Frederick Sheehan

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.

Regards,

Frederick Sheehan,
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

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 Minded

    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.

  • George

    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.

Recent Articles

Extra!
6 Reasons You’ll Love Being a Late-Stage Investor

Matthew Milner

When investing in a private company, there are two kinds of investors: early-stage and later-stage. And while early-stage investors have more upside potential, they're also exposed to far more risk. Today, Matthew Milner explains how you can be a successful later-stage investor, and still make great gains, with much less risk. Read on...


Video
How to Predict an Economic Collapse

Kate Incontrera

In his recently released book, A Viennese Waltz Down Wall Street, Mark Skousen gives the Austrian School's take on what triggered the 2008 financial crisis - and why you should be wary of the artificial boom that's driving the recovery.


Laissez Faire
Why Heartbleed Will Change the Internet as You Know It

Mike Leahy

The Heartbleed bug is a massive security flaw that could put you and your personal information at risk. And while there are things you can do to limit the damage, you haven't yet seen the ramifications of this security disaster. The Internet in the post-Heartbleed world won't look like anything you've seen before. Mike Leahy explains...


Big Opportunity in the “Baby Bakken” Oil Field

Matt Insley

As the U.S. "shale gale" nears its 10th birthday, it appears the America energy renaissance has outlived its critics. Still, it's natural to wonder whether all the big gains are behind us. Today, Matt Insley reveals the newest shale hotspot, and explains why there's still plenty of opportunity left in the U.S. energy boom. Read on...


Maestro
The Real Reason the US Media Hates Vladimir Putin

Marc Faber

The U.S., Russia, the EU and Ukraine all met in Geneva, where all sides agreed to halt all violence and provocations in Ukraine. But the news media are still taking an antagonistic stance toward Vladimir Putin and Russia. What gives? Today, Marc Faber explains the hypocrisy behind U.S. foreign policy... and the BS the news media are pushing about it...