Friday, February 22, 2013

Bernanke's Plan...If He Identifies Bubbles

By, Chris Rossini

Greenspan - Deny Everything

The Maestro, Alan Greenspan, testified in front of Congress on June 17, 1999 (my emphasis):
The 1990s have witnessed one of the great bull stock markets in American history. Whether that means an unstable bubble has developed in its wake is difficult to assess...

But bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong. Betting against markets is usually precarious at best.
It's fascinating that Greenspan portrayed himself as merely a clueless bystander, because Paul Krugman was singing a different tune during the time. In a 2002 New York Times editorial, Krugman wrote:
To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
Of course, the "imperceptible" Greenspan did exactly that, but then washed his hands of any responsibility. In 2007, he said:
"We had no control, that I could see, which would have made any difference in the extent of the bubble that was emerging," he said.
In other words, to paraphrase what Greenspan was saying:
Don't try to pin the blame on me...I'm not about to make a run for the hills like John Law did....Not when I can pull in $250,000 per speech. When it comes to the bubbles, I only have one thing to say...It wasn't me.
Now, of course, those who understand The Austrian Business Cycle Theory, know that The Maestro was full of it. Both booms and busts can be perceived well in advance, and their cause can and has been identified. The great enemy of the Fed, Ron Paul, has brought it to the public's attention many many times.

Now let's move to Helicopter Ben.

Bernanke - Have An Open Mind

Bernanke surely won't take responsibility, but because of Ron Paul, must at least concede that there's some "disagreement" on the issue of Fed bubble creation.

Bloomberg reports:
“There’s a lot of disagreement about what role monetary policy plays in creating asset bubbles,” Bernanke said on Jan. 14 at the University of Michigan’s Gerald R. Ford School of Public Policy in Ann Arbor. “It is not a settled issue.

“Our attitude is that we need to be open-minded about it and to pay close attention to what’s happening,” he added. “And to the extent that we can identify problems, you know we need to address that.”
You can be sure that Bernanke is so "open-minded" that he immediately downloaded free copies of both Human Action and Man, Economy & State.

So what's Bernanke's plan, should one of these bubbles occur? Central Planners always have plans right? It's part of the delusion.

Bloomberg continues:
The “first line of defense” if bubbles emerge “needs to be regulatory and supervisory” actions rather than changes in monetary policy, according to Bernanke.
In other words, if bubbles emerge, throw some bureaucrats at it first!

Surely he means some new goofy laws, but can Bernanke also mean price controls?

He has stated in the past that:
“The achievement of price stability must not and will not be jeopardized…I am also confident that, when the time comes, the Fed will act to ensure that inflation remains firmly under control.”
The next step that governments usually take to give the illusion that "inflation remains firmly under control" is to enact price controls.

Is Bob Wenzel right that TSA agents may be used in other ways? Will they be sent into out of the airports and into the streets to make sure that the price of tomatoes aren't "too high"?

It could never happen here right?

We're not like like Argentina and Venezuela right?


If you look at what Bernanke has said in the past, the answer would be Yes...of course we are.

This is a man who, prior to taking the helm at the Fed said at Milton Friedman's 90th Birthday celebration:
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again."
What, according to Friedman, caused the Great Depression? A failure of the Fed to keep the money supply growing.

Bernanke agrees and won't let that happen again. Rothbard, of course, squashed this thinking in his monumental America's Great Depression, but Bernanke is perhaps not that "open-minded" yet....

So, according to his most recent comments, when Bernanke perceives a bubble, he'll throw bureaucrats and laws at it first. The money creation will continue. Bernanke has to keep his promise.

This is what we're dealing with, and what the brilliant Lew Rockwell warned against way back before Bernanke became Fed Chairman.

On April 27, 2005, Rockwell warned:
The Bernanke appointment is certainly a wake up call for anyone who has a benign view of the Bush administration's economic priorities. Indeed, we might as well say that, long term, this could be the most egregious decision that the Bush administration has made.

An inflationist Keynesian and an aggressive advocate of printing-press economics, Bernanke is the sort of crank who becomes famous in history for having destroyed whole countries. He is utterly and completely dedicated to the idea that paper money will save the world, with no downside. I shudder for our future if he becomes head of the Fed.
The future is here, and Bernanke is ready to take his hammer and nail to the U.S. economy's coffin.

1 comment:

  1. Didn't Greenspan in a senate hearing or something at least attempt to explain how things could all go turn to shit and was told to (effectively)shut up and do his job?