American Free Press
WORSE THAN ALAN GREENSPAN?
 

         Ben S. Bernanke            

 

http://www.americanfreepress.net

WORSE THAN ALAN GREENSPAN?

NEW FED CHAIRMAN CALLED ‘INSANE FAN OF INFLATION’

By John Tiffany, American Free Press, 11/07/05

The man tapped by President Bush to replace Alan Greenspan as chairman of the Federal Reserve system is noted for never once having expressed disagreement with anything said by the United States’ top banker. Yet it is known Ben S. Bernanke is not just a Greenspan clone. In some ways he is worse than his onetime boss.

Bernanke will likely take over on Feb. 1, the day after Greenspan’s term ends. But what sets the two apart is the fact that Bernanke, unlike Greenspan, is a noisy, and, some say, insane, advocate of increased inflation.

Many patriots fear the new Fed head will overuse the monetary printing press, which is completely controlled by the privately owned and controlled Federal Reserve.

Bernanke’s recent statement that he plans to continue his predecessor’s inflation-fighting policies contradicts his past remarks that he will print as much money as the govern-ment wants to spend.

Should price levels start to sag, declared then-Fed governor Bernanke, the Fed would prop them back up—if neces-sary, by the expedient of dropping dollar bills out of heli-copters.

In fact, in a speech in November 2002, Bernanke related this gem to a gathering of economists: "Japanese deflation will not happen in America because the U.S. government has a technology, called a printing press . . . that allows it to produce as many U.S. dollars as it wishes."

Any action resembling this, or even just such crazy talk, could cause foreigners and others to lose any remaining confidence in the U.S. dollar and dump U.S. investments and dollar reserves. Since dollars are not backed by silver, gold, or anything else, if that confidence is lost the econo-my will crash.

Outgoing Fed Chairman Greenspan, who has held the post, the most influential economic policy job in the world, for 18 years, is much touted for his alleged oracular wisdom.

But what is this guru’s legacy?

It includes a bloated housing bubble and an already burst stock bubble.

To preserve the nation from so-called "stagflation"— where economic growth stagnates while prices go up—the Fed instigated a real mortgage inflation.

Thanks in part to Greenspan’s influence, keeping interest rates low, which allowed Americans to buy houses they could not afford, America’s consumers are now overextend-ed, and the gap between household debt and savings has never been wider.

Is Greenspan truly a sage, or is he just a crude loan shark who kept putting off the inevitable financial ruin by loaning out even more money to Americans who are one pay-check away from bankruptcy?

The record shows Greenspan is far from infallible. The early-1990s real estate and banking problems caught Greenspan by surprise. So did the late-1990s stock market bubble.

And while Greenspan may have quietly scolded the profligate spending habits of Congress, he has done little to cool the artificial and dangerous housing boom.

Greenspan has pushed investors to take risks he now counsels against. He delivered his famous "irrational exu-berance" warning in 1996, claiming the market was getting too frothy. Then he flip-flopped to the dubious proposition that the exuberance was really not so irrational.

Greenspan’s policies have also robbed retirees, poor folks and the middle class—while making the rich richer.

Greenspan is also noted for his betrayal of the elderly on Social Security. In 1983, Greenspan chaired the commission that convinced Congress to raise the payroll tax that funds Social Security. He said the tax hike would ensure the Social Security system’s solvency.

The higher tax fell heavily on low- and middle-income taxpayers. Sure enough, the tax hike built up a surplus in the Social Security trust fund. With this surplus in place, Greenspan flip-flopped in 2001 and endorsed the Bush administration’s tax cuts, whose benefits went overwhelmingly to the richest 1 percent of taxpayers, those who make more than $373,000 a year.

Those tax cuts contributed to soaring budget deficits.

Greenspan then insisted we need to cut Social Security benefits in order to restore "fiscal discipline."

In other words, Greenspan jacked up taxes on working people, adding to the budget surplus, and then endorsed squandering that surplus on giant tax cuts for the rich.

So if Greenspan has been characterized as "good for America" by the mainstream press, Americans should keep a close eye on their savings and a tight grip on their wallets when Bernanke takes the helm of the country’s economy.
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WHAT'S MONEY...
http://www.apfn.org/apfn/money.htm

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Sent: Saturday, November 26, 2005 5:09 PM
Subject: [apfn-1] Fw: Federal Reserve raises interest rates to combat its own inflating of money supply

From: "Peter Myers"
November 24, 2005

Federal Reserve raises interest rates to combat its own inflating of money supply

Date: Thu, 24 Nov 2005 10:22:45 -0500 From: "David Chiang"
<sino.economics@verizon.net >

THE GREAT DEBATE

by Puru Saxena http://www.dailyreckoning.com/Issues/2005/DRUS112205.html

The entire investment community seems to be obsessed with the appointment of
Ben "Helicopter" Bernanke as the new chairman of the Federal Reserve. "What will
the new maestro do? Will he continue to raise interest-rates? Will he target
inflation? How will the markets react?" Such questions have been popping up
almost everywhere. I am going to address some of these issues but first, let
me explain the key concepts of inflation and deflation.

The widespread belief is that the Federal Reserve is currently increasing
interest-rates to "control" inflation. This misconception stems from the
fact that most people don't really understand inflation. The great majority
thinks that inflation is an increase in the prices of goods and services, which is
totally incorrect. In actual fact, inflation is defined as an increase in
the quantity of money. A general increase in prices is merely a consequence of
inflation. An over-supply of money (inflation) causes its value to drop and
it takes more money to buy the same quantity of goods and services, causing
prices to go up.

In addition to this, the consensus is that deflation is a fall in the prices
of goods and services, which is also inaccurate. It is crucial to understand
that deflation is in fact a decrease or contraction in the quantity of money. A
general decline in prices is merely a consequence of deflation. A reduction
in the supply of money (deflation) causes its value to rise and it takes less
money to buy the same quantity of goods and services, resulting in lower price
levels.

The fact that the public does not understand inflation or deflation allows
the central banks to carry on with their money printing agenda. All the while,
the public remains oblivious.

When the Federal Reserve was established in December 1913, its objective was
to "control" inflation. Well, I hate to break this to you, but the Federal
Reserve has failed in its task of "controlling" inflation. In fact, the U.S. dollar
has lost 95% of its purchasing power through money printing (inflation) since
the Federal Reserve came into power. In other words, the $1 your ancestors saved
for you in 1913 is only worth five cents today! This is an outright confiscation
of hard-earned savings.

Consumer prices only started to go up after the Federal Reserve came into
power in 1913. It is interesting to note that money lost most of its purchasing
power after gold was removed from the monetary system in 1971. Once the Americans
made gold redundant, the central banks were allowed to print as much money as
they wanted since money was no longer backed by a tangible. And print money they
did!
This reckless printing of money is the reason why things have become so
unaffordable for most people.

The grim reality is that the modern day central banking IS inflation...and
the quicker we get used to this idea, the better. The deflation scare is nothing
more than a decoy, which the central banks use in order to continue with
their money-printing (inflationary) program. Still not convinced? Then, consider
the greatest fabrication, the Japanese "deflation" scare.

For years now, we have been told repeatedly that the root cause of Japan's
economic problems is deflation. We have been forced into thinking that
deflation is the culprit. Allow me to share a secret - the central banks want you to
believe that deflation is a total disaster so that they can freely print
more money, thereby creating inflation. After all, who benefits from the
monetization of the economy?

Despite all the brainwashing, close inspection reveals that Japan never
really had any deflation! The truth is that throughout the past 15 years, Japan's
money supply has continued to grow (inflation). Japan has witnessed inflation, and
not deflation, since 1980. Sure, Japanese asset prices have fallen since 1990,
but the cause is not deflation, as advertised by the establishment. In fact, a
sharp rise in interest-rates was the trigger, which caused the Japanese stock and
property bubbles to burst.

These days, we are being told that the Federal Reserve is raising
interest-rates to "control" inflation. If the Federal Reserve were really curbing
inflation, why would the American money supply continue to surge despite recent
interest-rate hikes? Despite all the noise about inflation, the Federal
Reserve has added roughly $1 trillion to the system over the last year. So, on one
hand, the Federal Reserve continues to inflate, and on the other hand, it is
raising rates. "But why would they do that?" you may ask. You see, the U.S. economy
is in a mess, and a true contraction in the money supply (deflation) would send
the whole world into a severe recession. Under this scenario, millions of
companies and individuals would go bust and the entire financial system may collapse.
Therefore, you can rest assured that the Federal Reserve will continue to
inflate for as long as possible. It is shocking to note that the broad-based
money supply (M3) has increased from $ 6.5 trillion to $10 trillion in five
years - representing a 54% increase! Yeah, Greenspan did a fine job
"managing" inflation!

As far as the current situation is concerned, I believe the Federal Reserve
is raising interest-rates to prevent an outright collapse of the U.S. dollar. A
weak currency needs to offer a high yield (interest) in order to attract
capital. Indonesia, Russia, Brazil and Venezuela come to mind. Today, the
United States is the world's largest debtor nation, and its current account deficit
stands at $730 billion or 6.3% of GDP! Students of economic history know
that no other country or its currency has ever managed to get away with such
economic murder. It must be obvious to both Greenspan and Bernanke that the U.S.
dollar is skating on very thin ice. In an attempt to rescue the situation,
interest-rates in the United States are being pulled up to increase the
demand for dollars.

In my view, interest-rates in the United States will rise much higher than
most people expect at this time. If history is any guide, Mr. Bernanke will
continue to inflate the money supply whilst increasing interest-rates over the coming
months. Already, he has talked about dropping dollar bills from helicopters.
Well, at least the guy is honest!

--
Peter Myers, 381 Goodwood Rd, Childers 4660, Australia ph +61 7 41262296
http://users.cyberone.com.au/myers  Mirror:
http://mailstar.net/index.html

 

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