Ben Bernanke Considers Your Happiness and Security Expendable

“Ben Bernanke the money bomber has resorted to delivering his anti-gold, pro-fiat sermons to captive audiences on US college campuses,” writes Dan Denning of The Daily Reckoning Australia.

That’s right. Bernanke is taking his easy money message to the streets.

According to Bloomberg:

“Now that the weather is nice, I’m half-expecting Ben Bernanke to set up a lectern outside Federal Reserve headquarters on Constitution Avenue so he can enlighten passersby about the need for easy money. He’s been delivering the message lately to anyone who will listen–including a couple dozen lucky students at the nearby George Washington University School of Business. The Fed chairman is worried that the economic recovery could stall out if the Fed yanks monetary stimulus too soon.”


Dan Denning continues:

“He is returning to his roots as a professor. But professors must profess. So what is Dr Bernanke? Obviously he’s repeating the claptrap that to simulate growth you need to lower interest rates. But according to the rather nauseating article (which isn’t much more than an appeal to authority) Bernanke is going after Herbert Hoover’s Treasury Secretary Andrew Mellon.

“Mellon was asked by Herbert Hoover how to deal with the Great Depression. According to Hoover’s memoirs, Mellon replied:

‘Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.’

“Now there is some doubt as to whether Mellon actually said this. The only source is Hoover, who was trying to make himself look compassionate and enlightened by comparison. But if Mellon didn’t say it, he should have. This is a common sense view, which is probably why so many people oppose it. Time does not make bad investments go good. The recession/correction/liquidation is the cure for the disease of inflation.

“Mellon, if he actually said those words, certainly didn’t mean liquidation in the sense that say, Stalin, would have meant it. He wasn’t suggesting Hoover go out and shoot the farmers the same way Stalin liquidated the Kulaks who opposed his collectivist agrarian policies. But Bernanke reportedly called Mellon’s prescription, ‘pretty heartless’.

Isn’t that big of him?

“The ‘liquidation’ of bad investments is another way of saying that there comes a time when you must give up on the belief that an investment will come good. The sooner you do this, the better it will be for everyone. Resources like capital and labour will no longer be tied up in unproductive investments. But more importantly, human lives will no longer be engaged in activity that doesn’t make anyone more productive, wealthier, or happier.

Bernanke is the heartless one in all of this, even if he thinks his heart is in the right place. He represents an idea that has destroyed the life savings and purchasing power of millions of people. The control of money by central banks has sucked even more people into investment and borrowing decisions that will take them years to recover from, if they ever do.

“It’s not only heartless to believe in fiat money. It’s brainless. Maybe that’s why the centralisation of the money supply by people who have infinite confidence in the technology of the printing press receives so much popular support. People who support it aren’t really thinking. They’re believing…and following orders. ‘Nothing to see here… move along.'”

We think it’s fair to say that Ben Bernanke is willing to destroy the economy and your standard of living.

We don’t know if he’s part of a deliberate coordinated effort to transfer your wealth to the political and banking elite…if he does what he does knowing full well the destruction he’s causing.

Or maybe he just has a head full of bad ideas. Like a medieval “scientist” whose considerable knowledge all rests on the faulty premise of geocentricity.

No matter what Bernanke says, no matter how much the masses put their faith in his words, low interest rates and unbacked money creation cannot cause economic growth. Not the sustainable kind anyway.

All this interest rate manipulation causes are distortions. It may seem to create wealth and the appearance of economic vitality. But that activity is just misallocation of resources. And the misallocations will correct themselves soon enough. These corrections are attended by the disappearance of jobs in industries that should never have flourished (remember, these were misallocations).

Low interest rates distort economic signals. They tell producers that money is plentiful. Interest rates are the cost of borrowing money and when they are naturally low, it means that there is plenty of money looking for borrowers. The market is making borrowed money more available to both consumers and producers. This saved capital can be put to work to generate economic activity. Consumers will borrow to buy. Producers will borrow to expand start or expand production.

Artificially low interest rates, however, send a false signal to those consumers and producers. They get the economic juices flowing when capital is actually scarce.

Sure the economy may appear to grow. But they mask the reality, like when beer improves the appearance of the homely women at the bar. There are really no nutrients to support this growth. There is no saved capital. Low interest rates give the illusion of plenty of savings looking for investment. But it is just an illusion.

Also in an artificially easy money environment there are few corrective signals. This leads to malinvestment and to financial bubble. More nail salons and transgender studies degrees than there would have been without the easy money. Houses and company stocks may find they fetch a higher price than they otherwise would have, too.

And there we have it. The conceit of the Keynesians. They believe that good, honest growth can come by inducing borrowing with easy, greasy new money. Austrian school types insist that there must be savings first from which to borrow. Any boom based on low interest rates must necessarily result in a bust when the reality — There was no accumulated capital upon which to draw! — asserts itself.

But how do you go about monkeying with interest rates? Ah, that’s where having a monopoly on the money supply comes in really handy! You just create a boatload of new money and shovel it into the bond market.

And here the plot thickens. You see, a lot of this newly created money can buy up government bonds. That is to say, the central bank can lend the new money to the government through their preferred brokers.

Two birds, one stone. Interest rates are lowered (inducing “growth”) and the government has more borrowed money to play with. It’s a central planning jackpot.

Not enough tax money to cover the costs of all those wars and wealth transfers? No problem! Deficits don’t matter when the central bank is willing to keep lending you money…and keep the cost of borrowing (interest rates) down to boot!

Of course, these sorts of shenanigans can’t go on forever. It just seems like they can while your in their midst. But the reckoning must come. Anyone who is not prepared will be wiped out.

Interest rate manipulation and the creation of unbacked new money…it’s all part of a great con. We’re all told it spurs economic growth. But what it really does is destroy the things upon which growing economies rely: accumulated capital in the form of savings, and clear economic signals in the form of prices, both for goods and for the use of money itself.

We suspect that there are people who benefit from this degenerate non-market, central banking system and who know that they benefit from it at the expense of billions of their fellow humans. We’re not sure Ben Bernanke, however, is in the know.

Perhaps Greenspan was. But we think Bernanke really believes his lines. He is as fervent in his belief in artificial control of interest rates and fiat money as any free marketer is about his gold and silver. Ben Bernanke is a “fiat bug”.

Our advice is to stay as far away from Bernanke and the supply of paper he controls as you possibly can. That means physical gold and silver.

But “paper” gold and silver, along with other “paper” commodities may greatly benefit from Bernanke’s tender ministrations. At least for a little while before the whole house of cards comes down.

As the dollar goes down gold, silver and oil will obviously go “up”. But the stocks in the companies that look for and mine these things may benefit even more from a falling dollar.

In fact, the price of mining and oil companies and may be the only place Bernanke may be able to reach his stated goal of fighting deflation.

Bernanke considers your standard of living expendable. He’s willing to wreck the economy by sticking to his easy money claptrap.

Your employer or your customers will hand you Federal Reserve Notes for your labors. They have to by law. But you don’t have to keep those notes.

Protect your purchasing power and standard of living. Trade those notes for real money. Bernanke may only think something is “money” when its supply is under central bank control. But you know better.

After you get your gold and silver, however, be sure to get ready to profit even more from Ben’s efforts to fight price deflation. Get the right mix of gold and silver miners and energy companies.


Gary Gibson

The Daily Reckoning