Bernanke, Feb. 10: "Milton Friedman's view was that the cause of the Great Depression was the failure of the Federal Reserve to avoid excessively tight monetary policy in the early ‘30s. That was Friedman and Schwartz's famous book. With that lesson in mind," Bernanke continued, "the Federal Reserve has reacted very aggressively to cut interest rates in this current crisis. Moreover, we've tried to avoid the collapse of the banking system."

http://www.reason.com/news/show/135804.html

The US dollar is not money but the debt of the Federal Reserve, or to put it another way if you hold US dollars you are a creditor of the Fed.

A static supply of Federal Reserve debt does not necessarily mean inflation is zero. Cheques that bounce do not hold their value just because their supply is static.

Ben Bernanke also understands the basic economics and the implications of what he is doing (ie. collapse of the USD, inflation, unemployment etc. etc.) . I can’t believe otherwise . However his masters are political and he sings from a pre prepared song score. As a bureaucrat,ben snswer the questions asked and say no more – he isn’t allowed to say any more. So why does Ben continue along his current track? Has he sold out to Wall Street?

Well the only alternative it to allow the market to actually punish maybe half of the largest six banks and many other financial institutions with bankruptcy. Mogambo’s economic texts tell him this would be the best course of action – but what would be the practical implications? Hmmm the plot thickens . Perhaps millions of voters losing their life savings, otherwise efficient businesses going broke, riots and damnation of all involved for not doing “nuffin”. Think about it.

My bottom line guestimate is that the corrections that will occur include:

- Americans being forced to live within their means for once;
- Significantly lower real wages in the US;
- Dramatic reductions in “real” real estate values;
- 15% inflation for several years (wiping out much of the US foreign debt);
- Failed hedge fund managers joining the lengthening lines of the homeless and unemployed;
- Increased crime – with not subsequent funding increases to the America’s vast and shameful system of prison gulags (I wonder how many failed bankers, lenders and hedge fund managers will be sent to the gulags?);
- Significantly higher exports on a low dollar (though this will take a few years to ramp up)
- Muqtada al-Sadr taking over Iraq as a popular choice as the US coalition can’t afford to stay their any longer to prop up their puppet system of governance.
- Significant international contagion – with 1/3 of the world economy suffering from this pandemic of course the credit virus will spread.

Mogambo: Ben knows this, we all know thi; but officials are not allowed to say this in polite or even impolite company. Is it "ha ha" or "sob sob"? Over to you if you ever read this.