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.”

Source

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.

Regards,

Gary Gibson

Ben Bernanke Considers Your Happiness and Security Expendable was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The Fed has essentially one trick. It can legally conjure new money whenever it wants. With this one trick it manages to force interest rates down. Mainly it lends the new money to the U.S. government. That is to say, it buys government bonds.

The artificial demand the Fed creates by throwing billions of dollars at government bonds has a depressive effect on interest rates. But these lower interest rates are not a result of those free market forces we champion at the Whiskey Bar. Rather, they are the result of the machinations of a government-chartered bank with a monopoly on the issuance of currency.

The Federal Reserve’s goal is to make borrowing more attractive because of the lower interest rates…but the boom that results is one built on debt that must eventually be serviced…and inevitably at higher rates.

The Fed also loves it when lower rates make lending money or putting it in interest bearing savings accounts less attractive to investors. People instead seek returns in other markets…like stocks. This is supposed to be a good thing. Notice Ben Bernanke points to a rising stock market as proof that his orchestrations were masterful.

But all he really did—all central bankers really ever do—is create new money and shovel it into circulation. Creating money to encourage mass indebtedness and speculative investing, however, isn’t exactly a winning strategy. It’s like taking up smoking so the nicotine will help your concentration when you’re picking the ponies. Or something like that.

You’ll notice that the stock market is responding less and less to the byzantine stimulus of lower bond yields. And people are up to their eyeballs in debt, and interest rates are rising despite the Fed’s efforts. This is your classic “pushing on a string” scenario. It’s rather like the point at which more alcohol starts shutting down the imbiber’s autonomic functions instead of producing more drunken bliss.

The stimulus of treasury-buying with new money is now having the opposite of the intended effect. After the initial euphoric response, things are getting worse.

And then there’s the matter of all that new money…

We’re not sure why central bankers and so many economists believe that new money can be created out of thin air—without any corresponding increase in economic activity or actual wealth—and inflationary results somehow be avoided…as if the new money will conveniently behave itself and keep from being used to bid up general price levels!

There wouldn’t be much of a problem if the Fed had only created just a few hundred new dollars…even thousands. Enough, say, to buy the legal counterfeiters cool new cars and some snazzy threads. But we’re talking about the creation of billions upon billions of new dollars here. Those dollars are sloshing their way through the economy and they’re going to show up more and more in the general price levels. (Their very creation also makes some of the other big holders of U.S. debt—like the governments in Asia—worried about being paid back with money that’s worth far less in real terms.)

Those new dollars have to get spent into circulation to do their damage, but that’s never a problem. Whoever gets them first will get to benefit before prices go up (and those prices go up at all because the new money is being spent in the first place!)

Cui bono? Why, those to whom the Fed hands the dough first. Traditionally that’s meant the government whose debt the Fed buys with the money it wills into existence, but lately the Fed has seen fit to hand new money straight to banks, because after all this is a crisis. Apparently you fix crises you engineered in the first place by bailing out your cronies in the big banks.

The government uses that money to pay the staff in its countless departments, contractors, military and others counting on a government check. The banks use the money to pay their senior members enough to keep them in million-dollar Manhattan apartments.

The rest of us get to beg our employers to give us raises that keep up with this mysterious price inflation. But it’s really not so mysterious. It happens as the first-users of new money drive up the prices on the things we all need…like food and energy.

The new money doesn’t simply go into the prices that the Fed would like it to, like stocks. It gets all over the place. The least connected, the very poorest farthest away from the new money feel the effects first. In our modern global system, that means that a family in a “developing country” will find themselves paying around half of their meager daily income for the food that used to take only a quarter of it. Eventually they may find that they can’t afford much food at all.

The typical middle class American is only just barely feeling the pinch now, but there’s a lot more pain to be felt. In 2010 Americans spent around 5% of their incomes on food. Things could be a lot worse. In fact, they likely will be soon enough. Increased food and energy prices are currently only a drag on consumer spending. Eventually, however, the essentials could get costly enough to cause serious privation.

The threat of mass starvation tends to lead to all sorts of unpleasantness. Individuals can do prepare by saving in real money (gold and silver and copper-nickel), but that does nothing to remedy the discontent and likely rioting from the millions of others who will not be so prepared.

We can’t say how much of this future woe is already baked in. We do know that more quantitative easing will just make a bad situation worse. It’s not idle speculation. History shows again and again that unbacked money creation by governments and central banks only leads to misery.

The pundits are debating whether or not QE3 will follow anytime soon or if will even follow at all. Let them hash it out. In the meantime, if you can’t or won’t get out of the U.S. entirely, you might want to consider at least not being in the middle of any large population centers.

Regards,

Gary  Gibson
Managing editor, Whiskey & Gunpowder

The Federal Reserve Is Why You Can’t Afford Food And Gas was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

There are many reasons for intellectual inertia. People often believe things are true not based on evidence, but based on repetition. People’s brains begin to believe something if they have heard it enough times, and look for evidence that confirms their already-held bias. (This can apply to anarchists as well. Check your assumptions.) Second, when ideas are widely held people create incentives for other people to hold those same ideas. And third, because people have an incentive to learn some particular thing it can be more difficult to find someone or somewhere that teaches an opposing view. Despite these challenges, opinions that contradict widely held pro-statist ideologies are beginning to gain momentum.

Most Americans (and probably people in the world generally) really do believe that government spending does help people and can actually bring an increase in employment. Yet, very few hold this view because of time spent in focused reflection, but instead most hold it by its repetition in media. When enough very smart people have said the same thing repeatedly it can be extremely difficult to dislodge that idea. The second part of this-looking for evidence that supports your opinion and ignoring data that refutes it-tends to not be a problem for the man on the street as much as it can be for very well educated people. Probably both Bernanke and Krugman are aware of the crash in the early 1920′s and the great depression that did not follow. Yet, neither one will take the lesson from this episode that high interest rates at the fed as well as cuts in government spending are good for the rapid dissipation of malinvestment. This is because to believe that would necessitate a complete change in the way in which they think about the world. It is much easier for them to just dismiss 1922 as an anomaly and move on. And because almost the entire academic economic establishment will support this position, this is very easy for them to do.

This brings us to the next reason for intellectual inertia: it is easier, and often more profitable, to hold ideas that other people hold. It is rather difficult to get hired saying things that your potential employers don’t like to hear. This is true in any profession, but it is especially strong in academic economics because of the influence of the Federal Reserve. The Federal Reserve gives out millions in grants in an effort to influence which ideas get published in economic journals. And then there’s the private sector as well. Many options trading desks assume that markets are efficient. If you disagreed for whatever reason, why would they hire you when they can easily find someone else who will play ball? It is difficult to find a firm who will hire you if you fundamentally disagree about how the world works in a way that affects your job.

Because of this, most people go with the flow, and so there’s a demand to learn whatever the dominant ideology is. People want to learn about the EMH and Pareto optimality, and Kaldor-Hicks efficiency, even if these concepts are convoluted ways of saying very simple things, or just plain wrong. The state will pay money that’s required to be accepted by shop keepers for a policy analyst who can find a Kaldor-Hicks improvement (even if the concept makes no sense, even within its own idiotic definitions and assumptions that could never exist in a real situation). Because there’s a demand for the main ideology, it is mass-taught, reducing the marginal cost of learning it. A less popular ideology, on the other hand, can be more costly to learn. It can be harder to encounter in the first place, even if you’re seeking out the information, there may be social pressure against learning it, and if it is taught at all it may be taught at a higher monetary cost.

Despite these hurdles, anarchists are making progress disproving statist myths. In the past couple years there has been a boom in interest in learning Austrian Economics, even from academic professionals. Many hedge funds specifically scout for people who understand business cycle theory. Other dominant social themes like the infallibility of the state or the efficacy of democracy are being daily undermined, repeatedly reminding people of the problems inherent in any statist institution. All these things work against the advantage in propaganda the state has built up. The internet reformation has given those trying to push for better ideas an immensely powerful tool for overcoming the challenges anarchists face. Because of this, I suspect we have many reasons to be optimistic about the creation of a stateless society.

Regards,

Sima Qian
The Daily Anarchist

NOTE To view this article  in it’s entirety, click here.

Intellectual Inertia and Keynesianism was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

There are two types of bids in these auctions: competitive and non-competitive. The non-competitive bidders agree to buy the bonds at whatever rate the Fed offers. The competitive bidders will buy the bonds only if they are paying some minimum interest rate. When the bonds are auctioned the non-competitive bids are accepted first at the lowest interest rate offered by the competitive bidders. Any bonds left after the non-competitive bids are sold to the competitive bidders in the order of increasing interest.

Last Tuesday, the lowest bid was 0.0% – no interest. The highest bid accepted was at 0.055%–almost nothing. Nearly 99% of the bids were competitive ones. This makes sense – who in their right mind would buy a bond that pays no interest? (And who DID buy a little over 1%’ worth?!) But almost 30% of the bonds went at the HIGHEST yield. This is quite unusual. How many bidders are going to guess the exact percentage down to the thousandth of a percent? This could signal the market is starting to demand higher interest rates to buy U.S. debt and we will likely have to pay more interest in the very near future, a nice traditional attitude, or at a rough cynical guess, at the very least somebody knew something ahead of time about just how high competitors were willing to go and how much money they were willing to spend. Let’s worry this one around a bit. Forget the interest, which is inconsequential. The first two questions that cross my Medieval mind are “Who was confident enough of prospective buyers’ interest in T-bills to hold off and demand ‘top’ dollar?” and “WHY did they want ten billion in short term bonds–four weeks being very short term–in the first place?” The interest isn’t even penny ante; there is almost certainly more money to be made in lightning trades.

The only answer that sprang to my mind immediately was that someone knew or had strong reason to suspect that it will be safer or more advantageous to hold one sort of government paper rather than the same government’s fiat currency very soon. On the surface, one would suppose the things are interchangeable, which only makes me wonder more what is lurking down in the murky depths. If I know that my competition is willing to buy two-thirds of what is available…and that all the bonds must be sold lest the foundation rock even more under the monetary world (and by the rules of the game)…why do I put in my top bid at 0.055%? Why not try for more, toss in .075%, perhaps, and see who blinks?

What do I really want, the interest, to keep up the sham of an auction, or to hold the T-bills for what they represent/may be worth at a later date?

Let’s let that percolate through the assorted facts and theories in our minds while we look at WHO was buying the bonds.

There are 3 types of bidders in the competitive bid world:

1. Primary Dealers – The banks that are “part” of the Fed (J.P Morgan, Citi, e.g.).
2. Direct Bidders – Groups that bid directly through the Treasury department. Direct bidders are usually other countries such as China and Japan. China, of course, just sold off about that much US paper, leaving Japan holding the biggest and ugliest of the Old Maids out there.
3. Indirect Bidders – These have to bid for the T-bills through a Primary Dealer…but neither the Primary Dealer nor the Fed is required to report who they are. Hmmm. Now, why would anyone want to keep a thing like that secret, other than embezzlers or Congressmen who had kept the cash in their freezers, or possibly someone who wouldn’t want to be known for picking up such a position…Sometimes accounting for how one came by money can be quite embarrassing…

Historically, these are individuals or banks that are not members of the Federal Reserve System. In the last year the Fed has also bid on the T-bills it was issuing through the indirect bidder channels. This is one of the ploys that makes honest folks like us whimper, because it seems like money laundering or Dr. Seuss’ Star-Bellied Sneetches. After the money has been run through the machine several times it can be quite difficult to keep up with what is “real” and what is imaginary, even for fiat currency.

Swapping trading cards is one of the ways they have accumulated their $5.1 trillion balance sheet. Note: Indirect bidders are reported through the primary dealers. Whimper again. If the Primary Dealer doesn’t have to report that he bought, how does he explain reporting who he sold the T-bills to? “Oh, look, the cute wee elves drank the little bowls of milk we put out for them and left us certificates to sell!?”

It is…disturbing…that only 19% of the paper was bought by Direct Bidders, i.e., by foreign governments.

“Primary Dealers are required to buy whatever debt does not sell at auction. Thus it is possible, although unlikely, that the Fed just could not sell the full $37B and the Primary Dealers were forced to eat it. The reason I say this is unlikely is because $37B is a LOT of money even to organizations as big as the Primary Dealers. The Fed is NOT going to put their buddies (the Primary Dealers) in a cash flow bind if there is any way they can help it. But, if the primary dealers did get stuck with that big a chunk, it would mean that our debt is not even AA rated (as Moody’s has been reporting lately.)” comments my friend, Mike. Well…maybe. We were batting around the idea after a recent auction that there weren’t enough direct bids to cover most of the T-bills offered and speculating on the ramifications of that. It should be noted that the rules/definitions of what constitutes an “indirect bidder” have been loosened and fuzzied recently which hardens my suspicions that because our paper is being seen as less and less desirable new ways of disguising who is buying (or “buying”) are being sought. There have been rumors, let’s call them, of funds being transferred to other nations who use them to purchase/”purchase” our bonds. It could be that Citi has laid the groundwork to spring the “no withdrawals for 7 days” scheme to cover forced buys anticipated in an auction in March.

To digress only slightly into the banking situation, Citi is in bad odor this time for warning customers that effective 1 April it will “reserve” the right to deny withdrawals for seven days, almost certainly “banking days.” (See “New Meaning to Special Drawing Rights?”) Wells is in deep kimchee, WAMU and over a hundred other banks are pushing up daisies…banking in general is a pretty dicey business for anyone without a platinum parachute and/or the ability to pull strings…something like 700 banks are in the coronary ward…and FDIC is down another big hunk ($21 Bn) and gasping on the way to reaching into their $500 Bn from the Fed.

Last Tuesday, nearly 70% of the debt issued went through the Primary Dealers and will either be resold to indirect bidders or kept by the Primary Dealers. (In normal times the goal is for the Primary Dealers to be stuck with the debt to leave indirect buyers free to invest their money in the stock market and corporate bonds.) But, then again, in normal times the Treasury is not issuing debt at these levels. Or with this frequency.

The last time this much of the debt issued went through the Primary Dealers was in mid-January of this year. That did not alarm many at the time because the stock market was generally going down and it was easy to suppose Fed paper was picked up by folks selling their stocks and parking their money in T-bills for a month or two until the market returned. This time seems different-–or maybe we’re just being cautious or even paranoid.

Nearly a third of the bonds purchased by the Primary Dealers went at the highest rate (30% of $37B–the amount sold at the highest rate–about the same as 43% of $25.9B, a previous result that I discussed in an article the name of which escapes me. I write a lot of the things, you know!)

It appears that a gaudy chunk of the Primary Dealer purchase went to one person/organization. My friend, Mike, commented “That certainly could be a ‘whale’ like a George Soros or Warren Buffet sensing–or setting up–an imminent drop in the stock market and trying to protect his money – even though the stock market has been going up more or less again for the last month, but it could also be the Fed again buying through the Primary Dealer channel to hide just how bad the quality of our debt is.” It gets harder and harder to hold on to that triple-A rating. Moody’s is of the opinion that AA is pushing it. Spontaneous laughter…maybe Timmy needs to get one of those firms that run banners across the bottom of the screen offering to straighten out bad credit ratings.

Hmmm…Once may be an oddity or somebody’s accountant dropping a decimal, but we’re starting to develop a pattern that I would be inclined to label a trend if we get one more dot that belongs on the same plane. Three dots may show us who’s playin’ with the money. Recall that the Fed announced that it wouldn’t buy any more after 31 March, 2010, so in the next month Uncle Sam needs to come up with a new player in the game of “you buy mine and I’ll buy yours.”

Are you, too, starting to feel that all of this is meshing in ways investors aren’t going to like? The knowledgeable gentleman who brought these facts to my attention commented “at least a 60% chance that Direct Bidders (China, Japan, etc.) no longer want U.S. debt and we are going to start seeing bad inflation in the next few months and the ‘bad’ inflation will turn into ‘way bad’ inflation within a year because the Fed is just monetizing the debt through the Primary Dealer channel.” Optimists forecast hyperinflation no later than 2012, but only the green shoots crowd doesn’t expect it by then. That was my tentative conclusion in January, when we had an auction that looked like this. The banker boys are playing ring-around-the-rosy with electronic digits, or, to put it bluntly again, laundering fiat money.

Knowledge comes from tearing words and figures apart hunting for contradictions, nuances, and straws in the wind. We’re past the occasional straw and looking at what (honest!) is known as a “flake” of hay, a hunk ripped off for an individual animal. That’s useful terminology on more than one level: the well-positioned flakes are ripping us off, as usual, but it is also possible that some of them will be eaten in the process. If all the banks on the watch list fail the estimated bite for FDIC is something like $409 Bn, which, when added to how much it is in the red now, would wipe out c. 86% of the imaginary “special fund,” and another half a trillion dollars.

Analysts work with what we’ve got and keep dumping data in the hopper. Our..inner minds?…extrapolate from the handful of puzzle pieces we have and test hypotheses and conjectures, worrying bits of data that don’t appear to fit anywhere, and leaping blithely over several missing steps when necessary to form working hypotheses. If the picture appearing weren’t so unpleasant I would be enjoying myself because quite a few bits are slotting into my mental grid very neatly. A reader asked recently that I write an article on how I think and analyze, and the one- sentence answer is “Accumulate a lot of information and impose order on it.” In time we learn to deduce what the probable structure is and keep that hypothesis in mind until something disproves it. Not closing our minds in the process! We’re trying to discover the truth, not pushing global warming.

Facts that indicate we’re in for–at best–the Greater Depression with strong possibilities of civil unrest or even dictatorship have been accumulating for several years, now. All that has varied are the time table and speculation on which pillar will collapse first placing further stress upon the remaining supports. Every additional strain makes the aging system that much more rickety, and here in the Whiskey Bar we’ve been expecting the collapse of the commercial real estate bubble–and the collapse of the bond market. One odd recommendation I haven’t found a logical home for in the emerging picture is taking physical possession of stock certificates. Helpless gesture; I didn’t think anyone who dealt in round lots ever wanted to hold those things. Don’t we just leave them “in street name?” Ideas, anyone? A simple answer is a pitying, “You were a trader, so you never planned on holding anything you bought for more than a few months to a year or so. People who are in it for “growth” or “investment” should keep up with such papers in case the computers all go out.”

I expect the bond market to go first, and soon. As Abraham Lincoln asked, “How then will I fill my coffers?” If the Washington gang can’t sell paper to cover creating “money” out of thin air, where will they go for funds? My call is the GRA, a grab for the fifteen trillion held in private retirement accounts of one sort and another. I’m no Miss Cleo, but the sheer relief of “solving” the projected debt now and through perhaps 2020 will almost certainly set off an even bigger bender of government spending. Hurrah, hurrah, they don’t have to decide between shutting down a lot of useless, detrimental government programs and throwing Grandma out when she needs an MRI…can put off whether to make trial lawyers or union/government pensions take the next hit…can put off cutting welfare programs while inflating their way out…They think. Some day soon we’ll discuss Juan and Eva ruling Argentina.

Sorry, Charlie, as the old tuna commercial went. The only way from here is down, down, down.

The above was my first draft, which I sent to Pete (the Middle East expert), Mike (who sent me the basic figures, darling man that he is) and our own Tex Norton, before leaving the matter to bubble through my brains. Today is when things really started to pop. Tex wrote back thanking me for the “brilliant” thought that there may come a time when an instrument denominated in dollars may be worth more than the face value–and my mind bonged “Ka-ching! Like silver ‘dollars’ being worth more than FRN.” I thanked Tex prettily but started writing that I’m not fully responsible for what the gremlins in the gray matter do. Just as I prepared to write that I didn’t know why that such a disparity in relative value might be, my brain smacked me firmly. Of course I can account for how it might be that a short-term T-bill could suddenly be worth more than face value.

Two things were obvious instantly and my brain added, smugly, “And don’t forget Hugo Chavez.” Right. He devalued lately, but there is a tiered system; what your money is worth depends on where you are spending it. Brain also said, “GM, yoyo.” Right; what your stock was worth after the government takeover depended upon whether you were union, management, or Joe Nobody who owned 22 shares. The “obvious” reasons were what we know about legislation with short sections that exempt “certain corporations located in New Jersey” or American Samoa, and SPQ-USA, where Senators rail loftily over bonuses they had already approved in previous legislation. Ayn Rand, of course, and the “frozen” railway bonds which could be melted by those with pull and cash. Piece of cake.

The fix is in, and in time to come–perhaps very shortly–some bonds may be more valuable than other pigs. My advice is that we NOT buy T-bills because that’s bound to be a mug’s game; the rules will be written carefully to benefit only connected players, and not for the man in the street or even the Whiskey Bar.

Regards,
Linda Brady Traynham

March 1, 2010

Gaming Imaginary Money was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

But just days ago, the Petersen/Pew Commission on Budget Reform warned in a new report that “over the past year alone, the public debt of the United States rose sharply from 41 to 53 percent of gross domestic product (GDP). Under reasonable assumptions, the debt is projected to grow steadily, reaching 85 percent of GDP by 2018, 100 percent by 2022, and 200 percent by 2038.”

And long before the debt reaches such staggering levels, the commission tells us: “Fears of inflation and a prospective decline in the value of the dollar would cause investors to demand higher interest rates, and shift out of U.S. Treasury securities. The excessive debt would also affect citizens in their everyday lives by harming the American standard of living through slower economic growth and dampening wages, and shrinking the government’s ability to reduce taxes, invest, or provide a safety net.”

All of this financial tragedy is the direct and highly predictable legacy of our Federal Reserve System and their bankster cronies on Wall Street. Ben Bernanke and Alan Greenspan were the men in charge — and these are the very people who failed us every step of the way. Under Fed leadership, the U.S. financial system has buried our hard working middle class under a mountain of debt for the benefit of Goldman Sachs and a handful of “too big to fail” banks. It seems more than a coincidence that virtually every government official in charge of making these decisions, both here in America and around the globe, are former Goldman Sachs executives (and usually partners).

Yet Time magazine singles out Bernanke as the man to be recognized for his good deeds. We’re sure Ben’s supporters would say “Give him more time.” Well we agree. We suggest 15 to 20 years…in prison. A warm spot in a jail cell would be more appropriate for worldwide king of counterfeiters. Every day that the Federal Reserve prints more money, it is robbing the American taxpayer — and future generations — of our wealth, property and financial stability.

On the other hand, one politician has been fighting to protect the American taxpayer for over 30 years…demanding accountability from the Fed…trying to save the American economy from the Bernankes of the world. For more than 30 years Congressman Paul has been looking out for the little guy. For more than 30 years, Congressman Paul has been trying to get Congress to think about our children’s financial future, not just today’s re-election campaign. For more than 30 years, Dr. Paul has been dogging the heels of our runaway Fed and calling them to account for their despicable practices.

Congressman Paul has been sponsoring bills to audit the Fed ever since he first entered Congress in 1976, and on six occasions Paul has introduced bills that would have ended the Fed entirely. Standing largely alone, yet seeing clearly into the future, Ron Paul has challenged a rotten to the core Fed over a period of decades, while Congressional colleagues and a mainstream media, asleep at the switch, were busily applauding people like Bernanke and Greenspan as masters of the universe and oracles of the modern world. So who was right all this time . . . and who was wrong? The answer, we’ll tell you, is crystal clear: It wasn’t the Ivy League bankers or Wall Street masters of the universe. It was a country baby doctor named Ron Paul, by a country mile. If Time magazine cared at all about the American taxpayer, its true “Person of the Year” in 2009 would certainly have been Texas Congressman Ron Paul.

When Paul ran for president in 2007 and 2008, he was genuinely surprised to find that his youthful audiences were responding powerfully to his message about ending the Federal Reserve. An audience of college students at the University of Michigan went so far as to burn “Federal Reserve Notes” (otherwise known as dollar bills) as Congressman Paul spoke about the Fed and its counterfeiting. These students figured out what the adults in charge were doing to their financial future — burning it.

By 2009 these students were no longer alone. Everyone, it seems, was catching on, and even our palace courtier “mainstream” economists began to notice that the Federal Reserve was responsible for inflating the housing bubble and otherwise dumping our once great country into the throes of imminent bankruptcy. Even Barack Obama seems to be catching on — speaking just days ago about the imminent financial disaster of the costs of Medicare and Medicaid. Even a big spending, big taxing leftist like Obama agrees that unless we act fast America faces insolvency and bankruptcy due to a tsunami of debt. Unfortunately, Obama’s solution to “government-gone-wild” and government-run healthcare programs bankrupting the country…is bigger government and expanding government-run healthcare to everyone.

Unlike a real doctor like Dr. Paul, President Obama’s prescription will kill the sick patient. Obama believes that if a patient suffers from obesity, diabetes and a mouth full of rotting teeth, the prescription is ice cream for breakfast, lunch, dinner and dessert. Not just any ice cream, but triple orders of Ice Cream Sundaes covered in chocolate syrup for EVERYONE! And it’s all free to eat as much as we want, as many times a day as we’d like. How will we afford it? The Fed will print all the money we need. That may be how a corrupt politician bribes the public to get re-elected, but it’s also the exact economic model of the Roman Empire…or the Greek Empire…or Argentina at the turn of the 20th century…or the Weimar Republic before World War II…or Zimbabwe today. All of those countries and empires ended badly. Unfortunately America is on the same path to economic ruin.

More and more “respectable” voices are picking up Ron Paul’s “End the Fed” mantra every day, and you ain’t seen nothing yet. The truth is that our criminal Fed is already a dead man walking, and Ron Paul, more than any other single American, killed it. What an achievement for a lonely Congressman, armed with nothing more than common-sense, courage and honor. Perhaps Don Quixote isn’t so helpless or hapless after all. Perhaps one lonely man tilting at windmills is exactly what is necessary to save our great country (and economy).

Ron Paul introduced two bills in the House during 2009, which will one day finish the job and end the Fed’s misery (and ours) forever. House Resolution 1207 generated more than 317 co-sponsors reflecting widespread bipartisan support for a Fed audit which would go far beyond the narrowly defined scope of Government Accountability Office reviews presently allowed. Specifically, H.R. 1207 would allow auditors to report on Fed dealings with foreign banks and nations, actions on monetary policy matters, and operations of the Federal Open Market Committee. For the first time, the Fed in 2009 faced a very real prospect that the American people will find out what it’s been up to, and while the bill has been temporarily stifled by bankster cronies and Goldman Sachs alumni, there can be no doubt that a line in the sand has finally been drawn.

Dr. Paul’s second bill, the “Free Competition in Currency Act of 2009” is even more far-reaching than H.R. 1207. Dr. Paul’s new bill proposes that the money monopoly of the banksters be ended forever and competing currencies be established to bring financial sanity back to the marketplace. America became the greatest nation in world history because of our economic freedom. Free markets worked. [They still do.–ed.] Here Congressman Paul is proposing free markets in money! It’s not a radical idea at all, and ending the money monopoly is an idea whose time has come. The “Free Competition in Currency Act of 2009” stands as the starting point for a new era of financial freedom and prosperity for America. A big thank you, Ron Paul — you’re far and away our “Person of the Year.”

Yes, the Fed needs to be ended. Until that happens, there are many other important steps that can be taken to restore fiscal sanity and encourage economic recovery for this great country. Let’s start with limiting the power of government; dramatically reducing government spending; cutting, instead of expanding entitlements; drastically cutting taxes, so that the people who earn the money get to keep more of it and will be encouraged to invest it in homes, stocks and opening small businesses (thereby creating jobs); restore the gold standard, so we limit the money that politicians can spend and waste; and perhaps most importantly, holding the politicians and bankers who caused this mess accountable. Let’s start limiting the politicians to two terms: one term in office…and one term in prison. Then we can start to put America back on track, and Americans back to work.

Regards,
Wayne Allyn Root
Rick Williams

January 7, 2010

Wayne Allyn Root is a small businessman, home-school father, and citizen politician. He was the 2008 Libertarian Party Vice Presidential candidate, and is a frequent guest on FOX News, FOX Business, CNBC and media across the country. His newest book is, “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts.” Wayne’s web site is RootForAmerica.com.

Rick Williams is a lawyer in Los Angeles, and is Chairman/CEO of Basic Media, Inc. and BreakTheMatrix.com.

Time Magazine Blunders with Bernanke was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Last week, Ben Bernanke got the nod for another stint as head of the world’s most important central bank. Yes, he completely misunderstood the implications of the hugely negative US trade balance, believing that America did the world a favor by spending its “global saving glut.” And, yes, he missed the approach of the biggest financial disaster in three generations. Then, when it arrived, he mistook it for a routine recession, until finally, panicked by the collapse of Lehman Bros., he insisted that Congress pass a $750 billion spending bill – or “we may not have an economy on Monday.”

But except for things that really matter, he’s been a pretty good Fed chief. Besides, he has the right credentials. He was a professor of economics at Princeton and holds a Ph.D. from MIT – just like the most recent Nobel Prize winner in economics, Paul Krugman.

The United States has just averted the Second Great Depression, say the papers. “What saved us?” asks Krugman in a recent New York Times editorial. “Big government,” is his answer. Specifically, the big government of Ben Bernanke.

But the ghost of Milton Friedman haunts the central bank. Bernanke borrowed a phrase from Friedman, saying he’d even “drop money from helicopters,’ if necessary, to prevent deflation. This led to one of the surest trades of the Bubble Era was the so-called on the ‘Bernanke Put.’ Investors thought they could count on him. Buy stocks. If they went down, Ben Bernanke would make sure you didn’t lose. He’d add liquidity until the market bounced back. But the Bernanke Put trade went bad in ’07. The market fell. Ben Bernanke added liquidity. But so far, stocks have yet to regain 50% of what they lost. Meanwhile, consumer prices are falling. And yet, he does not drop money from helicopters. Why not?

Few people would have more authority on the subject than the group gathered at the Beverly Hilton in Los Angeles earlier this year. Michael Milken, the Junk Bond King, gathered them thither and picked up the tab for Gary Becker, Myron Scholes, and Roger Myerson…each of their names is preceded by ‘Nobel Prize winner.’ With that kind of brainpower on hand, you’d think you could come up with a good explanation. But the best they could do was a simple analogy. Gary Becker (Nobel awarded ’92) took the Friedman line; he argued that by putting out the little forest fires, the recessions of the ’90s and the early ’00s, the feds inadvertently created the conditions for an even greater conflagration. Instead of burning off the underbrush, the tinder built up until a huge blaze was inevitable. And in a speech honoring Friedman, Bernanke accepted Friedman’s criticism of the Fed in the ’30s. Yes, Bernanke admitted, the Fed made mistakes; but we won’t do it again, he said. The burden of today’s rumination is that he was wrong; he will do it again.

“Inflation is always and everywhere a monetary phenomenon,” said Friedman. But deflation doesn’t seem to be a monetary phenomenon at all. Despite huge inputs of new money from the Fed, prices are still going down. The Fed’s balance sheet more than doubled in the last 18 months. It will probably double again – to $4 trillion – before Bernanke’s next term is over.

Friedman won a Nobel Prize for his work. And he drew around him a community of scholars that won so many Nobel Prizes they ran out of room in the University of Chicago trophy cabinet. But it only makes you wonder about the Nobel committee. Friedman’s acolytes won their prizes for elaborating a series of mathematical proofs for things that were either self-evident or self-evidently absurd. Most of them were later shown to be wrong, irrelevant or misleading. Modern Portfolio Theory, Black-Scholes Option Pricing Model, Dynamic Hedging – the farther afield the scholars went, the more they lost touch with home. The more scientific their work became, the more it resembled alchemy or phrenology.

Friedman’s work itself was flawed in the same way. The general principle was correct – that the government that governs the markets least governs best. But when he got into the mechanics of ‘monetarism,’ he got lost. He believed that if the Fed kept its eye on the money supply; the free market would take care of everything else. But the free market didn’t take care of everything, at least not as people hoped. Economist Murray Rothbard explained why in 1971. You cannot expect the free market to function perfectly if you leave in the hands of the government the power to control money. Either markets are free or they aren’t, was Rothbard’s point. If they’re not free, you can’t blame freedom when they fail.

But free market economists are now blamed for everything. The free- market Chicago boys are out. The MIT crowd is in. And investors are buying the Bernanke Put again, confident that the Fed chief will keep pushing money into the system and stocks will continue rising. But Ben Bernanke, for all his bluster, is a victim of the trade. Everyone knows what he is up to. They can’t help but look ahead and see where it leads.

As soon as Bernanke starts his helicopter engines, bond buyers get out their missiles; the Chinese – the biggest single customer for US debt – have warned that they will shoot him down. What can Bernanke do? He is damned if he doesn’t. But even more damned if he does. He can’t guarantee increases in either CPI or stocks. All he guarantees is that Big Government will play a larger role in the economy…and that Milton Friedman’s history of the Great Depression will turn out to be prophecy:

“The Fed was largely responsible for converting what might have been a garden-variety recession… into a major catastrophe…”

Ultimately, Bernanke does what his predecessors at the Fed did in the ’30s…and what the Japanese did in the ’90s. He hesitates. He makes mistakes.

And he wonders why he took the damned job in the first place.

Regards,
Bill Bonner

September 1, 2009

Bernanke to Keep Blocking the Free Market was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

“Business outlays for new equipment and facilities have slowed sharply over the past year. That’s important because when businesses expand their operations they also add to their payrolls. Job growth over the past couple of years has been the primary support under consumer spending, so any sharp slowdown in capital spending would most likely have an even broader impact on consumers than the weakness in housing…

“The odd feature of this weaker spending pattern is that it has occurred during a period when the fundamental drivers of business investment have been generally strong. Based on robust earnings and record profit margins, the prospective returns on new plants and equipment have been high, even as investment costs have been low. The cost of borrowing in the credit markets remains relatively cheap, and banks, on balance, have not tightened their lending standards for their corporate customers. Companies also sport exceptionally high levels of corporate cash and solid balance sheets.

“This disconnect between the ability and desire of companies to spend appears to reflect a sharp turn toward caution in the boardroom. Companies have been rocked by one uncertainty after another since 2000, including recession, corporate scandals, terrorist attacks, war, and a tripling of oil prices…

“As for corporate confidence, one of the best indicators is businesses’ willingness to plunk down money for new equipment, a trend that has gone south in recent months. Orders for capital goods, such as machinery and high-tech hardware (outside of defense items and commercial aircraft), fell 1.2% in February, the fourth decline in the past five months. The three-month moving average of orders, which gives a good reading of the trend, has dropped sharply after heading almost straight up for about two years. The longer companies keep their capital-spending plans on hold, the more vulnerable the economy will be to other downdrafts, such as any new surprises from the housing market.

“The current slowdown in capital spending is actually part of a longer-term hesitancy on the part of businesses to expand their plants and equipment. Throughout this five-year expansion, the growth in outlays has failed to match the pace of the 1990s expansion, even prior to the boom late in the decade.

“For the past four years, the real, or inflation-adjusted, stock of equipment and software in place at nonfinancial corporations has generally not grown any faster than that sector’s real gross domestic product, based on Federal Reserve data. That suggests the 4.4% growth rate in equipment outlays in 2006, the slowest in three years, has been insufficient to keep up with the rate at which old computers and machines are wearing out.

“Companies aren’t wary only about spending. They also seem unwilling to borrow for anything other than financing stock buybacks and taking their businesses private. Recent Fed data show that nonfinancial corporations last year, on net, retired a record $602.1 billion in equity. In the fourth quarter alone, they set aside $701.2 billion, measured at an annual rate, far more than the additional $604.6 billion they borrowed in the credit markets. Companies seem interested in cutting their overall cost of capital, but they don’t seem very hot on taking advantage of cheaper capital to invest in expanding their operations.

“The answer to this paradox goes back to corporate prudence, and the heavy demands investors have placed on companies to perform. Capital spending decisions depend most crucially on prospects for demand, which has slowed in recent quarters, with little to suggest a pickup. Recent news that sales of new single-family homes plunged to the lowest level in more than six years, along with new evidence of falling house prices, only reinforces the perception that demand is softening.”

There is no paradox about falling capital spending, nor is there a disconnect, except in the minds of proponents of the Goldilocks theory. It remains complete silliness to expect businesses to expand in the face of rising defaults, rising bankruptcies, and decreased needs for all kinds of durable goods associated with home purchases. Nonetheless, that is what nearly everyone seemed to believe.

Lower Earnings, Less Capital Spending, Less Hiring

MarketWatch is reporting, “Lower earnings could cut into capital spending, hiring”:

“U.S. corporate profits fell in the fourth quarter of 2006, signaling the end of one of the greatest profit cycles in the postwar era, economists say.

“Economic growth is slowing, hurting corporations’ top line. Meanwhile, costs are rising, squeezing profit margins.

“‘Profits growth has turned decisively down, and the end is not yet in sight,’ wrote Gabriel Stein, an economist for Lombard Street Research.

“‘As the expansion matures and unit labor costs rise, profit margins will be under pressure,’ said Stephen Stanley, chief economist for RBS Greenwich Capital…

“‘The deceleration of profits may be dramatic,’ wrote Mickey Levy, chief economist for Bank of America, in a research note. ‘If so, weaker profit growth may affect business hiring and capital spending decisions, and will likely influence financial markets.’

“‘Weaker profits may undercut any rebound in capital spending,’ Levy said.

“Although corporations are sitting on a mountain of undistributed profits, their spending plans are based on future returns compared with the cost of capital. Money doesn’t burn a hole in a chief financial officer’s pocket as it can with a consumer. Corporations have been returning much of their profits to shareholders through dividends and share buybacks, rather than investing in expanding production.”

Awful Data

The grim reality is that, excluding transportation, durable goods orders fell 0.1% in February:

“‘Awful data,’ concluded Ian Shepherdson, chief U.S. economist for High Frequency Economics, in an e-mail.

“The outlook for capital spending and economic growth…’is at risk,’ wrote Drew Matus, an economist for Lehman Bros.

“The figures ‘inflicted a sharp blow’ on the outlook for U.S. gross domestic product growth, wrote Mike Englund, chief economist for Action Economics, in an e-mail. He now expects growth of 1.6% in the first quarter and 2.8% in the second quarter.

“The rise in orders for durable goods was mostly powered by an 88.4% increase in orders for nondefense aircraft, eclipsing a big drop of 60.4% in January…

“Economists surveyed by MarketWatch had been expecting durable goods orders to rise by 3.8% in February, after falling by a revised 9.3% in January…

“Shipments of durable goods overall fell by 0.8% in February.

“Inventories rose 0.2% in February. The inventory-to-shipments ratio rose to 1.44, the highest since August 2003.

“While not addressing February’s report specifically, Federal Reserve Chairman Ben Bernanke noted a greater softening in the demand for capital goods than would be expected at this stage of the business cycle.

“In testimony on Capitol Hill, he expressed optimism that business investment would ‘grow at a moderate pace this year.’”

Bernanke’s Testimony

Picking up on the Capitol Hill testimony theme, let’s tune into highlights from Bernanke’s economic outlook before the U.S. Congress Joint Economic Committee on March 28, 2007:

• Economic growth in the United States has slowed in recent quarters
• The inventory of unsold homes has risen to levels well above recent historical norms
• Weakness in residential construction is likely to remain a drag on economic growth for a time as homebuilders try to reduce their inventories of unsold homes to more normal levels
• Business spending has also slowed recently. Expenditures on capital equipment declined in the fourth quarter of 2006 and early this year
• The magnitude of the slowdown has been somewhat greater than would be expected given the normal
• Despite the recent weak readings, we expect business investment in equipment and software to grow at a moderate pace this year, supported by high rates of profitability, strong business balance sheets, relatively low interest rates and credit spreads, and continued expansion of output and sales
• Investment in nonresidential structures (such as office buildings, factories, and retail space) should also continue to expand, although not at the unusually rapid pace of 2006
• Thus far, the weakness in housing and in some parts of manufacturing does not appear to have spilled over to any significant extent to other sectors of the economy
• The continuing increases in employment, together with some pickup in real wages, have helped sustain consumer spending, which increased at a brisk pace during the second half of last year and has continued to be well maintained so far this year. Growth in consumer spending should continue to support the economic expansion in coming quarters
• Overall, the economy appears likely to continue to expand at a moderate pace over coming quarters. As the inventory of unsold new homes is worked off, the drag from residential investment should wane. Consumer spending appears solid, and business investment seems likely to post moderate gains
• Core inflation, which is a better measure of the underlying inflation trend than overall inflation, seems likely to moderate gradually over time
• Although core inflation seems likely to moderate gradually over time, the risks to this forecast are to the upside
• The rate of resource utilization is high, as can be seen most clearly in the tightness of the labor market
• Anecdotal reports suggest that businesses are having difficulty recruiting well-qualified workers in a range of occupations.

Those interested can click here for a video of Bernanke’s testimony.

If inflation risks are to the upside, then why did he remove the statement about additional firming being required from the latest FOMC statement? Answer: He is spooked more than he is letting on about the risks of a continued housing implosion.

When it comes to jobs, are we now down to “anecdotal reports…that businesses are having difficulty recruiting well-qualified workers in a range of occupations”? What about anecdotal reports about “The Disposable Workforce”? That last jobs report was anemic, with fewer than 100,000 jobs created, and 39% of those were government jobs.

With so many homeowners missing payments, exactly why should “growth in consumer spending…continue to support the economic expansion in coming quarters”? What about “Hot Lines for Hard Times” and 2.1 million homeowners who are struggling so much that they missed a home payment in the fourth quarter?

It is pretty tough to swallow the idea of strong consumer spending in the face of 2.1 million homeowner delinquencies. And what about those rising inventories in both housing and durable goods? What about the effect of interest rate resets, the bulk of which have not yet hit?

If someone is looking for a major disconnect, here it is: Bernanke is expecting growth in consumer spending in the face of a housing bust, a slowdown in capital spending, rising defaults, and massive interest rate resets that will culminate later this year.

Unlike Greenspan’s typical congressional testimony, one can actually understand every single word Bernanke said. Unfortunately, we have traded Greenspan’s incomprehensible gibberish for Bernanke’s comprehensible doublespeak. That doublespeak allows Bernanke to sit in his ever-tightening box pretending that these economic problems will go away, there will not be a housing spillover, capital spending will rise, and consumers will not throw in the towel. He is wrong on all counts.

Regards,
Mike Shedlock ~ “Mish”

April 3, 2007

Capital Spending: Myth and Reality was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.