Sunday, December 5, 2010

Bernanke Outright Lied on 60 Minutes and Appeared On Edge Through Out

There is no other way to put this, Ben Bernanke outright lied on 60 Minutes, and it looks like he is losing it.

As Taylor Conant points out:
 This video seems like the act of a desperate, unhinged man. Real change from the measured, secretive, calm and collected Ben Bernanke/Fed chairmen of yore. They undoubtedly had tons of re-takes and edits and still he came across this nervous and anxious.
Conant nails the seeming on edge demeanor of Brernanke during this interview. That's downright scary about a man that controls the money supply. Then there were the bizarre lies.

At one point during the interview with Scott Pelley, Bernanke says:
One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way.
The one person in the world that should know what money supply is doing is the Federal Reserve chairman. It is completely outrageous for him to say currency isn't changing. First because as every economist knows there are many components to the money supply that go way beyond currency, especially checking accounts. There is no economist I know who would use "currency" to mean the money supply.

That said,let us start with his very misleading mention of currency. Over the last 3 months currency has grown by an annualized rate of 5.6%. In all the dictionaries I have looked at. 5.6% growth means 5.6% growth and not that there is no change.

But more important, the M1 money supply measure, which includes checking accounts, has grown at an annualized rate over the last 13 weeks of 14.8% (beginning Aug. 23). This is huge. In 6 months ending Aug. 31, M1 grew at only 3.6%. In other words, the current growth in currency and checking accounts, known as M1, has grown over the last 13 weeks at nearly MORE THAN FOUR TIMES the rate of the prior six months. Take a look at the numbers yourself. This data will show you the current 13 week growth in M1 (It's the second data set). This data will show you the 6 month growth in M1 ending Aug. 31 (It's the first data set).

But, M1 itself is used by few economists as a measure of money supply. I prefer the M2 measure, as do most economists. In the 13 weeks beginning Aug 23, the M2 money supply measure has grown at 6.4%.(The data is here--second data set.). In the 6 months, ending Aug 31. M2 grew at only 2.5% (The data is here--first data set). In other words, M2 money growth has increased by a multiple of 2.5 times.

Bernanke simply lied. There is no other explanation. Money supply is skyrocketting and it is very likely that QE2 has only started to have its impact. By the time its over money supply growth (all measures) will be over 10%.

Another problem with entire interview is that Pelley had no idea how to properly challenge Bernanke. It was a total soft-ball experience that eventually turned into a Dali like production. At one point Pelley does this voicover:
Bernanke wanted to emphasize that these are the Fed's own reserves. It's not tax money. It does not add to the federal deficit.
The Fed's own reserves?!

The Fed the simply prints the money. There were no reserves sitting anywhere that Bernanke used. Pelley was way in over his head. The interview was a mockery of 60 Minutes.

At another point Pelley let Bernake get away with this doozy:
The other concern I should mention is that inflation is very, very low, which you think is a good thing and normally is a good thing. But we're getting awfully close to the range where prices would actually start falling.
There was no mention that all sorts of price are climbing that oil is at a 2 year high!

Then of course we have the absurdity of Bernanke forecasting unemployment numbers for the next five years. This from a men who didn't see the housing bubble that was right in front of him:
At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate. Somewhere in the vicinity of say five or six percent.
If Bernanke continues printing money the way he is, it will be a manipulated, inflationary recovery, but unemployment will be way down in 12 months. Bernanke is doing nothing but projecting the current rate out five years, without any understanding of the inputs and outputs that cause changes in the unemploymnet rates. Some economist.
Bottom line: CBS should send the clip over to NBC so that they can use it as a Saturday Night Live segment. Between lies, misleading comments and idiotic theories about unemployment and how the economy works, that's the only place the interview belongs.

Inflation is coming and coming hard and fast. Between his lies and confusions, Bernanke is going to lull a lot of people into a false calm. Indeed, his most dangerous comment was this:

Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.
When the price inflation becomes obvious, there is no way Bernanke is going to raise rates enough to stop the inflation. He may even raise them over a 3 month period by 500 basis points, but by that point inflation will be at, or over, 10% and  a 500 basis point move to, say, 6%, will be too little, to late.

Prepare yourself for a very nasty, inflationary economy. Bernanke is not going to do a damn thing to stop until it is much too late, and he will more than likely lie that there is inflation, even when it becomes quite obvious to everyone, just like he lied about the money supply.


  1. If anyone thinks that a central bank can immediately head off inflation by a few fed tricks as Bernanke seems to indicate, just watch what is going on in China today. People are freaking out with how fast food prices are going up no matter what the central bank does. Of course, pegging your currency to an inflationary currency also doesn't help.

  2. I can't get the video to work oddly enough. I've tried as many links as there are on google's first page and it just hangs.



  4. $100 trillion Zimbabwean dollars ... buys you an egg