For the best browsing experience on this site, we recommend you upgrade your browser
AboutSubscribe Your Editors Contact Us RSS

Ben Bernanke… What a Fraud… What a Phoney

Markets up, gold up. It’s been a while since that’s happened.

It’s all thanks to Fed Chairman Ben Bernanke of course. Last night he told the markets what they really wanted to hear. It was good old dovish Ben. The boss man came out and delivered a speech that wiped the floor with the Fed hawks…the ones that have recently expressed concern over the size and pace of the central bank’s monetisation program.

Here’s the key paragraph from Bernanke’s speech, with our emphasis on the key sentence:


‘Another potential cost that the Committee takes very seriously is the possibility that very low interest rates, if maintained for a considerable time, could impair financial stability. For example, portfolio managers dissatisfied with low returns may “reach for yield” by taking on more credit risk, duration risk, or leverage.

‘On the other hand, some risk-taking such as when an entrepreneur takes out a loan to start a new business or an existing firm expands capacity is a necessary element of a healthy economic recovery. Moreover, although accommodative monetary policies may increase certain types of risk-taking, in the present circumstances they also serve in some ways to reduce risk in the system, most importantly by strengthening the overall economy, but also by encouraging firms to rely more on longer-term funding, and by reducing debt service costs for households and businesses.

‘In any case, the Federal Reserve is responding actively to financial stability concerns through substantially expanded monitoring of emerging risks in the financial system, an approach to the supervision of financial firms that takes a more systemic perspective, and the ongoing implementation of reforms to make the financial system more transparent and resilient.

‘Although a long period of low rates could encourage excessive risk-taking, and continued close attention to such developments is certainly warranted, to this point we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more-rapid job creation.’

And there you have it. ‘We’re sort of concerned that things could get out of control, but we’re not really. We don’t see any problems, so we’re not going to take away the punchbowl. Party on, hedge fund dudes!’

We’re tired of this monotonous focus on the world’s most powerful central banker. The lack of accountability in the role is enormous. He thinks he can wait for ‘signs’ of excessive risk-taking before doing anything about it. He thinks he has the ‘tools’ to shrink the Fed’s balance sheet and get things back to normal when the time is right.

But his track record on responding to ‘signs’ is abysmal. He didn’t see a housing bubble even though he helped inflate it. He even went on record as saying there was no housing bubble.

Well there was one…it burst and went on to change the course of economic history, throwing thousands of people into misery. Of course, his predecessor, ‘Sir’ Alan Greenspan was just as responsible. Yet here he is swanning around the world, earning millions and claiming some special insight into how the world works. What a fraud and a phony…

But the joke’s on us. We really are a dumb and sorry bunch. And one day in the not too distant future, we’re all going to pay big time for letting these psychopaths run the place.

So thank you, Ben, for coming down from the mountain to speak with us and impart your divine wisdom…

Regards,
Greg Canavan
for The Daily Reckoning Australia

Join me on Google+
From the Archives…

High Tide on Main Street?
22-02-13 – Bill Bonner

The Fed’s Funny Money is Losing its Mojo
21-02-13 – Dan Denning

Resurrecting BHP, the ‘Big Australian’
20-02-13 – Dan Denning

End of the Australian Boom?
19-02-13 – Satyajit Das

Bond Guru Still Likes the Unthinkable: US Treasuries
18-02-13 – Chris Mayer

Greg Canavan
Greg Canavan is a feature editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Sound Money. Sound Investments, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.

1 Comment

  1. Mick Russom says:

    Bernanke and the FedGov and the FedReserveSystem is a criminal fraud along with the made up market of computers making up numbers to trade with each other.

    Fraud.

Leave a Comment