Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Sell Bernanke and the U.S. Dollar, Buy Gold and Silver

Politics / Central Banks Dec 13, 2010 - 10:28 AM GMT

By: Fred_Sheehan

Politics

Best Financial Markets Analysis ArticleWho am I? What is Money? The Fed is Here to Help

"I am a macroeconomist rather than an historian. My focus will be on broad economic issues rather than details."

Professor Ben S. Bernanke, "The Macroeconomics of the Great Depression: A Comparative Approach,"1995


"These days central banking is my line of work as well. Before that, I was an academic economist and economic historian."

Federal Reserve Chairman Ben S. Bernanke, "Economic Policy: Lessons from History,"April 8, 2008

60 MINUTES: "You've been printing money?"

BERNANKE: "Well, effectively, and we need to do that."

"60 Minutes" interview, March 15, 2009

CONGRESSMAN JEB HENSARLING, (R-TX.) "Will the Federal Reserve monetize the debt?"

CHAIRMAN BERNANKE: "The Federal Reserve will not monetize the debt...."

Federal Reserve Chairman Ben S. Bernanke, Testifying before Congress on June 3, 2009

BERNANKE: "One myth that's out there is that what we're doing is printing money. We're not printing money."

"60 Minutes," December 5, 2010

"New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements."

New York Times, "Money Woes Can Be an Early Clue to Alzheimer's," October 31, 2010

"It would be fair to say that monetary and credit aggregates have not played a central role in the formulation of U.S. monetary policy since [1982], although policymakers continue to use monetary data as a source of information about the state of the economy."

Federal Reserve Chairman Ben Bernanke, Open Opportunity Economic Forum, Washington, D.C., November 1, 2006

Response to Federal Reserve Chairman Ben Bernanke:

"...Is it really possible for a policy described as 'monetary' to be formulated and implemented without money playing a central role in it? Indeed, the suggestion that monetary policy can be conducted without assigning a prominent role to money seems like an oxymoron - a statement containing apparently contradictory terms, if not worse: for the literal meaning of the Greek word 'oxymoron' is 'pointedly foolish.'"

Lucas Papademos, Vice President of the European Central Bank, Open Opportunity Economic Forum, Washington, D.C., November 1, 2006

"I don't fully understand movements in the gold price."

"Bernanke Puzzled by Gold Rally" Wall Street Journal blog, June 9, 2010

"[The rising gold price is] strictly a monetary phenomenon...an indication of a very early stage of an endeavor to move away from paper currencies.... What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment."

Former Federal Reserve Chairman Alan Greenspan, Bloomberg, September 9, 2009

BERNANKE: "Well, this fear of inflation, I think is way overstated."

"60 Minutes," December 5, 2010

"The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."

Federal Reserve Chairman Ben S. Bernanke, Bloomberg, June 9, 2008

"We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

Federal Reserve Chairman Ben S. Bernanke, speech at the Federal Reserve Bank of Chicago, May 17, 2007

"[T]he recent capital inflow [has shown up in] higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things."

Federal Reserve Governor Ben S. Bernanke, speech before the Virginia Association of Economics, March 10, 2005

"Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run."

Federal Reserve Chairman Ben S. Bernanke, Washington Post, November 4, 2010

60 MINUTES: "Is keeping inflation in check less of a priority for the Federal Reserve now?"

BERNANKE: "No, absolutely not. What we're trying to do is achieve a balance. We've been very, very clear that we will not allow inflation to rise above two percent or less."

"60 Minutes," December 5, 2010

"The unwarranted assumption that 'creeping' inflation is inevitable deserves comment. This term has been used by various writers to mean a gradual rise in prices which, they suggest, could be held to a moderate rate, averaging perhaps 2 percent a year....Such a prospect would work incalculable hardship....Even if it were possible to control it so that prices rose no more than 2 percent a year - the price level would double every 35 years and the value of the dollar would be cut each generation. Losses would thus be inflicted upon millions of people, pensioners, Government employees, all who have fixed incomes, including those who have their assets in savings and long-term bonds...."

Former Federal Reserve Chairman William McChesney Martin, Senate testimony, 1957

"If a policy of active or permissive inflation is to be a fact, then we can rescue the shreds of our self-respect only by announcing the policy. That is the least of the canons of decency that should prevail. We should have the decency to say to the money saver, 'Hold still, Little Fish! All we intend to do is gut you.'"

Malcolm Bryan, President of Atlanta Federal Reserve Bank, 1956

EXPLANATION OF THE FEDERAL RESERVE'S "QUANTITAVE EASING" OBJECTIVE:

"[T]here is a...prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead the government commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates - interest rates measured in purchasing power - could become negative.... Ben S. Bernanke, Fed chairman, is the perfect person to make the commitment to higher inflation.... [T]he goal could be to produce enough inflation to ensure that the real interest rate is significantly negative...."

Professor Greg Mankiw, "It May be Time for the Fed to Go Negative," Wall Street Journal, April 19, 2009

Mankiw is just the man to recommend such policies:

"[W]hen you look at the mistakes of the 1920s and 1930s, they were clearly amateurish. It is hard to imagine that happening again - we understand the business cycle much better."

Professor Greg Mankiw, Wall Street Journal, February 1, 2000

"If it were possible to take interest rates into negative territory I would be voting for that."

Federal Reserve Governor Janet Yellen, speech at the University of San Diego, then-President of San Francisco Federal Reserve Bank, February 22, 2010

60 MINUTES: "Do you anticipate a scenario in which you would commit to more than $600 billion?"

BERNANKE: "Oh, it's certainly possible"

"60 Minutes," December 5, 2010

Note: $600 billion is the amount of money Bernanke has stated he will to print to buy Treasury securities during "QE2" - Quantitative Easing, Part 2.

The Fed "could theoretically buy anything to pump money into the system" including "state and local debt, real estate and gold mines - any asset."

Unnamed Federal Reserve official to the Financial Times, 2002

"Hello, young man. I'm with the Federal Reserve. Today, we're buying baseball cards."

Cartoon in Grant's Interest Rate Observer, 2010; Federal Reserve official is speaking to a boy at his front door.

"The truth is the current Fed governors, together with their crack staff of Ph.D. economists and market analysts, are as close to an economic dream team, as we are ever likely to see.... The best Congress can do now is to let the Bernanke bunch do its job."

Professor Greg Mankiw, Harvard University, New York Times, December 23, 2007. Mankiw was chairman of President George W. Bush's Counsel of Economic Advisers

60 MINUTES: "Can you act quickly enough to prevent inflation from getting out of control?"

BERNANKE: "We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now."

"60 Minutes," December 5, 2010

"There is no validity whatever in the idea that any inflation, once accepted, can be confined to moderate proportions."

Former Federal Reserve Chairman William McChesney Martin, Senate testimony, 1957

60 MINUTES: "You have what degree of confidence in your ability to control this?"

BERNANKE: "One hundred percent."

"60 Minutes," December 5, 2010

"Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds the best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter. [Quoting Bernanke]: 'When policymakers are unsure of the impact that their policy actions will have on the economy, it may be appropriate for them to adjust policy more cautiously and in smaller steps than they would if they had precise knowledge of the effects of their actions.'"

Wall Street Journal, October 27, 2010

"We have been living in a fool's paradise.... [If] the central bank creates money or if you like the phrase better, prints money, I think it can only do one thing, depreciate the currency."

Former Federal Reserve Chairman William McChesney Martin, before the American Association of Newspaper Editors, 1968

"We are in the wildest inflation since the Civil War."

Former Federal Reserve Chairman William McChesney Martin, from his farewell speech, 1970

"Inflation is a means by which the strong can more effectively exploit the weak. The strategically positioned and well-organized can gain at the expense of the unorganized and aged."

Federal Reserve Governor Henry C. Wallich, Commencement address at Fordham University, 1978

Note: Wallich was born in Germany in 1914. He was nine years old, living in Berlin, during the 1923 German inflation.

"[T]he increasing uncertainty in providing privately for the future pushes people who are seeking security toward the government."

Federal Reserve Governor Henry C. Wallich, same address, 1978

"[L]ower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment."

Federal Reserve Chairman Ben S. Bernanke, Washington Post, November 4, 2010

Note: Bernanke simply assumed his QE2 operation would drive down interest rates (the bold will). Just the opposite has happened. Federal Reserve Chairman Martin understood the foolhardiness of such a quest when professors prodded him to do the same:

"It has been suggested, from time to time, that the Federal Reserve System could relieve current pressures in money and capital markets without, at the same time, contributing to inflationary pressures. These suggestions usually involve Federal Reserve support of the Unites States Government securities market through one form or another of pegging operations. There is no way for the Federal Reserve System to peg the price of Government bonds at any given level unless it stands ready to buy all of the bonds offered to it at that price. This process inevitably provides additional funds for the banking system, permits the expansion of loans and investments and a comparable increase in the money supply - a process sometimes referred to as monetization of the public debt. This amount of inflationary force generated by such a policy depends to some extent upon the demand pressures in the market at the time. It would be dangerously inflationary under conditions that prevail today. In the present circumstances the Reserve System could not peg the government securities without, at the same time, igniting explosive inflationary fuel."

Former Federal Reserve Chairman William McChesney Martin, 1957

60 MINUTES: "If you had a message for the American people in this interview what would it be?"

BERNANKE: "...I'd say first of all the Federal Reserve is here and is going to do everything possible to support the economy."

"60 Minutes" March 15, 2009

"Think of all these people, decent, educated, the story of the past laid out before them - What to avoid - what to do, etc.... - trying their utmost - What a ghastly muddle they made of it! Unteachable from infancy to tomb - There is the first and main characteristic of mankind."

Winston S. Churchill, Discussing World War I, 1928

Conclusion: Sell Bernanke and the U.S. dollar; Buy gold and silver.

By Frederick Sheehan

See his blog at www.aucontrarian.com

Frederick Sheehan is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, November 2009).

© 2010 Copyright Frederick Sheehan - 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