Ben Bernanke: Bust of the Year – by Vasko Kohlmayer

bernanke

“The story of the year was a weak economy that could have been much, much weaker. Thank the man who runs the Federal Reserve, our mild-mannered economic overlord.” Thus wrote Time magazine about Fed Chairman Ben Bernanke, winner of the magazine’s “Person of the Year” award for 2009. Virtually crediting Bernanke with halting the world’s descent into an abyss, Time reverentially portrays him as a benevolent demigod, wisely presiding over our economic healing.

But when one carefully reads the featured interview, an impression forms that is sharply at odds with the one intended by Time‘s panegyric. The interview is, in fact, so full of red flags that one almost wants to run for the closest panic button. Perhaps the most revealing moment comes when Bernanke talks about whether he foresaw the 2008 crisis:

“We were certainly aware of the risks of financial crisis, but one as large and as dangerous as this one, I certainly did not anticipate. I wish I had, but I didn’t.”

This is an astonishing admission from the Fed Chairman. The man who is now supposed to fix our problems did not see them coming in the first place. One may perhaps think that the problems were so byzantine that they were undetectable until they at last erupted in the crisis. But this is not so. There were those who saw the problems clearly. A few predicted the crisis with uncanny accuracy.

One of them was Peter Schiff, a financial commentator and president of Euro Pacific Capital. From 2005 onward, Schiff warned about the upcoming meltdown both on television and in writing. Early in 2007 Schiff published a book called Crash Proof: How to Profit From the Coming Economic Collapse in which he told what was going to happen and advised how to prepare.

His predictions proved prescient and those who followed his advice were able not only to preserve their wealth but also to increase it. It is paradoxical that as Schiff was sounding the alarm, mainstream pundits – those of the Greenspan/Bernanke worldview – were laughing in his face. (You can see an eye-opening compilation of Schiff’s pre-crisis appearances on major television networks and the sneers he received by clicking here and here.)

Peter Schiff was not the only person who saw the crisis coming. Texas congressman Ron Paul saw it also. As early as September, 2003 he warned in the banking committee of the US Congress about the danger of a real-state bust:

“If we continue to inflate this bubble this way the housing crisis is going to cause an explosion and there is going to be damage worldwide.”

Almost no one on the committee – or in America at large for that matter – listened to Ron Paul’s warnings. Instead Paul was mocked and accused of insensitivity toward the poor. Needless to say, his foresight was vindicated in spectacular fashion by subsequent events.

Of course, Peter Schiff and Ron Paul have no crystal ball that enables them to foretell future events with uncanny accuracy. Their grasp of financial and economic situation is rooted in the Austrian school of economics. An outgrowth of classical liberalism, its main proponents are Ludwig von Mises, Nobel Prize winner Friedrich von Hayek and Murray N. Rothbard. One of the main focus areas of this school is the business cycle – the boom-and-bust recurrence – which defines the trajectory of western-style economies.

The Austrian school sees the central bank as the driver of the business cycle. This it causes by holding interest rates artificially low, which sends misleading signals through the economy. Fueled by cheap credit, more projects are begun than existing economic resources can support. These projects are termed malinvestments. Once inflation becomes a concern and the central bank – the Fed – is forced to raise interest rates, those projects must be abandoned. It is this that brings on the bust, more commonly referred to as “recession,” which is something we are living through right now. During this painful period of readjustment, labor and resources that were tied up in malinvestments must be relocated to more sustainable uses. The bust – unpleasant as it invariably is – is in reality a necessary and much-needed corrective. Because of this, it should be left to run its course. Any attempt on the part of government to forestall it will only make the inevitable day of reckoning all the more painful.

Yet this is precisely what our government, under Bernanke’s advisement, has been attempting to do. It has tried to keep up the inflated property prices; it has bailed out malinvestments; and, perhaps most dangerously, it has kept interest rates at near zero percent.

Ben Bernanke’s Fed has had a hand in all three policies. It has been buying toxic mortgage-backed securities, it has been providing cash for the bailouts, and it has been holding the federal funds rate at the rock bottom. And even though these misguided policies have softened the bust by partially re-inflating the bubble, they will produce disaster down the road. They have only postponed the inevitable and the next bust will be more violent than it would have been without all this government intervention. Equally alarmingly, the Fed’s loose monetary policy has put great downward pressure on the currency. The dollar has lost nearly twenty percent of its value since February 2006, the month when Ben Bernanke took the reins of the Federal Reserve. The policies he has pursued have greatly contributed to this decline.

But such is the way of government that those who cause most damage also receive most fawning and admiration. FDR, who kept America in the grip of the worst and longest recession in the country’s history, is widely worshiped today. Jimmy Carter, whose policies likewise caused much economic hardship, is feted as an elder statesman and was even given a Nobel Prize. Barack Obama – America’s most radical president who is taking this country down the road to socialism even while spending it into oblivion – received a Nobel Prize barely nine months into his first term. How fitting that each of the three men has also been named Time‘s Person of the Year.

  • keithrage

    We are in an upside down world.
    Bernanke, Obama and Gore receive awards when in reality they lie, steal and deceive, anything you hear from these grubby idiots is the opposite of the truth and their real intention.
    In time you will not be able to even watch or listen to such transparent B.S.

  • Huffer

    If a man on a job, as crucial as Bernanke's, does not see the writing on the wall, what the hell is he doing on this job…? It takes wisdom and insight to deal with the economy and that seems to be sorely lacking in the Liberals repertoire!
    It was liberal thinking (get something for nothing) that put our economy in the pits. The principle instigator for the fall was the housing market that was mishandled by liberal congressmen who in their shortsightedness tried to win votes of the poor by getting them in to housing they could not afford. To get housing for anyone, it requires a job! The liberal mind looks at what they want for an outcome and not what good business sense says needs be done to achieve it.

    A poor man needs a job, not a hand out, then he can enjoy the fruits of his labor.
    Again the liberal think tank is the problem, they sent the jobs to other countries, then taxed, to death, the ones that did survive their ignorant way thinking.

    The day a liberal learns how free enterprise works successfully, will be the day he learns good work ethics and the principle of reward for his efforts. Instead, the liberal competes with others of his ilk to see what he can get and not have to work for it…

    This did not come from out of the blue. It was planned long ago by people like LBJ, Carter, Cloward-Pivens and others who worked hard to train people to depend on others instead the American way of self sufficiency. Then comes the 'One World Order' minded liberal who thinks there is gain in giving more of someones earned assets to someone who did not work for them. Short term this may look good on paper but it is absolutely un-sustainable in the long term.

    This is Bernanke's problem, he is a 'Short Term Thinker' like 99% of all liberals…!

  • Gamal

    Peter Schiff saw what we all should have seen but his strategy of investing in Europe is a dangerous one because of the rapid Islamization of Europe. In addition to increasing the terror threat it creates a huge and dangerous welfare society. France in order to reduce the riots has increased its welfare spending but that will only encourage more riots in the future. Europe is in trouble.

  • 080

    Well,at least we found out how to be a financial genius. Invest everywhere- especially where the rate of return is through the roof. But there is one caveat:make sure that the Feds will bail you out. Now why didn't I think of that?

  • timeklek

    Bernanke does not work for the Govt. he works for Big Banking. Carter, Gore & Obama work for Bernanke:

    <http://www.youtube.com/watch?v=eAaQNACwaLw>

  • rosco1776

    Great article! Peter Schiff and Ron Paul helped me save my 401K, at least until the dollar bubble bursts!! I am truly fearful of the future as it's going now but I am prepared for whatever comes along. Let's hope more people wake up to what the government, Wall St/banks and big business is doing to this country.

    “If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” Thomas Jefferson

  • WAdelstein

    Here is the problem. One cannot graudate from a university program without being what we commonly call liberal. A student has to demonstrate that they roll with the program, at least enough of it. Some become conservative after their educational experience, but only inspite of it, not because of it. And then I find that even most so called conservatives still cannot compute and are still liberals just below the surface. It gets worse, “they” got our children. The not too distant future is going to brutal and laregly unsurvivable. Its time to move.

  • LindaRivera

    BANNED: HOW to FIX 2010 DEPRESSION

    WORLDNETDAILY.COM
    'The Secret of Oz' banned by e-commerce giant
    November 21, 2009

    © 2009 WorldNetDaily

    After being sold on Amazon.com for only three days, a new DVD video
    documentary on the state of the economy has been banned by the e-commerce giant for mysterious reasons, according to the fimmaker.

    “You may no longer sell on our site,” said Amazon in an email to Still Productions at noon yesterday. Still's documentary suggests government debt is at the root of the world's global economic problems.

    “In the coming year, the federal government will spend $4 trillion, but it will have to borrow half of that from big banks, both here and abroad,” he explains. “It creates a vicious cycle of government debt dependency. Government just can't say no to them – or so officials think.”

    This was Thomas Jefferson's main complaint about the U.S. Constitution as well: “I wish it were possible to obtain a single amendment to our Constitution … taking from the federal government the power of borrowing.”

    So what can be done with the national debt rocketing above $12 trillion?
    “You can't just reduce the national debt,” explains Still. “You have to change the system and eliminate it entirely. We have to eliminate the ability of the government to borrow our money into existence. There are ways to do this. 'The Secret of Oz' shows that we've done it before in American history; and we can do it again. The federal government has to be put on a pay-as-you-go basis.”

    In “The Secret of Oz,” Still, the filmmaker behind the mega-successful “The Money Masters,” warns the U.S. is heading for a deep Depression – unless lawmakers address the root of the problem: mounting interest payments
    on the national debt.
    http://www.wnd.com/index.php?fa=PAGE.view&pageI

    “The Secret of Oz” trailer – How to Fix the 2010 Depression – directed by Bill Still
    http://www.youtube.com/watch?v=6cq9yEVcGIU&feat

  • LindaRivera

    RUSSIA'S WARNING: U.S. Capitalism Gone with a Whimper

    27.04.2009 PRAVDA.Ru
    American capitalism gone with a whimper

    It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.

    True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.

    Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.

    First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather then the classics. Americans know more about their favorite TV dramas then the drama in DC that directly affects their lives. They care more for their “right” to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our “democracy”. Pride blind the foolish.

    Then their faith in God was destroyed, until their churches, all tens of thousands of different “branches and denominations” were for the most part little more then Sunday circuses and their televangelists and top protestant mega preachers were more then happy to sell out their souls and flocks to be on the “winning” side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the “winning” side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized in America.

    The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America's short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe.

    These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more then ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?
    http://english.pravda.ru/opinion/columnists/107

  • LindaRivera

    Obama Says U.S. Long-Term Debt Load ‘Unsustainable’
    By Roger Runningen and Hans Nichols

    May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

    “We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

    Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”…
    http://www.bloomberg.com/apps/news?pid=20601087

    Obama admits the terrible financial destruction wrought against Americans. WHY THEN DOES OBAMA NOT IMMEDIATELY REVERSE THIS TRAGEDY?

    A major investor states America is going to reach Zimbabwe hyperinflation.
    http://economyincrisis.org/articles/show/2942

    Billions of dollars urgently needed for America's defense is instead gifted to Islam. Nuclear Iran and nuclear North Korea both state they intend to destroy America. They are not idle threats. The same venomous hate for the U.S. is shared by other nations and Muslim terrorist organizations. The treasonous response of the U.S. government to America's increasing danger, is to drastically reduce our defenses facilitating America's annihilation.

    See: Aloha, “Star Wars” By: Washington Times Editorial
    Washington Times | Monday, June 29, 2009
    http://www.frontpagemag.com/readArticle.aspx?AR