Blogger Ben's Basically Full Of It

Tyler Durden's picture

Submitted by David Stockman via Contra Corner blog,

Ben Bernanke’s skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the “honest” part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.

Just recall that he first joined the Fed way back on 2002 after an academic career of scribbling historically superficial and blatantly misleading monographs about the 1930s. These were essentially zeroxed from Milton Friedman’s monumental error about the cause of the Great Depression. In a word, Friedman and Bernanke pilloried the Fed for not going on a bond buying spree during 1930-1932 and thereby stopping the shrinkage of money and credit.

In fact, excess reserves in the banking system soared by 12X during those four years, interest rates were at rock bottom and the US economy was saturated with idle cash. So there was no financial stringency——not the remotest aspect of a great monetary policy error.

Instead, what actually happened was that the US banking system was massively insolvent after a 12-year credit boom fueled by the Fed’s printing presses. This first great credit bubble arose initially from the Fed’s maneuvers to fund the massive war production surge of 1915-1919 and then from its fostering of a vast domestic and international credit bubble during the Roaring Twenties.

Alas, none of the Fed governors during the 1930-1932 credit contraction had graced the lecture halls of Princeton. But to nearly a man they knew you can’t push on a string, and that a healthy economy requires that busted loans and soured speculations must be purged from the financial system in order for sustainable growth to resume.

Bernanke has never had a clue about this truth. As I showed in The Great Deformation, what he got wrong about the early 1930’s—– he replicated in spades after the September 2008 financial crisis:

Upon becoming chairman of the Fed, Bernanke then foisted the Fisher-Thomas-Friedman deflation theory upon the nation’s economy in a panicked response to the Wall Street meltdown of September 2008. Yet monetary deflation was no more the cause of the 2008 crisis than it had been the cause of the Great Depression.

 

The monetary populists of the 1920s and 1930s, including Professor Fisher, had “cause and effect” backward. The sharp reduction after 1929 in the money supply was an inexorable consequence of the liquidation of bad debt, not an avoidable cause of the depression. The measured money supply (M1) even in those times consisted mostly of bank deposit money rather than hand-to-hand currency. And checking account money had declined sharply as an arithmetic consequence of the collapse of what had previously been a fifteen-year buildup of bad loans and speculative credit. During 1929–1933 commercial bank loans outstanding declined from $36 billion to $16 billion. Not surprisingly, as customer loan balances fell sharply, so did checking accounts or what can be termed “bank deposit money” as opposed to currency in circulation. The latter actually grew by $1.1 billion during the four years after 1929, to about $5.5 billion.

 

By contrast, it was the loan-driven checking account portion of M1 which dried up, declining from $25 billion to $17 billion over the same period. And the reason was no mystery: the way banks create demand deposits is to first issue loan credits to their customers. Indeed, in the modern world money supply follows credit, and rarely do central bankers inordinately restrict the growth of the latter.

 

In truth, loan balances and checking account money rose to inordinate heights during the financial bubble preceding the 1929 crash and unavoidably declined thereafter. This had nothing to do with causing the depression. The real reason the American economy was stalled in the early 1930s is that it had lost its foreign customers.

 

The reduction of M1 owing to the liquidation of bad credit, by contrast, was a sign of returning financial health. Indeed, the major component of bank credit shrinkage had been the virtual evaporation of the $9 billion of margin loans against stock prices that had reached lunatic levels before the crash. In blaming the Fed for the Great Depression, therefore, Professors Friedman and Bernanke implicitly held that the Fed should have underwritten the margin-loan-based speculative mania of 1926–1929 in order to keep M1 from shrinking!

That’s the essence of the matter. Bernanke thought the 2008 crisis was a replay of the fictional world of his so-called Great Depression scholarship. Given half the chance by the clueless White House pols—-so-called conservatives who appointed a thorough-going Keynesian to the most powerful economic job in the world——-this time he did underwrite the speculative mania that preceded the crash. So doing, he took the Fed balance sheet into the netherworld of monetary crankdom.

Had the 1930 Fed actually followed Bernanke’s spurious advice, the experiment back then would have been short-lived. There was only about $17 billion of public debt outstanding in 1929 or about 18% of that year’s GDP. In no time, the Fed would have owned 100% of the public debt, the chastened survivors of the crash would have been petrified by the central banks repudiation of all known rules of sound finance, and the economy would have remained mired in depression. The problem back then, like in 2008, was mountains of bad credit and massive over-investment, not a deficiency of that after-the-fact Keynesian chimera called “aggregate demand”.

Unfortunately, three decades of free lunch fiscal policy had left Uncle Sam with plenty of debt to monetize by September 2008, and Bernanke’s specious alarmism about an imminent Great Depression 2.0 resulted in a further $1.5 trillion fiscal eruption within the space of 5 months (TARP and the Obama Stimulus). So there was nothing to stop the money printing experiment this time around, thereby enabling an academic scribbler to act out the Friedmanite fantasy.

The extent of the calamity will be evident soon enough. Bernanke’s monetary snake oil has been embraced by nearly every central bank in the world, meaning that the global financial system is flying blind on a perilous diet of massive liquidity, rampant speculation and a nearly obscene inflation of financial asset valuations that has showered the 0.1% with a stupendous windfall of unearned riches.

It is only a matter of time, of course, before Bernanke’s  monumentally misbegotten experiment in defying the laws of sound finance and common sense alike comes crashing down. In the meanwhile, he appears to be taking every possible opportunity to insult our intelligence by using his new blog to proclaim prophylactically that the next crash is none of his doing; and, in fact, that the $3.5 trillion of fraudulent central bank credit conjured from thin air which the Fed has injected into the financial system is actually working.

Thus, in response to the Wall Street Journal’s devastating critique of his money printing mayhem at the Fed, Bernanke had the gall to argue that QE and ZIRP have been a roaring success for the working people of America. Indeed, according to the Bernank, the nirvana of full employment is nearly at hand:

 The unemployment rate is a better indicator of cyclical conditions than the economic growth rate, and the relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met. Growth in output has been slow, despite solid job creation, because productivity gains have been slow—perhaps as the result of the financial crisis, which hammered new business formation and investment in research and development, perhaps for other reasons. But nobody claims that monetary policy can do much about productivity growth. Where it can be helpful is in supporting the return to full employment, and there the record has been reasonably good. Indeed, it seems clear that the Fed’s aggressive actions are an important reason that job creation in the United States has outstripped that of other industrial countries by a wide margin.

There is no point in mentioning that there are 102 million American adults who are not employed compared to about 75 million before Bernanke joined the Fed; that only about 43 million of them are retired on OASI benefits; that on a constant labor force participation basis the unemployment rate is still in the double digits; and that the median real household income at $53k is still barely at the level it attained in 1989—-not long after Bernanke got his PhD and began publishing spurious scholarship about the Great Depression and the wonders of central bank printing presses.

Here’s the thing. The Bernank thinks the Great Recession happened because teenage girls piled to the rafters in export company dormitories in China went on a savings binge. Purportedly, the Fed had nothing to do with expanding credit market debt outstanding by $22 trillion or nearly 6X the growth of nominal GDP during the short interval between the time he joined the Fed in 2002 and the massive Wall Street meltdown of 2008.

Accordingly, his madcap money printing spree after the Lehman bankruptcy—-during which the Fed balance sheet of $900 billion accumulated over its first 94 years was nearly tripled in the span of 13 weeks—-is held to represent some kind of Great Reset. That is, whatever happened before September 2008 is to be ignored because the crisis was caused by a debilitating global “savings glut” that only central bank wizards like Ben understood and had the “courage” to run the printing presses white hot to save the world.

Well, that’s self-serving poppycock. There was no Great Reset on his watch—-just a plunge into monetary madness. Accordingly, you can’t measure “success” by starting at the bottom of the Great Recession in 2009; you need to measure from at least the begging of this century when the Fed’s serial bubble-making got going in earnest.

Likewise, and contrary to his Keynesian palaver, the US is not remotely approaching full employment, nor can any serious adult accept the idea that the one-job-one-vote statistics published by the BLS are a valid metric of economic success. For crying out loud, the BLS counts a 10 hour per week lawn mowing gig and a $100,000 per year roughneck job in the shale patch as the same thing.

Well, here’s the real truth of the matter, and it comes from the government’s own statistics mill. During the entire time since the turn of the century——the era during which Bernanke was on the Fed—-there has been hardly a single net labor hour added to the nonfarm business economy.

You can look it up——even if you are the former Chairmen of the Fed.

That’s right.  When it comes to an honest measure of employment gains, there are been none for 15 years. Zero. Nichts. Nada. Yet Bernanke has the gall to claim that his monetary policy disaster has given rise to nigh onto “full employment”?

In fact, there are fewer breadwinner jobs in the US economy today than there were in the year 2000 when the Fed’s balance sheet stood at a mere $500 billion. That is, a 9X expansion of the Fed’s money printing fraud has accomplished nothing for main street’s standard of living; it’s just fostered serial financial bubbles on Wall Street.

Breadwinner Economy Jobs - Click to enlarge

Breadwinner Economy Jobs – Click to enlarge

So Blogger Ben has produced something that is “full”. Namely, a full load of self-serving economic BS.

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AIIB's picture
AIIB (not verified) May 5, 2015 12:58 PM

QuiverLips is gonna learn ya! He's gonna sock it 2 the unfaithful!

Anusocracy's picture

Ben is a example of liars believing their own lies.

localsavage's picture

And surrounding yourself with people who have fold back teeth and pistol grip ears who only tell you what you want to hear.

rccalhoun's picture

he doesnt believe his lies or he wouldn't have to blog to justify and re-inforce his inner confusion and seek people to affirm him

zaphod's picture

I've mostly stopped posting here over the past 1-2 years, but will repeat what I've maintained since ZH started. 

This will continue until the people walk away from the FED's dollar. As long as people use the dollar and more importantly BORROW in FED dollars, they will continue to give value to the dollar even as the FED abuses it to no end. 

The only way to stop this is for the majority to walk away from the dollar and use something else. Until then it will continue. 

Oh regional Indian's picture

So much anal sys for what has been the most brilliant ponzi wealth extraction method ever foisted on the world.

There was no panicked response to the crisis of 2008. If that is what you are chest-thumping about with that view as your basis, you are already deluded.

That was a long forseen, well-planned crash to do a giant-grab. They do that every once in a while, when greed gets them or when moloch gets hungry. Every thinking hedger should read the first 70-100 pages of WIlliam Coopers Behold a Pale Horse...the part about Silent Weapons for Quiet wars.

Mind-boggling and un-erasable because it makes so much sense. A model for the globes functioning, an econometric model...and then keep adjusting and fine tuniing to achieve your goal, Georgia Guidestones or otherwise.

Words, wasted words if you are willing to strike at the root..

Words...

https://www.youtube.com/watch?v=gTot6Wcz3-g

 

bonderøven-farm ass's picture

Ben is.... "Basically full of shit"

 

OpenThePodBayDoorHAL's picture

Too right.

It's the simplest bankster playbook in the world. Extend credit to the breaking point, then grab the collateral when the creditor goes bust.

CarpetShag's picture

Great rant! Now what?

B2u's picture

Fuck you chrome dome Bernanke

KnuckleDragger-X's picture

Academics and government work, where incompetence pays off.....

GRDguy's picture

What's so sad is that professors like Bernanke are rewarded by TPTB for being Wrong-Headed, with teaching positions, funding and higher wages and positions.  Those who would teach the truth about economics would not be rewarded teaching positions and funding. When you think about the thousands of economic teaching positions controlled by the Fed (subject of numerous commentaries), it's no wonder so few understand economic realities. 

AIIB's picture
AIIB (not verified) GRDguy May 5, 2015 1:16 PM

That's why Shalom & Co. keep fucking that chicken. It's all about the Benjamins to them. Nothing else.

fiftybagger's picture

24 But woe unto you that are rich! for ye have received your consolation. 25 Woe unto you that are full! for ye shall hunger. Woe unto you that laugh now! for ye shall mourn and weep. 26 Woe unto you, when all men shall speak well of you! for so did their fathers to the false prophets.

Luke 6 King James Bible

abgary1's picture

Stop giving Bernanke press.

I Write Code's picture

Great point, Dave, on the hours worked.  But Bernanke knows this, he's just reciting drivel in his blogs, the crap he posts in his blogs have nothing to do with what he believes or how he did his work at the Fed.

devo's picture

Bernanke never had anyone's respect, so none of this is new. His 2nd hedge fund will turn insolvent, too.

buzzsaw99's picture

leave the hobbit alone!

Clowns on Acid's picture

So .. what ultimately will be Ben's penalty for his criminality ?

Amish Hacker's picture

Condemned to give after-dinner speeches to billionaires for $250,000 a pop.

InsanityIsWinning's picture

When this system blows Bernanke won't even be granted Russian asylum . . . I see a thatch hut duplex in Zibabwe with a jungle view in his future.

PrimalScream's picture

Set aside the gobbldy-gook.  I used to buy into the notion that people like Greenspan and Bernanke were high-IQ academics whose theories were far too simplistic for the real world of finance.  This is an image that the Fed loves to project ... "well we're just a bunch of brilliant people who really know how to run the banking system.  And so we publish abstract papers about Three Wise Men, a Dog, and a Monkey who conduct financial operations on an island".

BUT if you stop to look at what happened when LTCM went down in the 90's, you come to realize that the Fed UNDERSTOOD the real deal.  And that was fairly complex financial arithmetic.  So the Fed got it!  Therefore, if the Fed can understand LTCM, they can certainly realize that their policies are blowing bubbles in the US economy, and that this is totally counterproductive.

SO WHY do they keep doing this stupid behavior?  The only logical explanation is that the Fed have certain studies at their fingertips, or certain Government policies, that are NOT available to the public.  So if the Fed keeps doing dire things, like lowering the Interest Rate to zero, these studies must be saying there are critical problems out there.  PERIOD.  That's it.

 

 

Bastiat's picture

It's much simpler than that: they are kicking the can.  If they hadn't bailed out the banks in 2008 the whole derivatives amplified and interwoven shitshow would have come down . . . and them with it.  Here's the choice:  lynch mob now or a lynch mob a few years from now.

Itchy and Scratchy's picture

'Creditors have better memories than debtors.' - Benjamin Franklin

Mike Honcho's picture

NY Times Best Garbage List 2015: The Audacity of ZIRP by Benjamina Bernanke, with a special foreward by the Commander in Thief.

gcjohns1971's picture

Wow,

I really like David Stockman's grumpily-delivered razor wit.

Itchy and Scratchy's picture

The fact that the USSA now bombs & destroys any country that looks at them sideways is a pretty good indication they have hit the debt wall!

PrimalScream's picture

The theory has OFTEN been put forward that the Fed is "kicking the can" down the road.  I think that the Fed is probably well aware that Federal deficits cannot keep growing at the rate that they are .. and they cannot keep growing AT ALL.  It's interesting to speculate that the Fed is simply treating the current US crises as "standard recessions in a business cycle", when what's really wrong is something more serious.

Yes, something much more serious is afoot.

Although I disagree with most of Bernanke's theories and policies.  He did do ONE THING right.  He did participate in the trip to China where Washington DC tried to convince the Chinese to soften their peg linking the yuan to the dollar.  This was a CORRECT MOVE.  It needed to be done!!  But the Chinese were having nothing to do with it.  They threw some banquets and whispered sweet nothings in the ear of the visiting Americans.  The Chinese see this as part of an Economic and Financial War.  Their currency peg is working!  Their low wages have stripped away most of America's manufacturing base!!  Their system of long-term economic warfare is highly effective.

It's likely that there are people in the US Government who have figured this out.  So whatever is going on, there is a hidden strategy that is not obvious.  But MY MAIN PROBLEM is that all these complex games have undermined the US Free Market System.  And that is a ridiculous thing to do !!  Once you undermine the Free Markets, you have destroyed completely the mainstay of stability in the global financial system. 

So what do you get?  AN UNSTABLE FINANCIAL SYSTEM

g'kar's picture

When the FCC gets through with us Ben's blog will be the only one left on the internet.

undercover brother's picture

If things were as good as Bernanke says the are, why must the fed continually change the methods of calculating unemployment, GDP, and inflation, etc.  He's been believing his own bullshit for the past 30 years.   Sociopath.

Fun Facts's picture

Blogger Ben is used to dealing only with scripted interviews, shills, sycophants and stooges.

In the real world his dishonest, packs of lies messages fail.

Mostly because everyone with an IQ above hamburger knows the FED is a privately owned corrupt criminal enterprise who bought the US government.

Random_Robert's picture

James Grant for Fed Chairman

David Stockman for Treasury Secretary

and Vladimir Putin for President...

 

Now THERE is a ticket that might actually inspire me to run out and cast a vote in November 2016...

kchrisc's picture

I'll only "vote" if the Constitution is running. Otherwise, I'm staying home and doing some preventative maintenance on my guillotine.

Liberty is a demand. Tyranny is submission.

kchrisc's picture

"Blogger Ben" is not "full of it," but a criminal.

Liberty is a demand. Tyranny is submission.

undercover brother's picture

sadly, politics in the US is also corrupt and Bernanke is one of them.  even if the markets crash and the economy burns, criminals do not put one another in prison, they merely showboat for the media.  end of story.  

Berspankme's picture

That's right. Need tro quit the articles that Ben the mealy mouth cocksucking fraud turtle fucker doesn't understand. He understands full well and he is a motherfucking criminal and needs to be held accountable on a fucking lamp post.

steelrules's picture

Ben's job was never to fix the economy, Ben's job was to make sure the private central bank called the Federal Reserve made money for it's banker owners.

Diplodicus Rex's picture

"busted loans and soured speculations must be purged from the financial system in order for sustainable growth to resume."

Ahh, yes Mr Stockman. Might as well keep repeating that mantra and who knows, that skittle-shitting, unicorn-like oxymoron of "sustainable growth" might just appear. Then again, here's an old codger with more brains in his little finger to explain why that little ruse is not going to work....

https://www.youtube.com/watch?v=F-QA2rkpBSY

 

"The greatest shortcoming of the human race is the inability to understand the exponential function" Dr Albert Bartlett

monad's picture

Take away all of Howdy Doody's shit. Dump him on the steet. He can eat at the soup kitchen, sleep in a halfway house and blog from the public library like many of his casualties. Send Howdy Dudette a message.

Never_Put_Down's picture

Everything we knew changed on 9-11 - including the financial system itself

Sorry_about_Dresden's picture

he took the Fed balance sheet into the netherworld of monetary crankdom.

What's up with all the crach references? Was Stockman a victim of the glass pipe in the 1980's?

His point about M1 shrinking as a result of loan write offs does make sense. He makes a strong argument, very strong. The Bernank is killing us.

bid the soldiers shoot's picture

 

Well, Mr S.

You omitted a few ingredients from your stink bomb.

1) the existence of Alan Greenspan as Chairman of the Fed from 1987 through Y2K and the dot.com bubble to his departure in 2006. Don't you think Greenspan brought Bernanke to the Fed as a Governor in 2002 when he was reappointed Chairman?   George W. Bush must have asked him for a name, don't you think?  And there was 'irrational exuberance'  He said it but he never raised the margin rate.  And if he had gone to wall about not repealing Glass Steagall with Congress and Clinton where would MBS and CDO be?

2) the $1.5 trillion fiscal eruption in 2009.  Would you have us believe that fiscal eruption didn't put a bottom of 6500 on the DJIA, which has practically tripled since.  How much of Bernanke's "full employment," or whatever he wants to call it, can be attributed today to the DJIA in a trading range between 17,000 and 18,400?

Tell us what life in America would be like today with DJIA 9000?  Better or worse?

3) Do you have any foreign policy expertise? Will pretend Empires undergo hardships for 90% of their citizens, to beggar their neighbors, friends and enemies?

ALL TO RULE THE WORLD

 

 

TheReplacement's picture

We should be fair.  Bernanke never was the problem.  He was a symptom.  The problem is the Fed and the power that private CABAL has over, well, everything.  Certainly Bernanke has a Phd in moron but was it really his fault about Bear and Lehman and who exactly VOTED FOR the bailouts?  That is right, he wasn't is it was the treasonous criminals elected to represent and SERVE the PEOPLE.

Stop falling for the bait ZHers.  They (TPTB) want to pin every failure on someone who isn't THEM.  WakeTheFuckUp.  Bernanke is a harmless douchebag at the bar (blackeyes excepted).  TPTB own the bar and pay the doucebag.  If you hang the douchebad they'll just hire another.  Look up because that is where the boot that is stomping on your face is coming from.

WTFU