11/10/10 Paris, France – “Global Backlash Grows,” says The Wall Street Journal.
This is the backlash against Ben Bernanke’s crackpot money-printing scheme.
The foreigners don’t like it. Because the US is flooding the world with “hot money.” This fast cash chases oil, commodities, collectibles, farmland – just about everything.
It creates bubbles. It distorts markets. And it will certainly lead to busts and bankruptcies…and maybe to hyperinflation, too.
So, sit back and enjoy the show, dear reader. It’s the greatest show on earth. Yes, it will most likely lead to embarrassment and poverty in the US. Yes, the US dollar will cease being the world’s reserve currency. And yes, America’s leading economists – many of whom have won Nobel prizes – will be shown to be hapless goofballs.
But this is all good news to us. Under the leadership of modern US economists, Americans have been getting poorer for the last 10 years.
Why? How could that be?
With the encouragement of the Fed and Congress, Americans consumed more than they produced. “Go out and buy an SUV,” said a Federal Reserve governor. “Buy a new house,” said Fannie Mae. “Spend, spend, spend,” said mainstream economists.
Result: Americans have less real, net wealth than they had when this millennium began.
Now, finally, the average yahoo is wising up. He’s lost this job. And he knows he’s been played for a fool. But he’s learning. He’s defaulting on his mortgage…and he’s paying down his debt.
Consumer credit keeps contracting…it went down by $2.1 billion in September.
But the feds have kept at it. They tempted him with lower interest rates: the Fed brought its key rate down to zero; it can’t go lower.
The Fed also bought up worthless mortgage loans so he could borrow more cheaply and took over Fannie and Freddie so they could continue suckering people into a lifetime of mortgage payments. The latest word is that losses from Fannie and Freddie could reach to $363 billion through 2013, according to the Federal Housing Finance Agency.
But with Tea Partiers in the House…and the Fed hard up against the “zero bound,” what else could they do?
The Fed could print money! No need to ask Congress to pass spending legislation now. Forget what it says in the Constitution. The Fed can print money. And it can use the money how it sees fit – even funding an “off the records” stimulus program if it wants to.
Each dollar is, in effect, a liability of the US government…engaging the full faith and credit of the government and its taxpayers. But what law was voted on? What act of Congress authorized spending billions of dollars?
How came it to be that the taxpayers are on the hook for $600 billion more in financial responsibilities with no vote of their elected representatives? No point in even asking the question….
This is, after all, late, degenerate state-guided capitalism. If Congress can make citizens buy something they don’t want – such as health insurance – surely the Fed, which is a privately-owned bank, can write checks from the taxpayers’ checkbooks. Heck, nothing is too absurd.
So, the Fed goes boldly where no sensible person would want to go. It is trying – trying! – to create bubbles…asset bubbles, to make people feel like they have more money. If people feel richer, the feds reason, they’ll spend more money. Presto, we’ll be richer.
Are we beginning to rant and rave? Are we “losing it”? Is there a doctor in the house?
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Bill,
Don’t get yourself too worked up. Humans can screw things up royally, (as they are now right before our very eyes) but the “Big Boss” upstairs is still running the show.
It is by now clear to even the Amazon jungle lost tribe that America is run by a bunch of imperial mafia gang who pump balloons filled with nerve gas to make a living. And they will keep pumping as long as they’re in charge. This will lead to only one thing – the imperial dollar gang in NY & DC will take everybody down with them. It’s too bad America is heading toward revolution, the real thing, to clear out the trash. The sooner the better.
@TC
You misspelled imperial… in this instance it is spelled imbecilic!
LOL
Increased controls for the flow of money out of the USA surely must be coming.
Please keep ranting.
I do not want to be the only Don Quixote fighting the absurdity of another debt based speculative bubble after another to create an illusory wealth and kick the can to avoid any pain of poor decisions for the ruling elite ever !
You say, “Forget what it says in the Constitution.”
What exactly does it say? Where is the issue of currency addressed? If the Federal Reserve Bank is in violation of something in the Constitution, then it will have been in violation since its creation in 1913. That has never been addressed in the SC, to my knowledge, but what Bernanke is doing now is certainly not anything that’s never happened before.
What are your thoughts regarding Fisher’s paper on debt deflation?
Isn’t Bernanke just trying to stoke inflation right now? I don’t think any Fed chairman intentionally would create a bubble – to create mild inflation however, is their goal. Maybe his method is wrong, but I doubt his rationale is based on evil.
Any guess about how long the countdown for the final collapse & Revolution is? Above all: should I exit the gold and silver market just afterword to ride the new funny paper-powered bubbles?
It is worse than that. The elite team of banksters, polticos, ex-politicos, progressives and globalists is on the march despite (or perhaps in response to) the recent turn of the “average yahoo” to the right. They are inciting and agitating in an attempt to run a great misdirection play right up the middle. While the right is busy fighting the left, ourselves and our posterity will be taken to the cleaners for whatever we have left while the foundations for the transition from a constitutional republic to a global network are laid in stone.
Don’t believe for a minute that the BRICs are going to welcome all that American investor’s “hot money” buying up their farmland, commodities, waterfront communities etc., and that the “average yahoo” can be kept quiet indefinitely while subsisting on what will become 199 weeks of unemployment. The hot money will eventually burn a hole in someone’s pocket.
The debt which represents the tab since 1913 simply cannot be repaid, nor was it designed to be. The choice to inflate or default will be overcome by events.
Those events have historically included war. We’ll be lucky if we only wind up going the way of the Soviets when the USSR morphed into the loose but nonetheless historically-based arrangement we see today. Likely it will turn out that there were no winners in the Cold War after all… except those who financed it.
The key is to turn disadvantage to advantage under such circumstances. Some think of it as akin to seasons. There is a way to prosper during winter. And perhaps the power elite will be hoisted by their own petards. Recent blogs have posited otherwise that these times will require of us nothing less than the actions and courage of our forefathers….
If past, present and future Nobel laureates believe that money supply can be easily tightened, then we have no problem. Sit back and relax, let the Nobel prize winners handle this.
Obama got a Nobel peace prize and he hadn’t even done anything yet!
Even the Nobels are all inflated and cronyist nowadays.
The feds are not stupid. They are monetizing the debt but they can’t say it in public. So they put on a charade. Bank liabilities will get smaller and assets bigger, gov’t debt will go away. And in all likleyhood the economy will go away too. But they know that as well. They have their plan and the little people and assorted sheeple are not in it.