by Bill Sardi: Senators
Intervene To Halt Wellness Ambassadors Who Recommend Dietary Supplements
Instead of Drugs at Rite-Aid Stores
It would be
nice to talk about the Federal Reserve bank and just stick with
topical questions about money supply and interest rate strategy,
without launching a personal attack against its chairman, Ben Bernanke,
but this is not just a man who heads up a reserve board that makes
critical decisions about the American economy, he is the Fed’s sole
decision maker and creator of unprecedented financial maneuvers,
acting as king of the world’s banking system by virtue of the dominance
of the US dollar as the world’s reserve currency.
is concern expressed over a one-world currency, the US dollar is
very close to fulfilling that idea. That Mr. Bernanke is doing things
far beyond what the US Constitution could imagine cannot be denounced
outright because we live in a world of interlocking international
commerce where a banking crisis in Greece is also a potential crisis
in America. But at the same time, reckless central bankers across
the globe are taking their institutions beyond prescribed limits
(Basel agreements) and then essentially extort the world with demands
for bailout money or they will default on their debts, causing chaos
in the world’s financial grid.
It is in this
environment that chairman Ben Bernanke operates and he is under
fire. Negative public opinion of the Federal Reserve cannot be totally
ignored now that books and bumper stickers say "End The Fed!"
This has prompted Mr. Bernanke to pledge to be more transparent,
to come out of his ivory tower and be responsive to questions posed
at press conferences for the first time. But these have turned out
to be contrived events where the nation’s news press serves up pre-arranged
softball questions, fearing a lack of support for Mr. Bernanke could
undermine America’s dominant position in the world.
So in a propaganda
piece that pretends to examine Mr. Bernanke inside and out, from
his management style to his education and policy positions, financial
writer Roger Lowenstein publishes a featured an article in The
Atlantic about Mr. Bernanke with the Fed Chairman’s photo on
pointed rebuttal by Charles Hugh Smith, Roger Lowenstein’s 15-page
fluff piece in The
Atlantic about Ben Bernanke, his article has not been adequately
refuted in the public court. (More about Smith’s contrarian piece
of The Atlantic shows Mr. Bernanke with his patented
Mona Lisa-type smirk on his face displayed with the words "THE
HERO" underneath. The sub-headline asks: "He Saved The
World Economy. So Why Does Everybody Hate Him?" Contrarily,
the actual title of the article inside is "THE VILLAIN"
and goes on to let Bernanke off the hook for taking the stalled
American economy to a box canyon it may never find itself out of.
Yes, Mr. Bernanke saved the day but prolonged the agony.
Here is a man
who created more electronic money to cover short-term vulnerabilities
for panicked bankers all over the globe than any central banker
could imagine. Bernanke then says, three years after the 2008 financial
crisis, that bailout funds were only a few hundred billion, not
the trillions some news reports claimed. But who is about to believe
the Federal Reserve which is an unaudited institution. Roger Lowenstein
– that is who.
Ben: and so likable
is posed by Lowenstein as the perfect man to meet the challenge
of the perfect storm. He is cool and calm under pressure. Or is
he secretive and has hidden agendas? Let’s just say that Bernanke
is disarming. He chooses to pick no public fights.
extols Mr. Bernanke’s humility and "willingness to hear all
views." Lowenstein also portrays Bernanke "as just another
guy at the table."
quotes Larry Summers, former Presidential economic advisor as saying:
"Among Washington insiders, ‘I don’t think anybody dislikes
cares if this guy is nice and has no enemies? That’s just the point.
Maybe Mr. Bernanke needs to make waves. Insiders do love him, but
for their own selfish reasons. He fixed the stock market but not
the plight of the average American homeowner who is out on the street
or living in a home that is not worth its mortgage price. More aggravating,
Mr. Bernanke pretends to be surprised that unemployment remains
doesn’t rate with this central banker
At least one
central banker isn’t at all impressed with Mr. Bernanke, and he
is none other than Hervé Hannoun, Deputy General Manager
for the Bank for International Settlements (the central bankers
bank) in Basel, Switzerland. Oh, Mr. Hannoun doesn’t take Mr. Bernanke
to task by name, but he is certainly pointing
a recent message at Ben, not others.
central banks have lost their mandate by expanding their balance
sheets (taking all those bad home mortgages off the accounting books
of lenders and placing them on the public's liability ledger). He
says four years after the start of the credit crisis beginning mid-2007
there is still no exit strategy from the unconventional monetary
policy actions that are extolled in Lowenstein’s article about Mr.
Bernanke. Hannoun says: "This is a dangerous precedent if it
takes hold in the minds of policymakers and of the public."
on to say: "And while markets and governments are all too eager
to see central banks come to the rescue, they are bound not to be
pleased to see them withdraw. All this increases the risk of exiting
too late and too slowly, as has been the case all too often in the
says: "Fiscal policymakers (how could he not be talking about
Bernanke?) should also… make clear that inflation cannot be the
solution to the problem of government debt overhang… and that monetary
policy should be refocused on maintaining lasting – and the key
word here is "lasting" – price stability." The Federal
Reserve has a miserable track record on that measure of performance.
with yesterday’s answers
a student of the Great Depression of the 1930s. And in reading Lowenstein’s
article, you get the distinct idea that Bernanke is fixing today’s
unprecedented worldwide financial crisis with solutions to the 1933
collapse in the stock market.
"By 2008 Bernanke was confronting the very type of banking
meltdown he had spent his academic life studying. No one was better
suited to the job; indeed, the Fed had adopted the remedies Bernanke
had outlined in his 2002 address nearly point for point."
quotes Stanley Fisher, Bernanke’s thesis advisor at MIT and current
governor of the Bank of Israel to say that Mr. Bernanke found that
the failure of the 1930s was not a matter of not printing enough
money. "What Bernanke discovered was that it wasn’t the quantity
of money, it was that the banks stopped lending."
economy: Bernanke sells icicles
But Mr. Lowenstein
leaves Fisher’s statement without mention that this is the very
same situation that the Federal Reserve has created today. To fix
the bankrupt balance sheets at America’s 7400 FDIC-insured banks
and provide needed liquidity, Mr. Bernanke loaned them money, but
only allowed the banks to put the money on their books, not use
it, so as to prevent run-away inflation as it becomes many-times
more money as it travels through the fractional banking loan system.
Then, inexplicably, Mr. Bernanke offered the banks interest to park
"their loaned money" at the Fed (have you ever heard of
a lender paying interest to a borrower?), and then having the audacity
to later say the banks have paid back most of what they had borrowed!#&*!
So the money
is frozen, and the economy is too! Release the money to create growth
in the economy and create hyperinflation or hold it and stifle the
economy. To use baseball as an example, it’s like leaving a runner
stranded on second base and suspending the game at that point. The
banks can’t lend and the economy can’t grow.
been steadfast in saying the economists of the Great Depression
era didn’t pour enough money into the system for it to grow itself
out of its decline. Only World War II and its money creation finally
grew America out of its economic funk, a fact that stuck in the
heads of politicians and central bankers alike. Some anonymous figure
has said that if a country is not fighting a war about 25% of its
population will be unemployed, which is a side story that deserves
attention at some future time.
you care about unemployment when your agency caused it?
says over the past four and a half years Mr. Bernanke, 58, has presided
over the most sustained period of crisis of any civilian official
in recent history. But Lowenstein adds this to that statement….
"with the fate of millions of unemployed and underemployed
Americans hanging in the balance."
Mr. Bernanke has said he can’t understand why employment figures
remain so dismal. But that seems so disingenuous. The Fed has done
nothing to bailout the average American worker or to spare mortgage
holders from foreclosure. In fact, the Fed has apparently known
all along that American banks were hiding 4 million non-performing
home loans on their accounting books that they didn’t foreclose
on, meaning all of their asset valuations are meaningless.
A great deal
of the unemployment has been generated in the real estate business
with literally millions of building contractors, plumbers, electricians,
building suppliers, furniture and home furnishing manufacturers,
real estate agents, title insurance and mortgage agents waiting
for the real estate market to return – an impossibility.
quotes Allan Meltzer, economist and historian of the Fed, to say:
"we are past the point where further rate cuts will stimulate
Just how would
these people train to enter another job market that doesn’t exist,
Mr. Bernanke? Don’t anticipate the real estate market gaining any
semblance of its former self in the next decade. Lowenstein does
quote a former Fed governor who says "We have been trying to
fake a housing recovery for four and a half years."
to this shadow inventory of foreclosed home loans, according to
the numbers provided by Lowenstein, the Fed has taken $2.9 trillion
of these bad loans off the bank ledgers and placed them onto the
Federal Reserve’s assets.
"Bernanke hopes such purchases will lower mortgage rates, revive
housing, and create jobs in construction." What drivel.
now says 4 million additional bad home loans are due to be dumped
onto the Fed’s doorstep, 1 million per year over the next 4 years
and that they are planned to be auctioned off at a discount via
a new entity called a land bank, possibly at 20-30% of their original
value. These properties are destined to become rental properties,
according to Mr. Bernanke in a report published at CBS’ MarketWatch.com.
last resort or master counterfeiter?
When the Federal
Reserve does something under the name of rescuing the economy, specifically
by creating money out of thin air or taking bad loans off bankers
books, by virtue of its position as the bank of last resort, it
escapes being branded as a counterfeiter or "cooker of the
accounting books." Anybody else would be in jail for doing
what the Federal Reserve has done.
What the Fed
ends up doing here is becoming a conduit for irresponsible bankers
to keep their profitable loans and dump their losses onto the public
– what is called privatized profits and socialized losses. The more
the Fed underwrites the reckless practices of lenders, the more
lenders are going to press the Fed into a corner or threaten to
bring down the whole financial system just as it did in 2008. This
could be called extortion. The 7400 FDIC-insured banks hold about
$8.5 trillion of interest-bearing accounts that could be lost should
(heaven forbid) the entire banking system collapse and this saved
money would vanish into money heaven.
In the short
term, Mr. Bernanke has saved the bankers at the expense of the people.
But can we expect anything different from a central banker? It would
be imprudent to frighten savers and create a run on the banks, but
that happened any way when it became known that Washington Mutual
lacked liquidity. Maybe more transparency in the banking system
would create stronger banks that would have to demonstrate they
actually do retain adequate reserves and aren’t imprudent in their
Imagine a bank
advertising they have 12% reserves backing behind their loan portfolio,
a third more than the 8% reserves suggested by the Basel Accords?
You would end up with banks competing to be safer, not riskier.
But don’t think any central banker wants that to occur any time
quotes Mr. Bernanke as saying in a December 2010 interview, that
he was "100 percent certain of his ability to control it (inflation)."
sings praise to the Fed for a Consumer Price Index (CPI) that has
averaged 2.4%, which Lowenstein says is lower than that under any
other Fed chief since the Vietnam War. But does anyone buying groceries
at the supermarket or gasoline at the filling station believe that
inflation is just 2.4%?
against quotes Bernanke saying in February, before Congress, that
"our nation’s tax and spending policies should increase incentives
to work and save."
an economist writing at ShadowStats.com
shows that the government altered its way of tabulating the CPI
back in 1980 and 1990 and if those measures are used, the real rate
of inflation is more like 7-10%. So the Fed is lying about inflation
and a lot of other things. But the Fed Chairman must remain smug
and put on appearances of normalcy.
has his blinders on. "He sees no evidence of inflation, but
he does see economic distress," says Lowenstein. Either Bernanke
needs reality therapy or the remainder of the population is just
imagining the high price of oil and food.
high rate of inflation is punishing savers. But what does the Federal
Reserve do about that? It elects to allow large banks to resume
paying stockholders dividends, at the expense of their depositors
did you say?
Lowenstein the Fed flooded banks with $1.5 trillion of excess reserves
(electronic money made up out of thin air, not debt-based money
that is normally borrowed from foreign-sources in exchange for Treasury
bills that pay back principal plus interest). That’s like having
a banker remove your debts and laying them off on his other depositors.
It was later,
beginning in November of 2010, that the Fed purchased $600 billion
of its long-term Treasury bonds in a second round of that has been
called "quantitative easing." This is kind of renegotiating
your own interest rate on your credit card debt to buy you some
more time by repurchasing T-bills does nothing to fix the fundamental
flaws in the world money system. The ship of state is sinking via
overspending and Bernanke just delays the inevitable. For that he
is a hero, at least in Lowenstein’s mind. And The Atlantic makes
a political friend out of Bernanke and the current administration
that re-appointed him.
had direct access to interview Mr. Bernanke, numerous times. Mr.
Bernanke said to Lowenstein on one occasion: "I would argue
that everything we have done has been in the interest of the American
public and, broadly, of the global community. A lot of people get
that." But certainly not the masses mired in a sour economy.
The Fed had better get some bumper stickers printed that counter
the End The Fed campaign that has become so popular. Maybe the Federal
Reserve ought to issue bumper stickers that say "Ben Saves.
– Federal Reserve Act 1913."
keeps citing Mr. Bernanke’s perception of what the Fed’s primary
mission is – which is to "furnish elastic currency" working
under the authority of the Federal Reserve Act of 1913. But what
happens when the currency becomes stretched to the point of becoming
a covert tax increase? The government overspends and fears
the unpopular prospect of raising taxes, so the Federal Reserve
cooperates and erodes the value of money via inflation so the government
pays back its debts in inflated dollars. The Federal Reserve Act
of 1913 established a mandate that the Federal Reserve stabilize
the value of the dollar rather than stretch it so far that it only
has a value of 3-cents in 1913 dollars today.
When a prophet
says Mr. Bernanke "was dubious that anyone could identify,
in real time, when markets were off course." But isn’t that
the very job of the Fed, to prognosticate? When the Fed fails miserably,
as it has, then somebody should be asking for Mr. Bernanke’s resignation.
When no one
goes to jail, when there are no forced resignations or dismissals
from office, one gets to thinking this whole crisis was pre-planned.
In fact some thinkers have privately shared with me their thought
that former Fed chairman Greenspan, who identified himself as a
libertarian at one point, might have thought the best way to reform
the system would be to crash it.
concedes Mr. Bernanke "did not anticipate the looming crash
in home prices." But that downfall seems forgivable to Lowenstein.
Alan Greenspan, Mr. Bernanke’s predecessor also says he could not
foresee the consequences of a cheap money policy allowing more affordable
housing to be sold but which also created a stage where a lot of
financially marginal buyers were permitted to become mortgage holders.
And the Fed had no idea that lenders were offering teaser interest
rates and writing up "liar’s loans" where the creditworthiness
of borrowers was relaxed to the point of meaninglessness?
What, Mr. Bernanke
couldn’t see that his central bank was fueling false demand for
home buying with cheap interest rates? If leaders at the Fed can’t
see that, what are they there for? Without prognostication, without
navigation skills, one might as well "End The Fed" and
let a laissez faire policy proceed.
then follows this by saying that Bernanke in a 2005 speech "cogently
explained how capital from china and other countries was flowing
into the US mortgage market and spurring higher prices in residential
real estate." Lowenstein says Bernanke "did not express
concern." The following year the housing bubble reached its
peak, says Lowenstein.
So Mr. Bernanke
did know. Newly wealthy Chinese were stealthily bringing money to
the US and buying real estate, peaking demand that would surely
burst at some point in the future when China would predictably reign
in the exit of its money to the US. We are talking trillions of
business cycles no more, and other fantasies
says the Fed "had tamed the extremes of the economic cycle."
He is referring to the boom-bust business cycles that have plagued
the modern world. But the causes of these cycles are known. The
US borrows money into existence in a debt-based money system. The
money is borrowed from trading partners like Japan and China who
sell us their goods and end up with a cache of US dollars. We offer
these countries IOUs in the form of Treasury Bills plus interest.
The borrowed money then becomes US dollars, but the interest is
never created into existence. Every so many years the US economy
nears default because it can’t pay interest on this debt and the
Federal Reserve becomes the conduit to foist these losses off on
the masses. The Federal Reserve knows this. No warnings of these
crashes in the economy are issued to the public, just the insiders
who govern the Federal Reserve system.
when you fail, blame it on your schooling
lets Mr. Bernanke off the hook time and again. Lowenstein does concede
Bernanke didn’t scrutinize the banks closely enough… "He overlooked
the fact that dicey mortgage-backed securities made up a sizable
portion of the assets of the big banks." But Lowenstein explained
this failing away by saying "Bernanke’s training failed him."
Ah, we understand now, Mr. Bernanke wasn’t accountable, maybe his
he reluctantly gave away money
hands Mr. Bernanke a parachute once again. He writes: "Bernanke
defended the bank bailouts as necessary, but he expressed supreme
distaste for them." Ah, forced by the circumstances. We certainly
understand, don’t we?
Mr. Bernanke schedules one of his now infamous press conferences
and he should he make any pronouncement that is not the status quo,
that the Fed has chosen to raise interest rates and rescue savers
or print more money to fan the flames of inflation, the stock market
teeters and gold prices soar. So at this point in time, Mr. Bernanke
can say nothing meaningful. Mr. Bernanke has backed himself into
a corner. How does he plan to unwind this mess is the big question.
says Mr. Bernanke has been thinking about how to exit from quantitative
easing "almost from the day he began it." Lowenstein says
Mr. Bernanke will: "in plain English… reward the banks for
keeping some of their money inert, which will give some time to
unwind the balance sheet gradually. No one knows whether this gamble
big rationalization for the Fed’s dereliction is that the Fed is
authorized to make loans under "unusual and exigent circumstances
as long as loans are secured to the satisfaction of the Federal
Reserve banks, meaning as long as the Fed does not expect to suffer
any losses." Lowenstein concedes that, "in the depths
of the crisis some of the Fed’s emergency loans violated this dictum."
Good God Mr.
Lowenstein, the Fed doesn’t sustain losses, it palms them off on
the public. Just how is the Fed going to deal with the write-down
in the value of its real estate assets? Wouldn’t that be the biggest
loss in the history of the Fed? The Fed doesn’t pay, the people
who lost their homes already did.
ends his Fed-favorable essay by saying the Fed’s "dual mandate"
is to promote "maximum employment" and "stable prices."
Lowenstein, "bankruptcies and foreclosures play a restorative
role – returning assets to the market newly unleveraged and reasonably
priced." So why didn’t Bernanke let the worst players in the
banking field implode so as to quickly right the system?
glowingly refers to Bernanke as "innovative" and "imaginative,"
but also "close to having exhausted his options." Regarding
those who call for gold-backed money Lowenstein stops short of calling
archaic and refers to them as "originalists," not the
modernizer Mr. Bernanke is.
lone rebuttal of Lowenstein’s portrayal of Bernanke
That one lone
rebuttal of Lowenstein’s gravure of Mr. Bernanke, written by a near-obscure
blogger, serves to say the news media is part and parcel of the
problem – covering for the sins of government and semi-government
agencies. The Fourth Estate as they are called is remiss in fulfilling
its mandate to make government accountable to the people.
That lone blogger,
Hugh Smith, says "I have long thought that America Is
Just Going Through the Motions – of caring about the deficit,
of financial ‘reform,’ and everything else. Let's be honest, shall
we? There never was any fire for real reform of the financial sector.
It was all rote, a foul, stupid play-act, a passionless pantomime
of ‘caring’ and fake-‘progressiveness’ displayed for propaganda
purposes. I now think we're just going through the motions because
we have no other choice than to ‘extend and pretend’ the Status
on to say: "We all know what Ben ‘saved,’ and it wasn't the
economy – it was the fraud-based crony-capitalist financial sector…
Ben is no genius nor is he a hero. He is simply doing what he has
to because he has no other choice."
Imagine a moment
in time when the Federal Reserve chairman, in an effort to protect
the public from predatory loans, stands up and warns wanna-be home
owners of the pitfalls involved in signing these types of mortgages.
That would occur only in some type of utopian book, not any part
of today’s reality. Mr. Bernanke’s role is to cover for the sins
of many. By that measure, he rates an A+. His term expires in January
him mail] is a frequent writer on health and political
topics. His health writings can be found at www.naturalhealthlibrarian.com.
latest book is Downsizing
© 2012 Bill Sardi Word of Knowledge Agency, San Dimas, California.
This article has been written exclusively for www.LewRockwell.com
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