08/26/11 London, England – What strange pass have we come to?
The whole world is on the edge of its seat, this morning. Taking short breaths.
People watch. They wait. They listen for a pronunciamiento that could mean trillions in losses…or gains. It could — in theory — push up the world’s growth rate…speeding up economies and bringing millions into the workforce, where they can earn money to pay for their wants and needs.
At the margin, it could make the difference between life and death. Many millions of the world’s people live day to day, hand to mouth, barely getting enough food to eat. A downturn in the world’s economy hits them like a plague in the Dark Ages, pushing them over the edge into famine and death.
And from whom will these precious words come today? They will come from Benjamin Shalom Bernanke, once of Dillon, South Carolina, and lately of the US Federal Reserve Bank in New York.
The headlines tell the story:
“World Awaits Word from Jackson Hole.”
“Investors edgy before Bernanke announcement.”
“World economy rests on Bernanke’s shoulders.”
Who is this man, Ben Bernanke, and what kind of shoulders does he have? Is he a great deep thinker…a renown philosopher in whom the world’s people could have confidence? Is he a captain of industry…a man who has proven that he can lead men and run a profitable business? Is he an investment wizard, like Warren Buffett, with billions of dollars as testament to his understanding of the world of money? Is he even a powerful politician or an acclaimed statesmen, who can at least pretend to solve the world’s problems by threats and force?
He is none of those things. He is a fellow who studied economics and became a university professor. Now he is a quasi-bureaucrat, working as head of a quasi-bureaucracy, whose main function is to make sure bankers make a profit.
“It’s either control or money,” says our friend John Henry. John made a fortune out of a simple insight. If corporations would give up control of their legal problems, they could save themselves a lot of money. John takes on their legal challenges and handles them as commercial matters; he doesn’t particularly care whether they win or lose the case, as long as the net cost is lower. He shares the savings.
“But a lot of companies don’t really care about saving money. They don’t want to give up control. Or, more precisely, their legal team doesn’t want to give up control. So, they end up spending more money.”
Control or money. That is the choice. An economy functions best with no one in control. Central planning doesn’t work. A little bit of it is a drag. A lot is fatal.
But people don’t like it when things are “out of control.” And that’s the problem with capitalism. It is always out of control. At least, it should be.
And that’s Mr. Ben Bernanke’s real role…the service he provides is making people believe it is under control. But the illusion of control is expensive.
He pumped $1.2 trillion into the banking system after Lehman collapsed in 2008. What did he get for it? About 80 cents worth of GDP growth for every dollar spent. A losing proposition; but maybe he can make it up on volume!
And what can he do now? At least in 2008 he still had some ammunition. Now, his big guns are empty. He’s already stuck the Fed’s key lending rate at zero…and pledged to keep it there for two more years. And now we know QEs I and II don’t work either.
Yesterday we got word that housing went down in the last quarter — making 17 straight quarters of losses. Homeowners are down about $7 trillion…and still sinking. New building permits are down to a 15-year low. Sales have not been this low in a generation.
As for unemployment, the numbers are shifty. Most of the improvement in the unemployment rate comes from the feds’ taking people who can’t find jobs off the list of those looking for work. But layoffs are increasing…and it is now obvious that most of these jobs will NEVER come back.
GDP growth itself is near “stall rate.” Most likely, the recession of ’08-’09 never really ended.
And poor Mr. Bernanke. The weight of the whole world’s illusions on those weasely shoulders. An honest man would shrug.
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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“Who is this man Ben Bernanke?”
he’s the owner.
or at least the owners’ mouthpiece.
Allow me, if you will, to utilize my Fed-Speak decoder ring to help explain what Ben REALLY had to say this afternoon. Never mind what you heard him say, or what you expected him to say about QE-3. What Ben really said is this: “Dear Mr. Rick Perry. You’re probably going to be our next president. I don’t like the mean things you’ve been saying about me. My term doesn’t expire until you’ve been in the White House for over a year. Until then, I’m done tinkering. I’m done injecting money into the economy. And by the time January 2013 rolls around, you, Mr. Rick Perry, are going to be on all fours, pleading, BEGGING, for the federal reserve to something, –anything– that might make the fiscal hang-over go away. And my response will be for you to go breed yourself”.
Brucie, you make me feel tingly.
I was wondering if Bernank was able to sleep the night before. I wouldn’t be able to, knowing how many people’s lives I would be affecting. If I was him I’d go ask Ron Paul what to do.
I think it would be cool to put up a giant guillotine in front of the Fed.
Might help focus the mind.
Ben couldn’t do anything today because the “BigO” is going to save us with his big Jobs package plan….and when it flops then the Fed can intervene and flop….again…
It’s like a flat tire – flap..flap…flap….
Bill says “An economy functions best with no one in control.” Does anyone really believe the US economy has someone in control? Instead, it is a fine example of how relaxing controls encourages economic opportunism, greed, a growing income gap and white collar crime. Think back to the many key deregulation measures presidents introduced, starting from Nixon forty years ago. They have set up the present situation where there is so much debt in the US economy that it will take decades to return to ‘normalcy’ – if it ever happens. Get ready for half the US population to be living (surviving) below the poverty line. In the meantime, a lot of smoke and mirrors stuff is going on to keep people from looking below the waterline and seeing the full ‘no-one-in-control’ iceberg heading toward the titanic US economy. May God bless America because it surely needs divine intervention (the highest level of control, of course).
Where is Shawn? …
To my groupies. Don’t worry I am here. Sometimes Bill’s minions seem to ban me from posting.
Nothing worse than me posting one of my always brilliant comments and then finding it has been blocked. On those days I feel so bad for you, my fans.
It seems my latest ban from the Board here has ended. Bill must have rescued me from me from his minions.
Bill,
Another ‘sweet’ article and excellent summation of the ‘real’ job of Bennie Boy. Good insight and wonderful play on words. Most of what you say will sail over the heads of most but those who pay attention will keep hands on the rudder and maintain their sanity when all others go to “panic mode.” Government is the problem and your most deadly enemy….they will take everything that isn’t well protected.
…don’t you worry about that pesky “out of control money system” for now, just as soon as irene leaves town there’s going to be an out of control “shopping” event….
They not only need to put a guillotine in front of the fed – they need to use it. I’d love to see the expression on Bernanke’s face while his head was rolling around on the ground like a bowling ball.
Who owns this 22 trillion Euro-American debt?
The Euro-American poor and middle class don’t give a whit about the owners or honoring the debt….
Who is Bernanke? He’s the last great American nationalist who will use the US currency for its sovereign purpose – not for the debt owners … but to support and maintain US society.
Let the debt owners and politicians who serve them … go fish.
Print up 25 one trillion dollar-euro bills, pay the debt owners off rounded to the nearest trillion and have five-ten trillion in the bank for fractional reserve lending…
This Princeton nationalist will step in, in 16 or so weeks, when equities, commodities, and yes gold has collapsed in value and a global depression is apparent – even to Texans.
Don’t forget to go after that other Fed Head as well, the Great Libertarian Hope Alan Greenspan.
I interpreted the Bernanke message as: “I done what I could. Now it is Congress’ turn.”
Sooner or later, somebody in government will rediscover the Keynesian theory.
Ha! The chief deftly took a pause. Sharp arrows find their alternative landfalls. Be patient. Wait for the 21st breaking announcement!
Capitalism, after all is money profiting mechanism. Who cares for the global picture?
Though QEs don’t cure the syndrome, but temporarily it keeps the flags fluttering in the hurricane.
“Yesterday we got word that housing went down in the last quarter — making 17 straight quarters of losses…..” Is the space agency anticipated one more moonshot, another moon probe?
Sorry, Brucie, but there is no way in HELL Rick Perry will be the next prez – and not just because he’s an illiterate redneck who deserves no credit for a lot of major oil companies having their North American headquarters in Houston years years before he became guv.
The main reason is that he’s anti-Wall Street and anti-Federal Reserve. He’s already finished before he started. They will never let him get near the White House till he’s gotten on his knees and done something besides begging.
It is not uncommon that people are shying away from political magnetic field rather than gotten entangled in the political web which is more sticky than any super glue. One could safely be proclaimed as good as dead once his physical freedom is confiscated.
Red house, yellow house, white house, green house … in fact more or less the same.
Rick Perry,Ron Paul and Rand Paul are the only candidates who understand the main problem with our economy.They are very courageous and are not “paid for”/ lackeys of the international banks.
Before them the great leaders who understood the issues were Napoleon Bonaparte,Abraham Lincoln, Andrew Jackson,Jack and Bobby Kennedy and Ronald Reagan among many others.Times have changed because the Chinese leadership is aware of this history and cannot be bought or intimidated and have the military power, which Napoleon could not maintain forever as he ran out of resources and could not fight the armies paid for by the same banks that exist today in England and France.
E Paloyan,
Just because you want to go have a beer and like the twang of Rick Perry’s mouth, doesn’t mean he should be president.
DO SOME CRITICAL THINKING ON YOUR OWN!
Akakakak
Is Bonner a great writer or what? He’s a sort of Mark Steyn of finance. Difficult to imagine laughing while reading the report of your own viciously brutal rape… but there I was.
Too bad that can’t be said of us common-‘taters. But then we’re why power has such an allure.
Sheep: You ate up more of us, again!
Wolf: Yeah, but I’ll make sure that doesn’t happen anymore.
Sheep: Whew! Thanks. I’m glad we keep you as Flock Chief.
Baaa-a-a-a
At times it is not up to one’s great thought. Rather, the intuition, natural instinct, that make the difference. They are some who would consult the meteorological division, sensing the velocity, sentiment, duration of the wind, before making any comment. Most valued words are of course the outright outburst of resonance from nowhere.
“there is no way in HELL Rick Perry will be the next prez”
Perry is way ahead of any of the other hopefuls in two of the most important features of elected US presidents: Great hair and being able to pull off a cowboy image. It’s sad, but together these give him a huge advantage over the competition.
That headline should have read: “World Awaits Word from Asshole”. I hope I didn’t rip that off from the Onion.
Rick Perry can be president. Perry talks a great game just for the benefit of the commoners, but he is establishment all the way. The establishment doesn’t care about Perry’s pandering politics as long as he does the right things.