And Then…Bernanke Blinked…

…Not the squint of Eastwood’s “Go ahead…make my day…”, not the wince that should have come from holding rates where they were, or even raising them to try to get some control of the run-away inflation that is eating everybody’s budget, but the blink of a scared and desperate man who is trapped by politics and political pressures into doing the exact opposite of what is necessary to delay the crash of the national (and now international) currency. Make no mistake, yesterday’s rate cut will not stop the housing crash, it will only temporarily support the equity markets, but it will accelerate the dollar’s run to its intrinsic value…, a big fat ZERO.

From Mike Whitney, over at CounterPunch…

Consider this: In 2000, when Bush took office, gold was $273 per ounce, oil was $22 per barrel and the euro was worth $.87 per dollar. Currently, gold is over $700 per ounce, oil is over $80 per barrel, and the euro is nearly $1.40 per dollar. If Bernanke cuts rates, we’re likely to see oil at $125 per barrel by next spring.

Inflation is soaring. The government statistics are thoroughly bogus. Gold, oil and the euro don’t lie. According to economist Martin Feldstein, “The falling dollar and rising food prices caused market-based consumer prices to rise by 4.6 per cent in the most recent quarter.” (WSJ)

That’s 18.4 per cent a year, and yet Bernanke is still considering cutting interest rates and further fueling inflation.

What about the American worker whose wages have stagnated for the last six years? Inflation is the same as a pay-cut for him. And how about the pensioner on a fixed income? Same thing. Inflation is just a hidden tax progressively eroding his standard of living. .

Bernanke’s rate cut may be boon to the “cheap credit” addicts on Wall Street, but it’s the death-knell for the average worker who is already struggling just to make ends meet.

CNBC cannot have on, economist after economist, Treasury Secretary after Treasury Secretary (notice how quickly they come and go)…, spouting about a strong dollar policy, and how strong the economy is, and then add commentary about how much rate cuts are needed to keep from falling into (or recover from, depending on whose numbers you use) a recession. They are talking out of both sides of their face, and it is not fooling anyone.

Housing will continue to fail, since they were crashing before lending standards were tightened, and retail prices for consumer goods, especially imports, will continue to rise, …only faster.

Bernanke had the inflation information in front of him. But, in the end, he is not an inflation fighter. Central Banks make their money on inflation, even as it kills the currency they are using. In the end game, it is inflate or die, and that is just what the FOMC did. They know it, and most informed economists know it. Now we can look forward to rapidly rising consumer prices, followed by government price fixing and shortages. This is the way of all fiat currency collapses and it will be no different this time.

If you can, get out of debt. Even better, pay off your house. Try to outlast the banks. They won’t be in business much longer. BTW, get your cash out of there (the banks) and get it into gold, silver or oil.

A hat tip to Junker, over at The Mental Militia for the prod to do some blogging. I have been away too long. I’ll try to keep up more over here…

“The ultimate result of shielding men from the effects of folly is to fill the world with fools.”
— Herbert Spencer

“Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”
— Thomas Sowell

When the people find that they can vote themselves money, that will herald the end of the republic.
— Benjamin Franklin


4 thoughts on “And Then…Bernanke Blinked…

  1. All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.
    John Adams

  2. “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford

  3. “Why does Camelot lie in ruins? Intellectual error of monumental proportion has been made, and not exclusively by the politicians. Error also lies squarely with the economists. The “academic scribbler” who must bear substantial responsibility is Lord Keynes…” — James M. Buchanan, 1978

    Oddly is was Keynes who is quoted as saying…

    “It is better to be roughly right than precisely wrong.” — John Maynard Keynes

    But he also said…

    “I work for a Government I despise for ends I think criminal.” — 1917


  4. “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of the citizens.

    “By this method they not only confiscate, but they confiscate arbitrarily, and while the process impoverishes many, it actually enriches some.

    “The process engages all of the hidden forces of economics on the side of destruction, and does it in a manner that not one man in a million can diagnose.”

    ~ John Maynard Keynes in “Economic Consequences of the Peace” (pg. 57)

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