We are all familiar with the saying: "Beauty is in the eyes of the beholder." As we contemplate Bernanke's recent decisions -- and let us make no mistake about it, they are Bernanke's and his alone -- it has occurred to us that, in addition to beauty, insanity may also exist in the eyes of the beholder. Now, we wish to state emphatically that we do not consider Dr. Bernanke to be insane. However, it is crystal clear that more than a few of Bernanke's erudite critics, pundits of all stripes, opinion-making journalists and media, are of this view. The politicians have been NOTABLY ABSENT from this chorus of horrified condemnation, and with good reason. From the perspective of their own personal and political self-interest, money-printing and inflation constitute the EASY WAY OUT, as well as a means of obfuscating successfully the central role of the political class in originating, encouraging, supporting, and expanding the debt bubble to the astronomic proportions which must inevitably lead to a monster deflationary collapse, to which we are currently witness. We think that there are several streams which feed into the Bernankean decision-making process. We would like, in this brief analysis, to focus on just one, viz., Bernanke's OBSESSIVE and ALL-CONSUMING fear of deflation. Put simply, we judge that this fear exceeds by orders of magnitude any realistic basis for concern. The fear is so great that it amounts to what looks to be a classic NEUROTIC PHOBIA. There is, as we know, acrophobia, agoraphobia, bacteria phobia, and now we witness an acute case of DEFLATION-PHOBIA. Most neurotics damage only themselves and those close to them. A FED chairman who is in control of the central bank and of the monetary policymaking Federal Open Market Committee (FOMC) is in a position to jeopardize the prosperity of the nation, the prospects for economic recovery and growth, the stability of the currency. He is also, as a by-product of his neurosis-driven actions, in a position to RE-ALLOCATE much of the national wealth and income stream, taking FROM those who are retired or soon to be retired, those who live on fixed income, those who have been financially prudent and virtuous, those who have planned, saved, sacrificed current consumption for future needs, reducing their potential future need to become a liability to the national finances, economic growth, and the savings and consumption of those in more youthful cohorts. And, of course, while there is a FROM, there is also a TOO. The beneficiaries of the FED-driven reallocation are, of course, the debtors. This group constitutes the totality of the imprudent, the wasteful, the spendthrift, the cynical, the consumer who chooses deliberately to consume, spend, and borrow beyond his ability to meet current and future obligations. Above and beyond all else the prime beneficiary is the prime source of the debt and spending bubbles -- THE GOVERNMENT AT ALL LEVELS. The Bernanke FED is assiduous in relieving the greatest of all malefactor debtors -- government and the great banks. Supposedly the benefits of currency debasement, wealth and income re-allocation, and de facto if partial debt forgiveness financed by creditors and the generality of taxpayers,will TRICKLE DOWN to Joe Sixpack mortgagee and credit card-ee. Of course, we have yet to see this beneficent trickle down actually occur, despite the swollen river of chatter emanating from the FED and their mimics in the mass media. We need to bear in mind that there are always a plenitude of rationalizations, excuses, and "reasons" to justify any policy. In the case of a neurosis and deflation-phobic FED chair, these "explanations" which are adduced have an increasingly hollow ring among those who assess matters without any significant neurotic distortions. However chairman Bernanke seeks to dress it up, his decisions are primarily driven by his own drastically overblown fears. What the costs of this neurosis to the national future will be have yet to be seen. Moneysage, November 2010 |
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