Ben Bernanke will be steeping down as Fed Chairman within 18 months.
The political environment is changing rapidly in the US. Take a look at a few key developments in the financial community:
1) 2012 Presidential candidates making the Fed a hot button
2) Dissenting votes increasing at the Fed
3) Fed Presidents openly criticizing Bernanke’s policies
4) Lloyd Blankfein hiring a defense lawyer
The picture is clear when you connect the dots. For starters, the mere fact the Fed is even being mentioned by Presidential candidates (I’m discounting Ron Paul who’s been criticizing the Fed for decades) tells you that things have changed in a big way in the US: the Fed was seen as the savior of the world a mere two years ago.
I fully believe the Fed (and the economy) will be a primary issue for the 2012 Presidential election. In simple terms, Bernanke will be lumped in with Obama (as well he should) and criticized openly by any and all contenders.
It’s clear that several Fed Presidents have picked up on this and are now distancing themselves from Bernanke and his policies. This is a wise move for any Fed official who wants to maintain his/ her post or who wishes to be a future Fed Chairman: the next Fed Chairman will have to be much more hawkish.
However, it’s the final issue, Lloyd Blankfein’s hiring of a defense attorney, that tells me Bernanke will be stepping down and possibly even facing legal battles. The reason for this is simple: any and all Wall Street execs will very likely hang the albatross for corruption and thievery around Bernanke’s neck.
We’ve already had a taste of this with Ken Lewis at Bank of America. The reason Bernanke got through that mess was because everyone was still so worried about the “recovery” and stocks rising.
With another Crisis already at our doorstep, the litigation is going to be fast and furious. Blankfein is just the beginning. We’re going to see more investigations, more lawsuits, and more accusations of lies and corruption.
Do you really think Wall Street CEOs are going to let themselves be the scapegoats for this? All they have to do is say, “we did it because the Fed told us to,” and the legal focus shifts over to Bernanke.
Remember, Bernanke is just an academic figurehead. The REAL power in the financial system lies with the Primary Dealers (who include BAC, GS, and all the other firms who will be coming under increased scrutiny in the future). And these guys are not going to let themselves be sacrificed. No, they’re going to roll everything they can onto Bernanke.
With that in mind, I believe Bernanke will step down within the next 18 months. The only reason I give him this long is because he will likely go down after the 2012 election ends. Of course, with the Financial System on Red Alert today, it could happen a lot sooner than that.
Indeed, I fully believe we have entered the Second Round of the Great Crisis: the Sovereign Default Round. What’s coming will involve stock crashes, civil unrest, food shortages, bank holidays and more.
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