Bungling Ben Bernanke

[Fredkc]

Doug Casey on Bungling Ben Bernanke

Interviewed by Louis James, Editor, International Speculator

L: I wonder how much we could get for the Statue of Liberty? She’s got to be feeling uncomfortable in a country that no longer wants anyone’s tired, poor, huddled masses, yearning to breathe free.


Doug: That’s a good question. The copper alone is worth a lot of money at this point.


L: A quick web search shows two frequently cited figures for Miss Liberty’s copper skin: one of about 60,000 pounds, the other 179,000 pounds. At three bucks a pound of copper, that’s either $180,000 or something over half a million bucks – a drop in the ocean of America’s national debt.


Doug: I would have thought it was more, but of course the dollar isn’t worth a damn anymore. The real value would be as a work of art, of course. Although it must be said that considerations like that didn’t stop peasants in the Middle Ages from melting down Roman bronzes and disassembling classical buildings because they needed the raw materials. I wonder what it would fetch at a Sotheby’s auction? I’d guess the Chinese might be willing to pay half a billion or even a billion dollars to take the lady home. It’d be a good deal, since the ideals behind the statue are as dead as the Constitution itself.


L: Yes… we’re not using the Constitution either, maybe we should sell that to them as well. But even a billion dollars would still be a drop in America’s ocean of debt.


Doug: A billion is only a thousandth of a trillion, and they’re now thinking in trillions. Obama may soon have to ask his science czar what comes after a trillion.

I’ve thought about what I’d do if I were president of the United States, or chairman of the Fed, if my choices were limited to what’s politically possible. The right thing now, which is to bring on a deflationary collapse that would liquidate much of the malinvestment of recent decades, is not politically possible. With more than 50% of the people in the United States being net recipients of government largesse, no one can get elected, nor stay elected, who applies the breaks to the gravy train. The system is totally corrupt at this point.

We’re going to have a social revolution anyway, and it’s probably better to have it sooner rather than later. This whole house of cards should have been collapsed back in the ’60s, as opposed to having been built 40 stories higher since then. That just means it’ll be an even bigger mess when it does collapse. So, from at least a personal point of view, there’s nothing to be gained by doing the right thing. Although history would vindicate you, you’d be ostracized now.

L: That just raises an already impossibly high bar. The U.S. won’t be able to pay, when the bill comes due.


Doug: Yes. One of the most distressing things about this whole debacle is the total lack of intellectual honesty among any of the participants and decision-makers responsible for what’s going on with Bernanke being perhaps the worst of all.
On July 1, 2005, Bernanke stated with great confidence that the U.S. was not experiencing a housing bubble, saying: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”


L: Wow could he possibly have been more wrong about anything more important?


Doug: In November of the same year, he talked about derivatives, saying, “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” He also said, “The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”


And a couple months after that, back on housing again, he said, “Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”


L: So much for the wisdom of the expert…


[The rest..]


Fred

[Fredkc]

Feeling so up-beat today, I couldn't resist...

L: This has to be the worst case of “the emperor’s new clothes” on record.


Doug: Quite possibly. After all, who can gainsay the word of the second most powerful man on the planet? And a Ph.D. expert on the Great Depression to boot. Which makes perverse sense, as only an expert can screw things up as royally as he has.


I’m afraid the U.S. dollar is going to be totally destroyed. The consequences of that are going to make everything that’s going on now pale by comparison.



I mean, as bad as the consequences of propping up all these dinosaurs like General Motors and AIG and General Electric and Goldman Sachs, among many others, might be next through direct theft from the U.S. taxpayer are, that’s nothing compared to what will happen when things get really bad, which they haven’t yet.


It’s really going to be bad when they destroy the dollar that’s when it’s really going to hit the fan. Runaway inflation is bad enough in a place like Zimbabwe, where most of the people are still living on a subsistence level. And it was bad enough in Germany in the 1920s, when most Germans were still living on farms or making things with their own hands.


But in an advanced industrial society, as heavily urbanized as the U.S. is, runaway inflation is going to be unbelievably disastrous. As dim as the average American is, he’s bound to get perturbed when his quality of life nose-dives, and who knows what the social consequences of that will be.