How Ben Bernanke Can Prevent the End of Civilization

by Bill Bonner.Posted Jul 26, 2012.

Ain’t we got fun?

Ev’ry morning, ev’ry evening
Ain’t we got fun?
Not much money, Oh, but honey
Ain’t we got fun?
The rent’s unpaid dear
We haven’t a bus
But smiles were made dear
For people like us

In the winter in the Summer
Don’t we have fun
Times are bum and getting bummer
Still we have fun
There’s nothing surer
The rich get rich and the poor get children
In the meantime, in between time
Ain’t we got fun?

— Whiting, Kahn, Egan…1921

The Dow up 58 yesterday…nothing important there.

Gold up $31. Hmmm…what does the gold market see? More QE?

Last week, it was the IMF. It urged the Europeans to increase their money-printing efforts to avoid deflation. This week, the Financial Times tells Ben Bernanke to get off his cushy derriere and take bold, decisive action in the fight against the Great Correction.

Sebastian Mallaby, writing in the FT, says Bernanke is acting like a wimp. He needs to come up with some new weapons, new strategies, and new tactics. C’mon Ben, “show some real audacity.”

Ben Bernanke, hero of ’08, will not want to see himself stripped of his medals. He will not sit on his hands and watch as the US follows Japan down that long, lonely road towards stagnation. He will not want his resume blemished by a splotch of failure just when he faced his greatest challenge.

No, dear reader, he will ‘do something!’ — no matter how dimwitted it may be.

And here’s a BBC sage reminding Ben Bernanke what the greatest economist of the 20th would have done. “What would Keynes do?” he asks.

Of course, the answer is obvious to anyone who ever thought much about Keynes. He would have done just the wrong thing!

But that’s not the way John Gray sees it:

…The influential Cambridge economist has figured prominently in the anxious debates that have gone on since the crash of 2007-2008. For most of those invoking his name, he was a kind of social engineer, who urged using the power of government to lift the economy out of the devastating depression of the 30s. That is how Keynes’s disciples view him today. The fashionable cult of austerity, they warn, has forgotten Keynes’s most important insight — slashing government spending when credit is scarce only plunges the economy into deeper recession.

Even Richard Duncan urges the Fed to action. Duncan is unusual, though. He sees the problem clearly…which is to say, he sees it like we do. Here, CNBC reports on an interview:

“When we broke the link between money and gold, this removed all constraints on credit creation. This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it has already, and if credit begins to contract, there’s a very real danger that we will collapse into a new Great Depression,” he [Duncan] argued.

“If this credit bubble pops, the depression could be so severe that I don’t think our civilization could survive it.”

Duncan argues that governments in the developed world should borrow “massive” amounts of money at the current low interest rates to invest in new technologies like renewable energy and genetic engineering.

What could he be thinking? Of course the money would be wasted. That’s what government does. It borrows money from people who have proven they know how to make money and gives it to people who have proven only that they know how to take it.

One will offer to build a bridge to nowhere. Another will propose to assassinate a foreigner. Millions will put out their hands for retirement/health/unemployment and other forms of assistance.

And what will happen to the money? It will be gone…with only more debt…like “dead soldiers” left on the table after a party…to show for it.

Still, Duncan thinks that even if the money goes down a rathole, it still might make sense:

Even if this is wasted, at least we could enjoy this civilization for another ten years before it collapses,” he said.

That’s what separates a real pessimist from us optimists. It would be nice to see what Mr. Market would do. Left to do his work, he’d surely separate many of the rich from their money…he’d blow the doors of the banks…and flatten hundreds of corporations. He’d put a swift end to this Great Correction…and then we could get back to work.

But he wouldn’t wipe out our whole civilization! You have to be a genuine pessimist…to believe the correction will be fatal to our civilization.

Who knows? Maybe Richard Duncan is right. We’re all going to die anyway. In the meantime, and in between time, ain’t we got fun!

Regards,

Bill Bonner
for The Daily Reckoning

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.

Larry Bernard

“Austerity” isn’t the solution. You don’t JUST cut government spending. You focus your cuts on government spending that makes the economy stagnate. That makes it harder for businesses to function and makes being non productive a more attractive option. You cut those government projects to the point (not a cut of everything but an inflation adjustment spending increase… an actual negative growth rate of government).
General.Nuisance

Austerity should be applied to the United States military. If there was one department whose budget could be cut in half, that is the place to start.
Longnine009

Starship Butt Gerbil
Captain Ben in command:
“We must save humanity!”

Q: “Oh really Ben, how trite.”
LeadZep

These Governments should do Nothing, but try to look at Cutting Waste.
If a Country or Bank Declares Bankruptcy, then let those who Lent to them take a Loss.
As they say in the Prospectus, Money invested is NOT Guaranteed and May Result in Loss…
The Governments have been trying to Stimulate at the Beckoning of Those who Invested…
Pretty Much saying, “Don’t Burn Us or Else we wont ever lend to You Again”.
Yeah, So? Maybe they would have to Live within Their Tax Receipts, Like Many of us have to do. Live Within Our Incomes.
Anyway, People have ‘Short Memories’ and they will Surely Lend to these Clowns Again.
So, if they Mismanaged their Bank or Recklessly blew the State Budget, then Too Bad for those who Lent to Them.
Hey, I’ve bought some Stocks that ended up being a Bad Decision… Too Bad for Me, I took a LOSS.
President Zero’s Granny

We’re freakin’ doomed.
ken

What is the prob gentlemen. The solution is simple. Borrow enough to pay everything off.

Okay,,, Where’s my Pulitzer?
Wags

You do just cut government spending. The private sector clearly can’t support this much government.
Mark

Duncan does see things very clearly. I’ve read his books and have never found a more complete explanation of the total problem.

His books clearly define the nature of our predicament and how it came about. Fiat currencies, trade deficits, and accepted currency manipulation are the roots of this tree of debt. The worldwide ordainment of the U.S. dollar has abundantly fertilized it all. Like Mr. Bonner, I don’t think Duncan’s proposed solution will work, but I give Duncan credit for offering something that is even remotely possible.

If it all collapses, the reboot will likely be more sever and longer than we pessimists realize.
Boris

Too many dysfunctional governments, too much debt, too little time.
http://www.economicfractalist.com/ g lammert

These two charts contain everything there is to needed to know about the macroeconomy ….

http://www.economicfractalist.com/blog/

Thank you Lord Rees-Mogg
L0L!!!

i think fred austere did that one, didn’t he bill?

listen: keep drinking!
http://livewest.ca Filip

Here is a solution for the world: create seven billion, 10 billion dollar cheques, then distribute them evenly so that each person on the planet gets 10 billion dollars, even the rich – don’t forget to create 70 quadrillion dollars in the government bank account so those cheques don’t bounce of course! Voila, you have made everyone equally wealthy and you haven’t taken a single dime away from anybody! Problem solved.
Jean

“Gold up $31. Hmmm…what does the gold market see? More QE?”

Not necessarily. I would have thought it’s just the normal counter trend in the market ahead of the impending month end and precious metals close-out? Not covering the shorts?
http://www.best-italian-wine.com/ Andrew

“What is called the splendour of the throne is no other than the corruption of the state. It is made up of a band of parasites living in luxurious indolence, out of the public taxes.

Tom Paine
http://www.investorsfriend.com The InvestorsFriend

I have money in the bank(s)…

i.e. I own Wells Fargo and Bank of America

Thanks Ben!
Un-bailed

Thank me.
gman

“How Ben Bernanke Can Prevent the End of Civilization”

“can”? he is! he’s preventing the end of HIS civilization! yours, not so much ….
Starving Steve (Jacobs)

1.) Abolish the EPA. (This would save taxpayers money.)

2.) Build hydro-electric dams, atomic power plants, natural gas-fired power plants, and more coal-fired power plants.
(This would create jobs and lower the cost of living by lowering the cost for electric power.)

3.) Audit and/or abolish the Federal Reserve Bank in Washington.

4.) Encourage the drilling for oil/gas everywhere. Thia would create jobs and lower the cost of gasoline for cars.

5.) Export fossil fuels to the world in order to bring-in foreign echange.

6.) Raise interest rates to reward savers and investors; also to encourage banks to lend by making lending worthwhile doing.

7.) Guarantee a fundamental (floor) value to the U.S. dollar in terms of gold, silver, or energy. This would encourage savers and investors, and in so doing, create growth and jobs in the economy.

8.)Drive-down the cost of urban land and lower the price of new homes and new construction by abolishing all regulation by urban planners which act to increase the density of urban development. Lower land-use densities would encourage construction activity in and around metropolitan areas and create jobs.

9.) Expand the federal Medicare programme to cover all people, regardless of age or illness. This expansion of Medicare would create new jobs within the healthcare industry in America.

10.) Increase/expand free-trade.

11.) Link all public education in America directly to existing job demand, especially jobs in the computer and micro-electronics industry, healthcare industry, transportation industry, and the energy development industry.

12.) Teach literacy starting as early as kindergarten in the languages of trading partners in the world, especially including Spanish for trade with Latin America.
Starving Steve (Jacobs)

Abolishing the EPA would not only save the taxpayer money, but it would allow/promote economic development and growth. Abolishment of the EPA would make America more productive, and it would lower the cost of living.
CommonCents

The real question isn’t when will Greece,Spain,Italy,Ireland or Portugal get kicked outmofnthe EU. It is, when will Germany bail?
Toto Tambien

Thanks for the post. I’ve now added John Gray to my growing list of people who should be hanged.
Longnine009

Abolish public schools. All they do is indoctrinate kids
to dependency and servitude to some no-load authority.
If they want to learn, they can get a library card.
Or better yet, watch Bill Bonner and Doug Casey videos.
Starving Steve (Jacobs)

I can envision public schools, including universities dumping their ecology, history, music appreciation, political science, womens’ studies, ethnic studies, anthropology, sociology, economics, geography and its urban planning curriculum and replacing these curriculum (departments in universities) with a new curriculum directly related to the job market: trucking and truck-driving; piloting aircraft; piloting ships, piloting tugs, engineering trains; oil drilling; oil-exploration skills; oilfield management; oil refining; basic construction skills; basic skills in electronics and electrical circuitry; basic engine repair; welding and pipe-fitting; farming and canning; sewer and septic construction and repair; highway construction; paving;
nursing and doctoring; medicine and studies in drugs/pharmacy and medication; surgery studies; cancer treatment studies/skills; mining and metal refining; basic physics; atomic energy; basic chemistry; basic biology; and basic mathematics including calculus; fluency in the foreign languages of all trading partner nations.

The whole education curriculum, kindergarten thru college graduation has to be reformed in order to make it relevant to the job market of the 21st Century…. It’s just that simple.
The_Emperor_Protects

better than abolishing the public edu-ma-ca-shun sysem – teach your children how to advance ahead of the sheeple being indoctrinated. It’s easy to rise to the top when your competition is stoned out of their minds on the couch waiting for the gubbermint handout
http://artwabtrd.com Jean Pisacco

You all are wrong. To prevent a collapse of
American economy we have to create 4 day week work. So corporation have to hire 30
pro cent more workers. We have to raise
minimum wage to 20 dollars in hours, it would doable demands for goods and save
American economy. Simpol.
Mark

the fed caused this s****
we need to put the focus on them.
the more you know about the fed the more it all makes sense.
Bruce Walker

Commodity prices are going to the moon. Poor Ben will be powerless to do anything except drive the price of corn and beans higher with each “targeted” easing. It won’t matter what area of the economy they are trying to stimulate, all the new cash will end up in the commodity pit by this time next year. If crops fail again next year, then we get a Malthusian Winter and all the complaints about unemployment and deficit spending will seem quaint in comparrison.
President Zero’s Economic Advisor

Jean, you are so wrong.

American corporation must sack all full time workers. Then hire back two part time workers for one full time worker, and give each part time worker full time wage. That would double demand for goods and give reverse unemployment rate. EZ.

Of course, American corporation would have to double prices to cover, then demand would go down 50 pro cent.
http://forexlearntrading.net Haroun Kola

A collapse of this corrupt system spurred on by war looks very inviting
M. Mir

I want a damned tax cut!! Why aren’t any of the candidates talking about cutting the tax rates? I would vote for the fella that consolidated the 10,15,25,28% brackets into 10% and consolidated the 33,35% brackets into 35%. Then we could have 2 bracket tax structure that reflects American disociety.
Starving Steve (Jacobs)

Jean Pisacco on July 30th above recommends solving stagflation with more inflation and Keynesian economic policies, like raising wages and 4-day work weeks. But the problem of the Great Recession currently is not too little demand, but rather too much demand and powered (paid-for) by the cheapest of paper money— printed, devalued and inflated to death.
Scottar

How about eliminating the 35% corporation tax, it’s just a stelth tax on the consumer anyway. Doing away with that would help greatly to bring industry back here.

Then create nation wide free to work states, the unions have mostly lost their original purpose for crony government alliances that benefit the core bosses and reps.

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