http://www.moneyandmarkets.com/Issues.aspx?Ben-Bernanke-Destroyer-of-...

Ben Bernanke: Destroyer of Worlds
by Jack Crooks   07-19-08

I love readers' comments at the end of online articles and blog
entries. I recently came across one at the end of an article regarding
general Federal Reserve policy that simply said:

    "Ben Bernanke is like the death star. Destroyer of worlds."

For those of you not up on movie trivia, the comment is referencing
Star Wars. In the film, the bad guys build a manmade space station
meant to destroy an entire planet in a single attack.

And while Bernanke's official job description isn't destroying
planets, some might argue that he's at least destroying the U.S.
economy.

That opinion may have gained greater support this week after
Bernanke's two days of Congressional testimony.

Accompanied by Treasury Secretary Henry Paulson and SEC Chairman
Christopher Cox, Big Ben paid lip service to the panel of Congressmen
bombarding him with questions. While Bernanke gave the normal
reassurances about the state of the economy and inflation, the subject
of giving the Fed additional regulatory responsibilities made for a
heated discussion.

The best quote came from Senator Jim Bunning. When it was his turn to
address the Fed Chairman, he noted, "The Fed is the systemic risk."

Both that reader comment and the Congressional testimony point to the
same thing ...

People Are Sick and Tired of the Fed's Decision
To Fight Economic Fire with Molotov Cocktails!

Almost any economist will tell you that every boom period is followed
by a bust period. And typically, the larger the boom, the larger the
bust.

But it seems like lately the Federal Reserve is disregarding the
historical boom-bust cycle, doing everything in (and beyond) its power
to keep the good times rolling.

Sounds nice, but there comes a point when the economic system needs to
cleanse itself. Hence the subsequent bust to every boom. Excesses need
to be worked off; idle capital goods need to be redistributed or
repurposed; the fat needs to be trimmed.

By making every effort to sustain the boom when it's already naturally
run its course only delays the inevitable; the impending bust will
feel all the more painful. Think about fighting fire with Molotov
Cocktails.

Many analysts, including myself, are beginning to believe the Fed
needs to stop fighting the fire with bailouts and cheap money.
Instead, they need to tighten up and let the market process work
things out from here.

Right now, the Fed is no doubt in bailout mode. Just look at the
obvious Bear Stearns backstop a couple months ago and now the Fannie/
Freddie fiasco. And who knows how many other firms the Fed has saved —
so far — by opening up the vault doors to nearly everyone.

Have a look at the following set of charts. This first one shows the
total borrowings of depository institutions (banks) from the Federal
Reserve from 1980 until 2006:

Total Borrowings 1980 - 2006

You can see a major spike to roughly eight billion dollars of
borrowing in 1984, likely due to the economy's recovery from recession
in years prior.

This spike in total borrowings was also coupled with a brief surge of
inflation (of similar proportions to what we're experiencing today)
after Fed Chairman Paul Volcker brought the inflation rate down from
13.5% in 1980 to as low as 3.2% in 1983.

Now, this next chart shows the exact same series of data, only this
time I've included up through June of 2008 ...

Total Borrowings 1980 - current

As you can see, the period up through June 2008 completely dwarfs the
amount of borrowings in any period before it. In fact, it makes all
other periods look like a flat line!

The spike to more than $170 billion dollars of borrowings reflects the
newly created auction facilities.

What This Means for the U.S. Dollar ...

Bernanke recently admitted that the U.S. dollar needed to work off
some of the excesses from the rally that began in the mid 1990s.
That's part of why the bear market has extended so deep for the buck.

The dollar has done that — and more.

But the charts I just showed you prove that the dollar is not nearly
out of the woods yet.

Basically, if the Fed doesn't change its attitude and stop feeding
debt creation, asset prices will spiral higher, and more pain will be
crammed into the closet until someone or something knocks the door
open.

Bottom line: The buck is ready to fight back — if and when the Fed
realizes they need to HIKE interest rates just as they did in 1984
when they had another inflation scare after bringing rates down too
soon.

And, oh yeah, I hear it every day — "It's an election year and the Fed
couldn't possibly use interest rate hikes to teach some lessons."

I say they could, and should. I say we stop giving politicians a free
pass, and start making them earn our votes.

Best wishes,

Jack

Those that think the gov't is going to allow a US recession to happen
in a presidental election year are bananas and should get over it.
They WILL be pulling out all the "stops".  We will have to deal with
any consequences later.  Thanks to a good global economy it shouldn't
be all that bad.

Fred

news:0c600617-f5c4-44b4-9d75-7ab3fdf726d1@j22g2000hsf.googlegroups.com...
http://www.moneyandmarkets.com/Issues.aspx?Ben-Bernanke-Destroyer-of-...

Ben Bernanke: Destroyer of Worlds
by Jack Crooks   07-19-08

I love readers' comments at the end of online articles and blog
entries. I recently came across one at the end of an article regarding
general Federal Reserve policy that simply said:

    "Ben Bernanke is like the death star. Destroyer of worlds."

For those of you not up on movie trivia, the comment is referencing
Star Wars. In the film, the bad guys build a manmade space station
meant to destroy an entire planet in a single attack.

And while Bernanke's official job description isn't destroying
planets, some might argue that he's at least destroying the U.S.
economy.

That opinion may have gained greater support this week after
Bernanke's two days of Congressional testimony.

Accompanied by Treasury Secretary Henry Paulson and SEC Chairman
Christopher Cox, Big Ben paid lip service to the panel of Congressmen
bombarding him with questions. While Bernanke gave the normal
reassurances about the state of the economy and inflation, the subject
of giving the Fed additional regulatory responsibilities made for a
heated discussion.

The best quote came from Senator Jim Bunning. When it was his turn to
address the Fed Chairman, he noted, "The Fed is the systemic risk."

Both that reader comment and the Congressional testimony point to the
same thing ...

People Are Sick and Tired of the Fed's Decision
To Fight Economic Fire with Molotov Cocktails!

Almost any economist will tell you that every boom period is followed
by a bust period. And typically, the larger the boom, the larger the
bust.

But it seems like lately the Federal Reserve is disregarding the
historical boom-bust cycle, doing everything in (and beyond) its power
to keep the good times rolling.

Sounds nice, but there comes a point when the economic system needs to
cleanse itself. Hence the subsequent bust to every boom. Excesses need
to be worked off; idle capital goods need to be redistributed or
repurposed; the fat needs to be trimmed.

By making every effort to sustain the boom when it's already naturally
run its course only delays the inevitable; the impending bust will
feel all the more painful. Think about fighting fire with Molotov
Cocktails.

Many analysts, including myself, are beginning to believe the Fed
needs to stop fighting the fire with bailouts and cheap money.
Instead, they need to tighten up and let the market process work
things out from here.

Right now, the Fed is no doubt in bailout mode. Just look at the
obvious Bear Stearns backstop a couple months ago and now the Fannie/
Freddie fiasco. And who knows how many other firms the Fed has saved —
so far — by opening up the vault doors to nearly everyone.

Have a look at the following set of charts. This first one shows the
total borrowings of depository institutions (banks) from the Federal
Reserve from 1980 until 2006:

Total Borrowings 1980 - 2006

You can see a major spike to roughly eight billion dollars of
borrowing in 1984, likely due to the economy's recovery from recession
in years prior.

This spike in total borrowings was also coupled with a brief surge of
inflation (of similar proportions to what we're experiencing today)
after Fed Chairman Paul Volcker brought the inflation rate down from
13.5% in 1980 to as low as 3.2% in 1983.

Now, this next chart shows the exact same series of data, only this
time I've included up through June of 2008 ...

Total Borrowings 1980 - current

As you can see, the period up through June 2008 completely dwarfs the
amount of borrowings in any period before it. In fact, it makes all
other periods look like a flat line!

The spike to more than $170 billion dollars of borrowings reflects the
newly created auction facilities.

What This Means for the U.S. Dollar ...

Bernanke recently admitted that the U.S. dollar needed to work off
some of the excesses from the rally that began in the mid 1990s.
That's part of why the bear market has extended so deep for the buck.

The dollar has done that — and more.

But the charts I just showed you prove that the dollar is not nearly
out of the woods yet.

Basically, if the Fed doesn't change its attitude and stop feeding
debt creation, asset prices will spiral higher, and more pain will be
crammed into the closet until someone or something knocks the door
open.

Bottom line: The buck is ready to fight back — if and when the Fed
realizes they need to HIKE interest rates just as they did in 1984
when they had another inflation scare after bringing rates down too
soon.

And, oh yeah, I hear it every day — "It's an election year and the Fed
couldn't possibly use interest rate hikes to teach some lessons."

I say they could, and should. I say we stop giving politicians a free
pass, and start making them earn our votes.

Best wishes,

Jack

the congress controls the fed....

"Arrest the oil commodity speculators for conspiracy to commit "price
fixing" !

On Jul 19, 4:54 pm, com...@webtv.net wrote:

Bush and his boss chaney have destroyed america to the point that it
is beyond repair.   Only an idiot would say that a congress in for 4
years after a regime of 24 years of republican autocracy has any
responsibility for the mess.
America is screwed, the dollar will be destroyed as short sellers
turn on it instead of a handful of banks.

This is how a nation of backstabbing tyrants will be reduced to a
heap of rubble by the forces of good, america doomed itself
when it attacked an innocent and harmless iraq.

Death to the tyrants.

the congress controls the fed...

"Arrest the oil commodity speculators for conspiracy to commit "price
fixing" !

That is true.  The Fed engineered the boom to help cover Republican
malfeasance and the Fed is _STILL_ manipulating to cover Republican
malfeasance.  The difference _is_ that now the Fed is actually
manipulating to ward off a depression like the one caused by the 1920's
Republicans.  I do not like the way the Fed is doing it, but the
Republicans will not allow the _proper_ fix.

Actually the Fed is acting very differently than what it did in 1930 -
1934. At the same time the Fed is not attempting to continue the "good
times", but to prevent a total collapse. It remains to be seen if the Fed
can prevent collapse and/or how long it can do so without major fiscal
intervention.

Sure, sure, sure....  Every ideologue has the perfect solution.  Me too.

The boom had no "natural course".  The "boom" was bubbles created by
one piece of Republican thievery after the next.  All the Republican
bubble money has now come to rest in commodities.

That was the 1930 approach.  It is, in fact, what any Republican would
highly recommend. It makes the rich people richer.

If we are not dependent on foreign oil and we tax assets instead of income
then the "value" of the dollar is not terribly important to the vast
majority of the people in this country.

This is typical Republican swill.  Republicans lust after depressions
because it puts the servile masses under the direct control of the very
rich.  All the dollars are in the bank accounts of the very rich.  The
middle class is broke.  So, yesssssssssssss, says the Republican, time for
high interest rates and a strong dollar.  Republicans never change.

Daddy spank!@!  The children have been bad.  They have borrowed money
because the Republican leadership encouraged them to do so every step of
the way and the Fed kept the interest rates low to help the pig prancing
war making Republicans. It is time now to "teach some lessons", says the
Republican apologist. The lesson is that fascism works and that those in
power are anointed by God and that is why they are in power and if God had
not meant the rich Republicans to be rich then the rich Republicans would
not be rich.

A very good answer to this problem is found at the link in my signature.
My signature itself is an intro.

But speaking from an economic point of view, now is not the time to
raise anything but TAXES on the rich.  The Tax code can be used to stop
the adverse effects of inflation just as well and even better than
interest rates. Start taxing the hell out of NON-PRODUCTION and
NON-PRODUCTIVE assets and burn the money in an actual furnace or use it to
lower our dependence on foreign oil (invest in non-food biofuels).  An
asset tax does not care if the asset is owned by Bill Gates or the Chinese
government. Continued inflation is a tax on the T-Bills held by the
Chinese and the financial assets that are disproportionately held by the
rich.

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org/extend