We wince at congressional ineptitude but in one category legislative aptitude is improving: propaganda. The on-again, off-again finance bill (it’s on-again) was described by the Wall Street Journal as “the most extensive remapping of financial regulation since the 1930s.” It is nothing of the kind.
Where to open a critique is as much a problem as where to close it. So, this will start and end at the source: the Federal Reserve. In a single sentence, the Journal captured the most compelling reason to heave the proposed legislation into the BP oil spill: “The Federal Reserve would emerge as the pre-eminent regulator, with responsibility for the most complex financial companies.”
The Federal Reserve has less understanding of banking than Bonnie and Clyde. Fed Chairman Ben S. Bernanke is unable to comprehend there was cause-and-effect between the boom the 1920s and the Great Depression of the 1930s. His ineptitude gave then-Federal Reserve Chairman Alan Greenspan the academic cover to reduce the fed funds rate to one percent in 2003. The most egregious credit bubble in the history of the world followed. Learning nothing, Simple Ben has now cut the funds rate to zero, creating an even greater credit bubble than the behemoth that collapsed in 2007.
Bernanke and his cohorts have no excuse for their ignorance. Federal Reserve policy in the 1920s was central to the credit write-offs that sank bank balance sheets later. This story was chronicled by dozens of economists in the 1930s. Their contribution is resurrected in “Masses of Worthless Paper,” now posted on the AuContrarian.com website, in the “Articles” section. This was originally written for the May, 2010, Gloom, Boom, and Doom Report.
It is too late to escape the consequences of what Greenspan and Bernanke have done. But, there is no excuse for allowing the ruin to continue inflating. Chairman Bernanke keeps adding fuel to the conflagration. He should be handed a one-way ticket on a coal car to Princeton this afternoon.
for The Daily Reckoning
[For more of Frederick Sheehan’s perspective you can visit his blogs here and at www.AuContrarian.com. You can also purchase his book, Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009), here.]
Frederick Sheehan is author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession and co-author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve. Sheehan was a director at John Hancock Financial Services where he wrote the Market Outlook and Market Review. He contributes to the Gloom, Boom & Doom Report, Whiskey & Gunpowder, and the Prudent Bear, among others. He also advises an investment firm and a non-profit foundation. Sheehan is a CFA and graduate of Columbia Business School.
Simple – anything goes up must come down, there is a beginning there must be an end.
Universal rule – trying to reverse, reshape or deter this ‘universal workflow’ is simply foolhardy. So, don’t waste time and effort.
The money manipulators have always fiddled with the economy to benefit them and their minions who obey their commands. The rest of the people pay the price. Always been that way, always will. At least until the people learn about the issuing of a country’s currency. Until then, we are at the mercy of the banking families. The Revolutionary War was fought over this same exact issue, we face today. We, the people, are just more uneducated today about our financial and banking institutions.
If money were what really matters, Warren Buffett would have no peer. He has had unparalleled success in this world; surely he has a first-class ticket to the next. But what if Buffett's 84 years of luck turn on him now? Bill Bonner explores...
A new study out of Sweden will have you thinking twice about making that phone call. The study analyzed cases of glioma, the most common form of brain tumor, in patients diagnosed in the years 1997–2003 and 2007–09. Stephen Petranek has more...
Using Nassim Taleb's five sources of fragility, Charles Hugh Smith ranks the U.S. a 4/5 on the fragility scale. Read on to see what happens when the gum and duct tape holding the economy together breaks down...
Our own Chris Mayer tells Henry Bonner why he sees no big theme in US stocks today -- just hidden opportunities for those who know where to look. Read the interview here...
After swooning in October, semiconductor stocks put in a screaming recovery. And these things went gangbusters in February, blasting past the broad market. All told, semiconductors have posted gains north of 12% over the past six months, while the S&P crept along at 6%.