Schizophrenic Bernanke Trying to Save His Legacy

Isn’t it funny, in a Greek tragic comedy sort of way, how incompetent people in positions of power whose ideology and methodology fails utterly and completely can never seem to own up to their failures, or at least just fade away and let the process of cleaning up their mess get underway?

Such is the case with Fed Chairman Ben Bernanke, or Bernyankme if you prefer. Bernanke and all of the other liberal progressives keep trumpeting that things would have been much worse if we hadn’t spent hundreds of billions, and now trillions of dollars that we didn’t have, don’t have, and will never have. Yet they make these assertions with no real data to back them up. Just ‘feelings.’

In the first article below, Bernyankme is running around trying to salvage is legacy and convince everyone what a great job he did by spending trillions and monetizing our debt, but when confronted by a college student for concrete proof and even methodology behind his decision making on the bailouts, he can’t answer the questions. Then, in the 2nd article below, he says/admits that continuing the course that he played a major part in putting us on will lead us to total economic collapse a whole lot sooner than anyone is letting on. That’s the first really honest and competent thing I’ve ever heard him say.

I’ve said it before, and now even the Fed Chair agrees with me, we hurtling headlong into a repeat of the Weimar Republic economically, and socially if we do not RADICALLY and DRASTICALLY change course NOW. Not in 5 years, not in 10 years. We don’t have that long. If Washington doesn’t stop the deficit spending NOW, put us on a course to begin paying down our debt, get out of the way and let our economy take off, most of America has not the foggiest idea how bad things are going to get.



MCKINLEY AND FITTON: Bernanke’s fairy tale recession story for kids

Records show Fed had no coherent strategy for bank bailouts

By Vern McKinley and Tom Fitton | Wednesday, April 11, 2012

It’s an oldie but a goodie for our Federal Reserve chairman. In one of his recent lectures at George Washington University (GWU), Ben S. Bernanke made the self-congratulatory assertion that the “forceful policy response” led by the Federal Reserve in 2008 helped avoid a more serious economic downturn.

This rhetoric is nothing new. Mr. Bernanke has made similar remarks in the past. As he confided in one interview, “I was not going to be the Federal Reserve chairman who presided over the second Great Depression.” It is clear that like Treasury Secretary Timothy F. Geithner, who recently trumpeted the fourth anniversary of his role in the Bear Stearns bailout, Mr. Bernanke is aggressively using the GWU lectures to shape his legacy before he steps down.

During the chairman’s one-hour-plus lecture, he dedicated five full minutes (and four PowerPoint slides) to a case study on AIG. In the classic dour assessments reminiscent of 2008, Mr. Bernanke used Chicken Little hyperbole, noting that the “failure of AIG, in our estimation, would have been basically the end.” The chairman did not elaborate for the benefit of the students in attendance what he meant by “the end” or the precise connection between the failure of AIG and the end of financial life as we know it, but it certainly made for a dramatic moment during the lecture.

Interestingly enough, one of the GWU students pressed the chairman for more details on the decision-making process underlying interventions like what occurred with AIG. The student, identified by Mr. Bernanke as “Max,” boldly questioned the chairman’s methods: “Where do you draw the line between bailing out a bank and allowing it to fail? Is it arbitrary or is there some sort of methodology?” Mr. Bernanke meandered a bit in responding to Max and eventually admitted that the process was somewhere in between arbitrary and a set methodology, noting that it was a “case-by-case process” and “somewhat ad hoc.”

Let’s suppose for a moment that Max wasn’t satisfied with the chairman’s ill-defined response and he decided to do a more in-depth analysis of the Fed’s bailout of AIG for the semester’s final term paper. Surely, there would be an abundance of documents available supporting the Fed’s approach in the AIG case. After all, if the Fed’s bailout of AIG really saved us from “the end,” as Mr. Bernanke called it, the Fed should be all too happy to provide such details, and likely already has released an abundance of them.

We actually brought suit against the Fed nearly two years ago, requesting precisely that type of information. Some of the details revealed the shocking extent of the ad hoc, seat-of-the-pants nature of the analysis just days before the Fed made the AIG bailout decision. Emails produced by the Fed show confusion about basic information concerning AIG. One Fed email in particular says it all: “What do you know about AIG? Have you produced memos on them anytime recently?”

What we know from the material that was released is damaging enough but more than half of the content of the documents was redacted. We continue to this day to press the Obama administration to release details related to this bailout “success story.”

In the nearly 100 years since the Fed’s creation, the deeper the economic downturn, the greater the number of policy missteps by the Federal Reserve and its cohorts in Washington. This was the case in the Great Depression, which was a downturn rife with Fed policy mistakes. Similarly, the most recent downturn, although not as bad as the Great Depression, was quite deep and also involved numerous policy errors by the Fed. Unfortunately, that’s not one of the obvious lessons of financial crises that professor Bernanke shared with the GWU students.

Rather than admitting to the arbitrary and capricious nature of the bailouts, Mr. Bernanke would have us believe that he and his band of bureaucrats executed a cogent strategy to pull from the brink of disaster companies – and, indeed, a nation – that were too big to fail. The fact is that they guessed their way through the bailouts and cannot point to any cogent analysis of the costs of “inaction.”

We know this because we asked. But don’t expect these facts to get in the way of Mr. Bernanke’s fairy tale.

Vern McKinley is author of “Financing Failure: A Century of Bailouts” (Independent Institute, 2012). Tom Fitton is president of Judicial Watch.

Original article here: http://www.washingtontimes.com/news/2012/apr/11/bernankes-fairy-tale-recession-story-for-kids/print/



Bernanke to Congress: We’re Much Closer to Total Destruction Than You Think

CNBC.com | February 09, 2011 | 11:09 AM EST

Official Congressional budget estimates understate the peril of rising debt, Fed chair Ben Bernanke told the Budget Committee on Capitol Hill today.

Warning that our nation’s fiscal health has deteriorated appreciably since the onset of the financial crisis and the recession, Bernanke called upon lawmakers to confront the long term fiscal challenges sooner rather than later. If lawmakers don’t confront them, they’ll find themselves confronted by them.

From Bernanke’s prepared remarks:

By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis.

Bernanke explained that the Congressional Budget Office’s calculations miss an important reality. As the government’s debt and deficits rise, the economy will slow down—an effect not taken into account by the CBO. So, for instance, when the CBO says that federal spending for health-care programs will roughly double as a percentage of GDP in the next 25 years, it is probably being too optimistic. If debt keeps, rising, GDP will be much lower than the CBO estimates—which will mean that health care spending will be a much larger percentage of the overall economy.

Here’s Bernanke on the effect of rising debt:

Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living. Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, resulting in further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.

In short, the official estimates members of Congress hear from their budget office are under-estimating our dire economic predicament. If fiscal policy is not brought under control, things will be much, much worse.

Original article here: http://m.cnbc.com/us_news/41491193?refresh=true


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