Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bernanke, Time’s Person of the Year Drives the Debt Crisis Spiral

Politics / Recession 2008 - 2010 Dec 23, 2009 - 09:53 AM GMT

By: Claus_Vogt

Politics

Best Financial Markets Analysis ArticleFed President Ben Bernanke has been named Time magazine’s Person of the Year for 2009. However, in looking back at former People of the Year it becomes crystal clear that this title doesn’t necessarily mean that the honored person has done something good for the world …


It only meant that he or she had made a big influence on the course of history during the preceding year. Some have brought us blessings, while others have brought plagues.

And this year it surely seems that Time’s journalists think of Bernanke as a blessing for the world.

Well, I have to strongly disagree …

It Didn’t Work in Zimbabwe, And it Won’t Work in the U.S.

It’s really surprising how acclaimed a monetary politician can become nowadays by doing just one thing: Printing money like there’s no tomorrow.

Yet it didn’t come to pass for Leonard Tsumba and Gideon Gono, respectively the former and the current Governors of the Reserve Bank of Zimbabwe. So they may very well feel snubbed by Time’s choice for Person of the Year.

You see, both central bank chiefs were printing boatloads of money long before Bernanke ordered the helicopters into overtime.

If you stop looking for a job, you’re not considered unemployed in the official data .
Zimbabweans have felt the pain of irresponsible monetary policies.

And under their policies, prices for basic necessities were doubling as fast as every 24.7 hours!

Then this past January, with inflation running at 500 billion percent, the Zimbabwe government ditched their dollar in favor of various currencies such as the U.S. dollar, South African rand, sterling and Botswana pula.

Consequently, the government hasn’t been able to attract any budgetary support because donors distrust Zimbabwe’s central bank.

Only a few months ago Mr. Gono was interviewed by Newsweek. And I think one his answers should have been given much more media attention than it received. Read it for yourself and see what I mean:

Newsweek: “Your critics blame your monetary policies for Zimbabwe’s economic problems.”

Gono: “I’ve been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren’t in the textbooks.

“Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not.

“I decided that God had been on my side and had come to vindicate me.”

At least Mr. Gono is fully aware of the similarities of his and Mr. Bernanke’s monetary policies. So maybe, just maybe, the same reckless policies will yield the same hyperinflationary results!

We’ll soon find out.

What’s more, we have the undeniable conclusion that …

The Great Recession is the Result Of Unsound Monetary and Fiscal Policy

By now there is the widely held consensus that the crisis of the last two years is the result of a burst real estate bubble. Even the economists who didn’t see it coming and who had no clue about the bubble and its unavoidable aftermath have finally come to this conclusion.

If you stop looking for a job, you’re not considered unemployed in the official data .
The central bank is responsible for monetary growth.

But here their analysis and their economic curiosity stop. It’s hard to believe, but mainstream economists do not even raise the obvious question about what caused this huge bubble. They don’t seem to be interested in truth and cognizance.

That’s very sad … because the answer to this question gives us very important insights into what I call the “Crisis Spiral” or the “Inflation Trap.” And it’s theoretically well founded and empirically well documented by financial history. Here it is:

The necessary condition for the development of speculative bubbles is superabundant money and credit growth.

Of course you know who is ultimately responsible for money and credit growth: The central bank, that is Mr. Bernanke himself.

After all, the central bank laid the necessary groundwork for this huge bubble to develop. Hence, the central bank is also responsible for the devastating outcome of the unavoidable bursting of this bubble.

If you stop looking for a job, you’re not considered unemployed in the official data .
A blessing or the plague?

Bernanke Is Not The Savior of the World …

There is no doubt in my mind that Bernanke — along with his predecessor Alan Greenspan — are the most notable creators of the Great Recession. And Bernanke is not the savior of the world as Time wants you to believe. In fact, he’s the opposite!

When Greenspan implemented the very same policy as Bernanke does now, the latter was already a Fed governor strongly supporting Greenspan. I used to call this policy “the great experiment of Dr. Greenspan” and forecasted the horrible outcome we have witnessed now.

Today, Bernanke is in the driver seat. And he’s doing the very same things as his predecessor, but even more so.

The politically correct answer to a crisis stemming from easy money is — more, much more, easy money. Therefore, it stands to reason that the outcome of this even grander experiment will be much worse.

So stay tuned. The coming years are promising to become very interesting and challenging.

Best wishes,

Claus

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com


© 2005-2022 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