Ben Bernanke is rapidly digging himself down the chart of worst central bankers of all time. Captain Carnage, former Helicopter Pilot has vowed to raise the inflation tax again and again
Now getting to the outright bottom is very unlikely, because it’s filled with catastrophic blunders of hyper-inflation and depression. However, it’s not beyond possibility that by this time next year he will be rated the among worst central bankers in a developed nation in the post-WWII era. After yesterday’s hair raising double digits per year Producer Price Index, one would think that even Captain Carnage would realize that he’s not just pushing on a string, but wrapping a wire around our necks.
Now failure is a team effort, and the cult of blaming or praising central bankers for everything is well overblown. Instead, central bankers are either accommodative, neutral, or hostile to what the economy and fiscal authority are doing. In the end, central bankers have to decide whether the economy is going in the right, neutral or wrong direction. Most of the time, they should be neutral, and let the political and economic processes play out. Greenspan and Bernanke decided to be sluttishly accommodative to a poor fiscal policy of invade Iraq and do a no strings attached bailout of the stock market’s largest investors, and an economy that decided that it was time to build bloat into every part of the chain: food, houses and gasoline.
The first thing to remember is that market forces are always present, even in the most regulated and planned and top down of economies. Stop believing in the invisible hand, and it will slap you silly. And it is. The American public thought that it could grumble about Bush and take the cheap money. This, was a poor move. If you don’t like the management team, don’t go long the stock. And yet Americans went very long George W. Bush.
What is happening, as the wholesale price report makes very clear, is that finished goods are not going up, but that market forces are adapting: the pricing power is in the hands of resource producers, who are raising prices: 20%, ex-food, ex-energy. This means that inflation hasn’t been tamed, merely moved. Cheap production is being bought at the price of resource profligate development. The dollar you are saving on your tv, is coming out of your wallet at the gas pump, and not coming in in your paycheck. Yes you. Not some other guy. You.
Don’t like this backlash spin of the paper for oil economy, where your house goes down, but your bills go up? Fire the Fed.
Now there are limited things that a fed chief can do about this, but one thing he should not be doing is pouring dollars on a dollar glut. There are a series of reasons for this. One of the most important effect is in global stability rising food prices world wide. This means that power in other countries is moving from the general public, to the resource producers in those nations, and to those small channels of people who have access to western off-shoring dollars. This leads to rising inflationary pressures around the world, and those people… come here. If you want to know the root of the wave of immigration, documented and undocumented, it is right there in front of you: we are inflation taxing out of house and home millions of people around the world. They can’t eat where they live, so they go to where they can.
Want to solve this crisis? Fire the Fed.
In addition to creating global instability, it is also pulverizing the dollar. We stand within a breath of 2 dollars per pound sterling. The dollar slides to new lows against the Euro. Is the Euro over bought? Sure, but one possibility is that Ben Bernanke will just sell more dollars. And he has the keys to the printing press, and he’s not afraid to use them.
Don’t like Bernanke’s keys in your dollar? Fire the Fed.
What’s even worse of course is this process is not bailing out the housing market, prices continue to plunge
Fire the Fed.
People on Capitol Hill and in the White House like Ben Bernanke, he's willing to trundle up there and tell them that his ink is wet and his gates are wide open. What's not to like? Don't raise taxes, just let Bernanke inflation tax so that the borrow and squander party can go on and on like there is no tomorrow.
However, there is a reality about the inflation tax, and that is that at the beginning people like it a lot, because they get some of that inflation pricing power. At the end, they hate it, because they realize that for every dollar in of inflation tax they get, the pile of dollars they have gets smaller by much more.
Don't like the fact that your fixed income is getting eaten by the White House and Congress? Fire the Fed.
Recessions are painful, no question about it. And in this make the poor pay era, they are more painful still. Americans got shafted hard the last recession, and have not made head way. But guess what, Americans voted, not once, but again and again, to get shafted. More over, they are about to vote to get shafted yet again, having decided that all that is really needed is a few small adjustments. Americans seem to think that "unity" means everyone pulling together, when in fact it means elites closing ranks as they stick ordinary people with the bill.
Don't like this? Fire a whole mess of politicians. But on the way through, fire the fed.
Are there solutions. At this point, not really. What's going to happen here is that the powers that be are going to inflation tax their way out of this downturn, that's what they keep saying they will do, and since they get to vote raises for their own salaries, there's no reason to believe they won't. After the downturn is over, it will be a very slow recovery. Then, at some point, you, the public, will be sick and tired of being sticked and fired, and will do almost anything to get rid of the corrosion of your money. You'll demand pain, and you will get it.
The question you have to ask yourself is, what are you going to get for this? I mean, several times in the last generation there have been bail outs and pain, and each time you've said that you are too busy watching American Idol to run things, so let the wealthy ruin them. The next no strings attached bail out will be your last, because after that, you'll be working for people in Dubai and Beijing.
And when monarchies and oligarchies give orders, they expect to have them carried out.