Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold, Silver and Copper - The 3 Metallic Amigos and Their Messages - 5th Dec 20
TESCO Christmas Decorations Festive Shop 2020 - How to Beat the Coronavirus Economic Depression - 5th Dec 20
Premium Bonds Good, Bad or Ugly Investment? Here's What Return (Prize Wins) to Expect - 5th Dec 20
How to accomplish a technical analysis with the Forex - 5th Dec 20
What is life insurance and what are the benefits of having it? - 5th Dec 20
Pre-COVID US Economy Wasn’t All That Great Either - 4th Dec 20
Bitcoin Breath Taking Surge - Crypto Trading Event - 4th Dec 20
Platinum Begins A New Rally – Gold & Silver Will Follow - 4th Dec 20
Don't Let the Silver (and Gold) Bull Shake You Off! - 4th Dec 20
Stronger Risk Appetite Sends Gold below $1,800 - 4th Dec 20
A new “miracle compound” is set to take over the biotech market - 4th Dec 20
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Fed, A Weapon of Monetary Destruction

Economics / Central Banks Dec 21, 2009 - 01:58 AM GMT

By: LewRockwell

Economics

Best Financial Markets Analysis ArticleIn an extended propagandistic interview in Time magazine, Ben Bernanke is finally asked the crucial question:

Q: So, I'm a fringe economics type, I'm not personally, but I'm saying a reader picks up TIME Magazine, and they see this and they go, oh, my God, Ben Bernanke, low interest rates caused this whole thing. He's just an extension of that devil man, Alan Greenspan. Low interest rates, this is the whole cause. What's your bullet answer to that?

A: It's hard to give a bullet answer.


Q: Myth-busters answer.

A: Monetary policy in the early part of this decade was accommodated for good reasons. There was a recession in 2001, there was the jobless recovery, inflation was very low. Keeping interest rates low to get the economy back on track was a reasonable thing to do. I think there are a lot of forces that led to the crisis, a whole range of things were relevant there. I don't think that monetary policy was a particularly important source of the crisis.

By way of review, the Fed has only one distinct power: the capacity to create money out of thin air. In the end, and despite all its other powers, this is the one that matters. So if you are interviewing the Fed governor, one would think that this would be the central question: what did you do with the money-creating power to bring about this situation?

This is not a "fringe concern." This was a central issue in all 19th century debates on money. It was the primary concern before Keynes within the economic profession. The belief that money manipulations spawns booms and busts was the conventional wisdom even into the 1940s. As late as 1973, F.A. Hayek won the Nobel Prize for his work demonstrating the point.

To be sure, what matters is not whether this is a fringe issue but whether it is true. In fact, the point is so true that it is apparently the great taboo issue about which one is never supposed to ask the head of the Fed. We aren't supposed to ask the wizard about any possible downside to his powers.

What's even more interesting is that Bernanke doesn’t quite say that monetary policy didn't cause the boom-bust. What he says is that there were "good reasons" for injecting hallucinogenic drugs into the economic bloodstream. Then he goes on to say that the results were not "particularly important." We are supposed to trust his answer.

At least he does admit that the Fed was "accommodative" – in the same way that the drug dealer accommodates a daily habit. The economy was running on debt, but desperately wanting to cleanse itself of its problem. The Fed intervened to prevent the inevitable. And so the inevitable got worse and came anyway. That's the short history. And from this we can know the future: the next time will be even worse. This is the nature of the state and its affiliated institutions: to learn nothing from mistakes and to screw things up even more the next time.

What about Bernanke's history of the early 2000s? He mentions the recession of 2001 and the "jobless recovery" (what about today's jobless green shoots?). What he doesn't mention, and what very few people have pointed out, is the impact of the attacks of September 11, 2001.

After the World Trade Center and the Pentagon were hit, the mood in Washington was total shock and horror. Bush claimed at the time that he was determined to do whatever it took to show those terrorists that they couldn't hurt our economy. We will be strong in the face of these attacks!

Here is what Bush said immediately after 9/11:

I ask your continued participation and confidence in the American economy. Terrorists attacked a symbol of American prosperity. They did not touch its source. America is successful because of the hard work, and creativity, and enterprise of our people. These were the true strengths of our economy before September 11th, and they are our strengths today.

Of course, Washington doesn't have any magical ability to make the economy strong, to cause prosperity to appear as a way of showing terrorists what's what. The Fed is the only weapon in town for these purposes. And so the Fed went to work for the central state, as it always does. You can see the evidence here.

Now, this action, like everything else the state does, caused unforeseen results. They thought they would create a boom but now we are all paying the price. Osama bin Laden must be laughing. If Washington had done nothing at all after 9/11/01, either in domestic or foreign policy, the world would be much more peaceful and prosperous today.

Llewellyn H. Rockwell, Jr. [send him mail] is founder and chairman of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com, and author, most recently, of The Left, The Right, and The State.

http://www.lewrockwell.com

    © 2009 Copyright LewRockwell.com - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules