped off us?
In an era dominated by massive efforts to reflate through an attempt to reintroduce the concept of confidence and nearly 1.6% of GDP in transfers and guarantees it is simply amazing that many of those with the greatest influence insist upon clinging to those that drove the system to collapse, ruin and consignment to GSE status. This process of abdication of the last few remaining aspects of responsible self governance to private central banks all in the name of stability without responsibility is beyond comprehension.
"...is beyond comprehension."
And yet here it is, in all it's glory, right in front of our faces; flaunting like whore in the red light district. And yet few choose to see it. Like the stupid beast from Hitchhikers Guide to the Galaxy; if I don't see it, it can't see me.
I was reminded again this weekend why I come to zerohedge. Because if I talk about this stuff anywhere else I am quite literally in danger of being burned at the stake for being a heretic. More proof that most would rather believe a lie, than listen to the truth...
Riots break out in switzerland, and the news shows nothing. The drinking water in Portland Or. has been contaminated (though it is said to be contained now) with E-Coli... Anyone outside of Or. hear that?
That and more DOD. The real treat is how the facade of pretense is falling away. BTW, ya I heard about Portland here in Memphis. Just because I have associates in that area. Expecting news organizations to report actual news falls into the realm of my quip.
The news is horrible. I get so mad about them. It's not only what they report, and how, but what they DON'T report. Disgusting.
Seemingly intelligent friends/family/innocent bystanders get all hot and bothered about anything that isn't stated in terms of "glass half full".
It's easy to feel like an outcast when you actually stop watching television and look under the proverbial rug to see what the hell is wrong with American society.
Haven't we warned you not to watch the scripted newsreaders on the tele???
I know, I know their physical enhancements do look attractive.
what do you think response would be to a complete audit of Fed's books??
well! well! well! Don;t we all have our panty's in a bunch! Can i say something? Ok! I will! Thanks ! No! maybe this is a question! How many of you ,saw this crash coming , say , 10 years ago? Cool! You were able to invest your energy likewise for a profit, I assume ? But , Can anyone say , that they saw this crisis coming 20 years ago ? Not even warren buffet, you say ! Well ! If the real People sat down and worked out the laws of economic stability before launching an aggressive monetary plan , we would know the possible future of our pocket's status , within a budget , right! Well how do we keep saying the fed let us down or the central bank did this or that or uncle ben spent the money in the cupboard or those dam chinese did something ! we use to blame Ruskies ! but you might see what I'm getting at . All these years of social management and not one audit of the budget ! Wow! what a bunch of numskulls we must be , to think were driving the car . Like those 8 year olds that steal dads car and drive along until they hit a bend to sharp , just imitating dad! did Ok! But not good enough for America . Just winging it won't make it. Are we allowed to audit the Federal Reserve ? So as to not be without an idea of the size of our reserves OR , Elect Congressmen and Senators Who Have Drivers Licenses? You know ! Make and keep to a budgetary highway? or build wealth the old fashioned way ! About a year or so before the collapse , I read a chinese students paper on international trade . He was way ahead of his time , having suggested sending every american , a check that coincided with the inflationary value of there house , which then could use to buy more chinese stuff . Just to keep the ball rolling! It was a sarcasm , but that is what we were really doing ! Please don't continue the farce . We must bite the bullet or else!
Stunned silence.
Then whimpering.
Show trials.
its killing time
Knock it off, JB. Zero Hedge is not the place for the homicidal expression of your particular viewpoint.
Speaking of an old personality on cncb (Dylan)...I found this article titled “Government Backed $4.3 Trillion in Assets Last Year” on cnbc. Over the past year, several articles have appeared exactly like this one, and the math never seems to make sense. Does that imply that people are withholding information? Or are the numbers that large that a few billion here or there doesn’t make a difference? I beg to differ about a few billion missing. Read the rest of my analysis of the numbers here: http://www.graspthemarket.com/articles/20091130b.php
As much as I applaud Sanders I would dare say there's a bit of grandstanding here, a fair bit. If there weren't so much hate and discontent he wouldn't be nearly as vocal about this. It's also too little too late IMO, as others have said, the damage has been done, and I really do fear we've crossed the rubicon.
There was an opportunity to clear the air in 2008, perhaps the last, but once again the printing press path was chosen. The next crisis is not that far off...perhaps much sooner than DC expects and it will be much less forgiving. And no amount of new credit or dollar creation will fix it, nor will it be politically viable.
Great blog and thanks, TD!
The problem with Bernanke is manifold: he is a complete lackey for the banksters, a former Yes Man for Greenspan, and completely inadequate as a so-called "expert" on the Great Depression.
He didn't, after how long, see the obvious connection between the securitization and credit derivatives, yielding ultraleveraging, as the cause of our present bank depression and the the cause of the first Great Depression; namely, the structured financing of mortgage pools, which took off in the 1920's, and leading to stock pools, thanks to Goldman Sachs and JP Morgan (yeah, they've been at this stuff forever!).
I truly doubt if Bernanke has yet to figure out what is going on. Those of us who know any actual economic history, and read all of John Kenneth Galbraith, have a bit of understanding for what is taking place today.
Anyone ever read Richard Parker's brilliant and scholarly biography of John Kenneth Galbraith?
Anyone ever read Dimitras N. Chirafas?
Greenspan let the fox into the chicken coop and Helicopter Ben is breeding foxes.
To: Anonymous 146706...Did anyone see this crisis coming ? 10 years ago, 20 years ago ? I think everyone that saw the "something for nothing" asset inflation, the gutting of the American middle class (Madison Avenue's "outsourcing'), and deifying of the math wizards that took hold of "investment" banking, saw it coming.
But without transparency (say, in derivatives, asset values, etc.) few people could pinpoint when the music would stop.
A few observations:
1. Hat's off to Mr. Ratigan for continuing to report on this.
2. Something doesn't square with Mr. Sander's brand of socialism, as a central bank is a critical component of the utopian workers paradise as envisioned by Marx.
3. I am simply dumbfounded that any thinking person would think it's a good idea to hand over the power to create money to private corporations to have them loan it back to us at interest. Can this system produce anything but a constant growth in debt resulting in a precipitous crash in the long run?
Well I applaud the efforts of Ron Paul and other reformers, it still boggles my mind that this ridiculous system find a place in our society at all.
If Dylan Ratigan doesn't get a Pulitzer Prize at the least for reporting journalism, it is a worthless award. ..but then I think that Amy Goodman of www.democracynow.org should have won the Nobel Peace Prize. John Pilger did win the Sydney , so there is much realization to encourage.
Many here know enough about demographics to understand how powerful this driver is. 70+Mill Americans plus 70+Mill Europeans approaching the end of their working lives, Japan already there (their performance is proof)… all known 20 years ago, nothing new. It’s all to do with income (ie enough to service debt or not), gov spending & falling tax revenues, overseas competition, limits of growth reached, Winter K-wave in full flow etc & the recognition by the financial mafia of the final stages of an era, acting ahead of the popularses, hence currency dilution, embezzlement, defalcation, peculation, fraud, lies, theft on a truly grand scale sanctioned & endorsed by the R&Rs & a handful of other families from the apex of the pyramid (above the eye). Perfection of destruction, almost science fiction.
Shee-it, someone else gets it. I think I must take it upon myself to educate fellow ZH space monkeys as to who is the real culprit: "The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings." Julius Caesar (I, ii, 140-141).
The bankers who many here & elsewhere believe are our masters are in fact our slaves. Sure, a few get filthy rich executing state policy, but in the end, it is the people themselves who have benefited from the inflationary impacts of FRB.
Why is it allowed/encouraged? Bribery or benefit? We live in a democracy (used to be a representational republic) - the people experience/enjoy the first hand effects of the wealth illusion and elect those who deliver the high. When the bill comes due, they want to blame someone else.
Population demographics and the bell curve. It's all you need to know. Everything, and I mean everything, flows logically from this understanding.
+10,000
Doesn't anyone else see the irony of Dylan Ratigan calling someone else "Biased and One-Sided?"
That's simile not irony. The pot calling the kettle black does not make them any less partners in the kitchen, and relentless and transparently so can be called biased against boolsheeple.
Bernanke reappointment is the difference between change that happens with much trepidation and some willing cooperation and change that is forced no matter how painful that force is.
change or chains ... there's a scribd piece how O manipulates audiences, hypnotizes etc .. I'll see if I can find it.
voici ... http://www.scribd.com/doc/7470439/Obamas-Use-of-Hidden-Hypnosis-Techniqu...
Sympathetic magic.
It truly does not matter who becomes the next Head Squid. After the "green shoots" turned into vinegar the credibility has been lost, and irretrievably so. From now on the rest of the show is merely a pathetic coda, that does not bear watching. Will the last guy to leave please turn off the lights?
put this up on another thread, no traffic, so here it is. apologies if I broke the rules.
by Bob Chapman http://www.globalresearch.ca/index.php?context=va&aid=16313 Global Research, November 28, 2009 The International Forecaster
The following information may be the most important we have ever published. One of our Intel sources, highly placed in banking circles, tells us that on 1/1/10 all banks that have received TARP funds have been informed by the Federal Reserve that they must further restrict any commercial lending. Loans have to be 75% collateralized, 50% of which has to be in cash, which is a compensating balance. The Fed has to do one of two things: They either have to pull $1.5 trillion out of the system by June, which would collapse the economy, or face hyperinflation. This is why the Fed has instructed banks to inform them when and how much of the TARP funds they can return. At best they can expect $300 to $400 billion plus the $200 billion the Fed already has in hand. We believe the Fed will opt for letting the system run into hyperinflation. All signs tell us they cannot risk allowing the undertow of deflation to take over the economy. The system cannot stand such a withdrawal of funds. They also must depend on assistance from Congress in supplying a second stimulus plan. That would probably be $400 to $800 billion. A lack of such funding would send the economy and the stock market into a tailspin. Even with such funding the economy cannot expect any growth to speak of and at best a sideways movement for perhaps a year. We have been told that the FDIC not only is $8.2 billion in the hole, but they have secretly borrowed an additional $80 billion from the Treasury. We have also been told that the FDIC is lying about the banks in trouble.
The number in eminent danger are not 552, but a massive 2,035. The cost of bailing these banks out would be $800 billion to $1 trillion. That means 2,500 could be closed in 2010. Now get this, the FDIC is going to be collapsed before the end of 2010, which means no more deposit insurance. This follows the 9/18/09 end of government guarantees on money market funds. Both will force deposits into US government bonds and agency bonds in an attempt to save the system. This will strip small and medium-sized banks and force them into shutting down or being absorbed. This means you have to get your money out of banks, especially CDs. We repeat get your cash values out of life insurance policies and annuities. They are invested 80% in stocks and 20% in bonds. Keep only enough money in banks for three months of operating expenses, six months for businesses. Major and semi-major banks are being told to obtain secure storage for new currency-dollars. They expect official devaluation by the end of the year. We do not know what the exchange rate will be, but as we have stated previously we expect three old dollars to be traded for one new dollar.
To the American people:
You have been fooled to bow in a submissive position (think bargain shopping); than lavishly greased from behind (think pork spending, stimulus, Medic/care/aid/public option etc., think cash for clunkers, tax bonuses for first time home buyers, the list goes on and on…). IT has been “applied” to you (hidden taxes, local government taxes), but you will not feel much, because of the grease. Only when you get a sensation ranging from tingle to severe pain from (the) inside (depending on your position in society/prison) and the perpetrator had rammed IT fully in (think dictatorship or open political oligopoly) then you will know that you have been VIOLATED (think the day of reckoning). Owning gold will not help much (think virgin belt) with your mouths gaping (think food rationing, strategic resources scarcity/confiscation). You have three choices in my opinion:
1. Endure the “pleasure”.
2. Suffer and fight.
3. Opt out (If “opting out” is still a valid option) and leave the country in hope that the chosen place in the world does not catch the American contagion.
Does your limited inteligence and perversion prevent you from expressing your opinion in any way other than vulgarity? Grow up, asshole.