Bernanke’s second coming
August 26th, 2009
He was one of the architects of the current economic crisis. But ‘Helicopter’ Ben Bernanke was on Tuesday rewarded with a second term as chairman of the Federal Reserve. Here Peter Schiff of Euro Pacific Capital argues the move will be disastrous for the US economy’s long-term health.
Ayn Rand wrote, “when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.” America is not doomed, but the fellows in Washington are pushing for that outcome.
It seems that all the characters that encouraged this financial crisis are being rewarded and Ben Bernanke’s re-nomination is no exception to this rule. He was on the board of governors when Alan Greenspan grew our bubble economy.
Known as ‘Helicopter Ben,’ Bernanke was the most vocal supporter of low interest rates to combat the bogus threat of deflation, even if it meant dropping cash from helicopters. He succeeded in his aim – as it is hard for prices to decline while the money supply is growing by double digits.
Of course, much of that new money went into speculative bubbles, first in technology and then real estate. When the misallocation became too great to ignore, the credit markets froze and leveraged institutions started failing.
Now, Bernanke says that he doesn’t want to preside over another Great Depression. That doesn’t mean he doesn’t want another Great Depression; he just doesn’t want to preside over it. His plan seems to be continuing to print money so that the depression isn’t apparent until after he leaves office.
…. Bernanke is being praised for avoiding a collapse in the financial system. While he has forestalled some short-term pain, he has in turn forsaken long-term gain. The ‘green shoots’ that set the pundits alight are nothing more than the direct effects of massive monetary expansion.
What this country needs is a Fed Chairman that is immensely unpopular, backed by a courageous president ….
Peter Schiff is president of Euro Pacific Capital and a leading commentator on markets and economics. He is author of Crash Proof: How to Profit from the Coming Economic Collapse (Feb 2007) and The Little Book of Bull Moves in Bear Markets: How to Keep your Portfolio Up When the Market is Down (Oct 2008). He believes the growing imbalances in the US economy, its twin deficits, lack of domestic savings, and the erosion of its industrial base, have reached a point where a severe recession, culminating in a substantial decline in Americans’ standard of living, is imminent.
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