Ben Bernanke: Time Magazine's Person of the Year

Time Magazine has nominated Helicopter Ben as the person of the year. Despite the fact that present-day United State (intentionally singular) kings and "nobles" like to fancy today's government system as more progressive than the "barbaric" and "uncivilized" feudal system of yesteryear, CNN refers to Bernanke as "our mild-mannered economic overlord".

Well, give them points for honesty.

[hat tip to Jason]

See my previous postings on the Federal Reserve here.

Also of note: one of the runners up was Stanley McChrystal, a sadist tasked with the responsibility of spreading the empire and killing those unfortunate enough to be born on a different plot of soil.

UPDATE: click here to see Time Magazine's comically deceptive description of how the Federal Reserve works. This video is consistently effective in communicating truths, provided the viewer knows how to translate: believe the exact opposite of what is seen and heard.

Home Prices Falling

The pathetic collection of beltway zealots have pursued their crusade to make home prices "affordable", but their idea of affordability has been to depress interest rates while promoting inflated home prices. This effort to win the support of their constituency is carried out by keeping home owners happy since the increased home price ruse can continue, while making buyers more dependent on the benevolent Fed by means of their depressed interest rates. This encourages individuals to purchase their over-priced home through debt financing instead of buying a reasonably-priced home by means of personal savings.

Just the same way the laws of gravity cannot be repealed, the laws of economics can also not be repealed, as evidenced by the reality of long-overdue falling home prices.

This is a rare case where the perspective taken by the media is that of the buyer, and gives a much-needed mainstream news article that does not perpetuate the falling price fallacy.

Peter Schiff Was Right

This is a video featuring clips of Peter Schiff predicting the economic crash which has been circulating the internet for a while and has over 1.2 million views on Youtube. Read Peter's latest piece on the continuing irresponsibility of the Federal Reserve.

Ben Bernanke: Arsonist Turned Firefighter

Ben Bernanke just got finished giving a very "candid" interview on CBS' 60 Minutes where he pledged that the Fed would do everything it can (i.e. print more money) to help stave off the economic meltdown. Whew, now I feel better. And how could the viewers not tear up when the head looter gave a heartfelt account of his humble upbringing?

The unprecedented interview with the Fed chief makes one wonder why he decided to provide the exposure to the media today when it had never been done before. The answer is because Bernanke is not stupid (diabolically intelligent, actually) and has sensed that the tides are changing with regard to the public opinion of who the Fed really is and what they do. The Fed has come under more pressure from many different angles, with the recent trend attributable to Ron Paul during his 2008 presidential campaign.

Bernanke is trying to head the public dissent off at the pass in an effort to appeal to the people that he is just a "regular guy tasked with the unenviable job of cleaning up the mess that the free market caused", not the more accurate perception that he is in fact the spawn of Satan himself.

Bernanke has taken a page out of FDR's playbook and is doing everything he can to prolong this Great Depression II by implementing the same tactics of attempting to print our way to prosperity. If printing money could create wealth, then the Wiemar Republic and Zimbabwe would be the two richest nations on the globe.

It is absolutely laughable to hear Bernanke claim that the Fed is printing trillions of new dollars while still trying to keep inflation in check. By definition, the Fed is the only entity that CAN create money and thus inflation -- how could we possibly be expected to believe that it is the fighter of inflation?

It is time that the people wake up and realize what the Federal Reserve really is: a private collection of bankers with the absolute ability to steal from the people because of its government granted monopoly. The Fed started this fire and now we have blindly tasked them to put it out.

One can't help but think of the quote by Albert Einstein: The definition of insanity is doing the same thing over and over again and expecting a different result.

The FDIC Is Broke

Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair wrote in a March 2 letter to the industry that "the deposit insurance fund could become insolvent this year" if new assessments aren't levied against the banking institutions which are ostensibly "insured" by the incapable government program. This is in stark contrast to the rosy picture she painted last July when she was quoted as saying "People should not worry. Their deposits are safe".

As Kathryn Muratore points out, imagine what an actual above-board insurance company would do in an emergency - say a hurricane hitting a populated area. In the days before and after the hurricane, can you imagine State Farm sending a bill to all of its customers in the Southeast for an emergency premium hike to cover the payouts that it knows are imminent?

In years past the Congress would have simply appropriated more tax payer dollars or used the monopolistic ability of the Fed to create new money in order to stave off the FDIC collapse. But with the recent looting of current and future tax payers to pay for the "stimulus plan" and the massive creation of new money by the Fed to bail out the financial industry (including Fannie Mae and Freddie Mac), the FDIC has been forced to resort to fleecing the "insured" banks.

UPDATE

Jobs vs Productivity

Speaker of the House Nancy Pelosi said that the goal of the stimulus plan is to create jobs. This is wrong for two reasons:

First, it is not the government's role to create jobs or stimulate the economy. The free market is perfectly capable of creating jobs and promoting economic growth without the government. The problem that must first be identified is that what we have is not a free market. There are myriad acronymic federal agencies that pepper the economic spectrum that remove any real functionality from a true free market. A true free market would be one without the interference of the largest destructor of wealth the world has ever known -- the Federal Reserve. A true free market rewards for success and punishes for failure.

Second, the goal should not be job creation but productivity. Twentieth century British economist John Maynard Keynes was such a proponent of government's role as the creator of jobs that he recommended that government pay people to dig holes and fill them up. Unfortunately this philosphy has spread like a disease throughout the media, politics, and academia. Productivity is the key to economic viability, and the easy credit conditions created by the Fed and the misdirected focus on job creation without long-term sustainability is what has turned this nation into the largest debtor and consumer in the history of mankind.

Read Tom Woods' article.

Inflation: The Hidden Tax

There are three ways that governments can raise revenue: taxation, borrowing, and inflation. Taxation is a fairly easily explained system of revenue production and is often the center of many debates between the left and the right. Borrowing, while responsible for financing a rapidly expanding portion of the federal budget, can be a confusing concept and will be addressed at a later date. Inflation is rarely discussed as a revenue provider and can also be difficult to understand but only because it has been improperly defined by high school civics textbooks and economists who have regurgitated this misinformation.

A simple Google search returned the following definition for inflation, which is consistent with what I was taught throughout high school and college:

"The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won't be able to purchase as much with that dollar as he/she previously could. [emphasis added] While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly zero inflation to 23% inflation, the Fed actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on circumstances."

This definition has about as much substance as a father's response to his child of "because I said so". The circular logic here is astounding and contains about the same level of intelligence as the students for whom it was intended. Inflation is treated as a natural and inexplicable economic phenomenon for which there is no cause or explanation.

There IS an explanation and it is just as mysterious as the inflation it pretends to fight: the Federal Reserve.

Inflation, properly defined, is the artificial increasing in the quantity of the money supply, whereas the increasing cost of goods and services is merely the consequence of inflation - not the cause. By definition and by virtue of the act of congress granting monopoly privileges, the Fed is the ONLY entity that can legally print new dollars. If you or I printed new dollars, we would go to jail; when done by the Fed, not only is it legal and accepted, its effect - inflation - is cloaked with a planned level of desired misdirection and obscurity.

Like a detective, one must adhere to the old adage and follow the money to find the beneficiary of any scheme in order to get to the truth. The case of inflation is no different, and a simplified scenario will illustrate this point:

Borrower borrows money from Lender at Time A and must repay the loan at Time B. In an inflationary environment, Borrower had the benefit of utilizing the dollar at Time A while it still possessed a relatively higher level of purchasing power than when paid back at Time B. Borrower is marginally better off because of the presence of inflation in the scenario.

So if one knows that borrowers are the chief beneficiaries in an economy ladened with inflation, then one must only ask who the largest borrower in the economy is. If you said the United States government, go to the head of the class.

The Falling Prices Fallacy

Why is it that home prices must always increase and falling home prices are commonly considered a bad thing? Apply that same logic to gas prices. Gas prices are always looked at from the perspective of the buyer and thus falling gas prices are always preferable. What about those who have positioned themselves as sellers in the gas exchange who stand to benefit from increasing gas prices? Recognize this farce: how many people were taking the side of gas station owners or others on the supply side of the oil equation when consumers were “gouging” them with cheap gas prices?

Why are home prices rarely looked at from the buyer’s perspective and that falling prices make homes more affordable for those who are looking to purchase? This idea of ever-increasing home prices perpetuates this ill-conceived notion that homes provide an infallible savings program despite the economic climate. When will people recognize this simple equation: for every seller, there must be a buyer. For every swing in prices, there is a party who benefits and a party who suffers. One can’t always parlay their current house into a bigger house because it will always gain in value.

But we should know this by now. How long has the government (through the Federal Reserve) been artificially depressing interest rates and flooding the market with newly printed money in order to pander to their constituents and keep up this ruse that everyone must own a house? Rather than continuing to wreck this economy with their never ending bailouts, their “investment” of tax payers money into programs like Fannie and Freddie, and their ongoing war against falling housing prices – why don’t they let the market determine housing prices and interest rates? Well, then we wouldn't need our benevolent leaders and central planners, would we?

When money is so cheap, why NOT borrow and spend? What is the incentive to save? So you can make a measly 2% in a savings bond or a CD? That doesn’t even keep up with even the official CPI as tracked by the Labor Bureau (not to mention what CPI would be if they would actually compute it the way they used to or include such costs like energy and food).

As is always the case, there are ebbs and flows in the markets. The best thing that could happen right now is for home prices to fall and interest rates to rise. Higher interest rates will effectively create a stockpile of aggregate capital that can be used to finance our inevitable future spending binge once pressure is put on the Fed to drop rates again. But if you get rid of the Fed, and get government out of the business of money management and central planning, markets will correct – and home prices will become more desirable.

That is if one does the unthinkable and looked at the situation through the lens of the buyer.