Tuesday, October 5, 2010

Bernanke says deficits pose 'real and growing' threat to economy, calls for plan to cut them

With millions of people unemployed and the economy limping along at output levels far below its potential, Bernanke is worried about deficits??? The current condition is creating mass poverty, which will become the heritage of current and future generations. A broad decline in living standards is taking place and the U.S. is ceding its economic leadership to countries like China! Yet Bernanke is talking about deficits!!

Bernanke has now become part of the problem and not part of the solution. It's bad enough that we have scores of ignorant lawmakers in Washington thrusting this misery onto us; but we don't need a bunch of squirrel-minded academics at the Fed doing it too!

The Fed has far too much power and that power is being wasted or misused when you have this ideology. I think I am beginning to feel that Ron Paul has it right...we should abolish the Fed! We don't need the government AND the Fed conspiring to make a nation of slaves, serving only the privileged and powerful. Get rid of the Fed and at least we'll have one less ignorant institution to deal with.


Райчо Марков said...

"It's bad enough that we have scores of ignorant lawmakers in Washington thrusting this misery onto us.."

Go Worren!!

mike norman said...

No kidding.

Unknown said...
This comment has been removed by the author.
Tom Hickey said...

The supposed purpose of Fed independence is to provide a buffer against clueless and self-serving politicians. Instead, we have an unelected and unaccountable board of clueless and self-serving technocrats in charge of monetary policy. This is anti-democratic, and giving this board control of interest rates results in a command system that is anti-capitalistic.

Moreover, the present public-private composition of the FRS is confusing, and the current participation arrangement of regional Fed presidents on the Fed BoG is unseemly if not unconstitutional. The law needs to be revisited and changed.

Operationally, the Fed and Treasury are implicitly consolidated agencies of the federal government. They should be explicitly consolidated under one agency that combines management of fiscal and monetary policy under a cabinet secretary. Under the present monetary system, there is no necessity for a separate central bank allied with the financial sector, especially a supposedly independent one.

Matt Franko said...


Perhaps the Fed and their bank sector cronies look at vertical money as their real enemy. It seems that the banking sector makes their money by originating loans that create the horizontal money, so the Fed is calling alarm to the creation of vertical money as it ultimately does 'crowd out' the need for private credit creation.

Just like we are experiencing here today, the tremendous amounts of NFAs (100B+/month) created by deficits is all ending up in the accounts of the companies involved in productive capitalism, these firms reportedly have near $2T in cash or equivalents. This 100B/month flow is evidently enough for productive capitalism to muddle through, if we had better people in govt, we could actually prosper with more fiscal here.

They (prod capitalism) dont need the banks to operate in this type of environment dominated by high fiscal deficits..and the Fed here is spinning for the banks in demonizing vertical money creation.

If we do go to a balanced budget amendment or paygo or fiscal rules, the only way the non-govt sector can compensate for the loss of NFAs transfered via fiscal deficits is just like before, go heavy into bank debt....this is perhaps what they are after, and this Bernanke speech is propaganda in support of this.

Bernanke is a major part of the problem when he spews propaganda like this and when he misinforms Congress on the potential further helpful effects of monetary policy at the zero bound when he goes to the hill.

Did you face technocrats like this (incompetent) back in the 60's? McNamara?


Ralph Musgrave said...

Matt: you claim Bernanke is part of a conspiracy. I suggest he is just not that clever. His speech has got “stupid” written all over it.

BTW the speech to which I assume Mike refers is here: http://www.federalreserve.gov/newsevents/speech/bernanke20101004a.htm

First, Bernanke claims that large national debts tend to lead to high interest rates. That idea, of course, is flatly contradicted by Japan which has a debt to GDP ratio of over 200% alongside near zero interest rates. Plus the U.S. and several other countries currently have record debts alongside near zero interest rates.

Second, the whole speech is based on the assumption that deficits lead to expanding national debts. Well, as Keynes and Milton Friedman and numerous other economists have pointed out, deficits can accumulate as extra debt OR extra monetary base. Looks like Bernanke has never heard of Keynes or Friedman, or if he has, then he doesn’t know what the two latter actually said.

Matt Franko said...


Yes I must be mindful of going off into the "conspiracy" type of thing. I generally dont believe such conspiracy type stuff.

But its almost like Bernanke sees himself as the leader of a sort of club or industry group representing banking interests sometimes. He just cant seem to be genuinely objective or intellectually honest. Doesnt see himself as a true public servant. He is only a public servant as far as it is congruent with his industry's interests, that type of thing.

He may see large amounts of public debt as a 'competitor' to his banking industry.


Anonymous said...

Do you steal all your ideas from Peter Schiff now???