News & Analysis
Fed Nostrums: Bernanke and Money Printing Have Got to Go
Corker Says QE3 Shows Bernanke Has 'Stayed Too Long' at Fed ... Bob Corker, a member of the Senate panel with Federal Reserve oversight authority, said the central bank's decision to embark on a third round of quantitative easing shows Ben S. Bernanke has "stayed too long." Corker said the Fed's asset purchases have alleviated pressure on Congress to come up with a credible fiscal plan that in his view would provide a basis for long-term economic growth ... "Ben did a great job during the crisis," Corker, 60, said in a separate Bloomberg Television interview. "I think he has stayed too long, yes, I am very despondent about much of what he is doing recently." – Bloomberg
Dominant Social Theme: It's a great institution run by flawed people.
Free-Market Analysis: Bloomberg recently launched two articles that show us just how pervasive the meme of central banking is and how hard it is to eradicate. We can see an excerpt of one above.
This article provides us with the insight that it takes a great man to move the levers of monopoly central banking and the awesome power of printing trillions soon begins to undermine one's mental health.
Another article recently circulated by Bloomberg cites the concerns of a Fed insider over Ben Bernanke's QE3 itself. The idea is that QE3 will not do what it is supposed to do. It will only generate more monetary inflation.
The second article is entitled, "Plosser Says QE3 Risks Fed Credibility, Won't Boost Hiring." It begins: "Federal Reserve Bank of Philadelphia President Charles Plosser said new bond buying announced by the Fed this month probably won't boost growth or hiring and may jeopardize the central bank's credibility."
We can see in both of these articles that the Fed itself – central banking in general – is seen to be relatively blameless. It is merely an instrument being manipulated by fallible people. The institution is fine; its servants are prone to failure.
The idea, of course, that a handful of people can print and control trillions of dollars while almost everyone else struggles to make ends meets on a few thousands is certainly an anti-democratic one. But nonetheless it has been imposed.
Basically, one-world government is being built on the back of central banking – and this is the reason that the powers-that-be defend it so fiercely. Central banking and monopoly fiat will likely have to fully founder before the spell is broken. In the meantime, the idea that servants are fallible but the institution itself is sacrosanct will continue to be advanced.
It is central banks, with what amounts to a monopoly over money, that print currency and cause inflation – monetary inflation that causes price inflation. The reality of this is evident and obvious every day.
But as what we call the Internet Reformation has exposed this resonant truth, those who created and supported this sort of monetary paradigm fight back with various promotions designed to confuse the issue.
Lately it seems to us, as we have pointed out previously, central banks have mounted an offensive with pure fiat types who argue printing massive amounts of paper money is not the problem but rather it is the private sector's control over such money printing that is causing difficulties.
The idea is that central banks are private entities and that if fiat money printing is put under the control of the "people" it will prove itself to be a wise and supportive process. There will be money for all and fears of inflation shall drive money circulation, further benefitting the "average man."
This is a relatively new wrinkle, not so advanced as other defenses of fiat money printing, but it is one that has gained currency nonetheless. The elites who stand behind central banking don't care, of course, whether the process is conducted "publicly" or "privately." They will control it either way.
Maintaining this control has always proven tricky but in the 21st century it is more difficult than ever. In order to ensue that central banking isn't literally pulled down brick by brick, those involved in its creation and administration have endlessly postured about its moral necessity.
Monopoly fiat money has been portrayed as much as a curse as a blessing – a kind of sacred responsibility of public service that its acolytes perform with weariness and tenderness. Each banker is acutely aware of the difficulties faced in printing so much money and the dangers inherent in the process. Characters can be warped. These selfless bankers literally "play with fire."
The article cited above is a good example of this meme. Bernanke is a good man whose psyche has been twisted by the terrible toll of printing trillions. Here's some more from the article:
"I know Ben Bernanke, I respect him tremendously," the Tennessee Republican said today at a Bloomberg Government breakfast in Washington. "My criticisms of the Fed in large part are about pressure being taken off us." He added: "If you saw markets swooning downward because we weren't acting, I think you would see us acting."
Corker, a Senate Banking Committee member who voted to confirm Bernanke for another term ending in 2014, praised the chairman's actions during the financial crisis and said the second round of bond purchases, announced in November 2010, was appropriately aimed at halting deflation ...
The policy making Federal Open Market Committee announced a third round of quantitative easing Sept. 13, committing to $40 billion in monthly purchases of mortgage-backed securities. The FOMC said the buying would continue "if the outlook for the labor market does not improve substantially."
"If you focus on the Fed's role as it relates to price stability, you can understand QE2," Corker said. "I do think we have gotten out of bounds now."
The FOMC also said that low levels for the federal funds rate "are likely to be warranted at least through mid-2015."
Not all Fed officials supported the latest round of bond- buying. Philadelphia Fed President Charles Plosser said in a speech at the district bank today that the new bond buying risks hurting the Fed's credibility. Plosser isn't a voting member of the FOMC this year.
Bloomberg reported on Plosser's comments separately but we find much the same kind of promotional elements in Plosser's comments as Corker's.
Corker is concerned about Bernanke the man and believes the awesome power of the Fed may have warped his judgment. Plosser believes that the actions of Bernanke are misguided. In the opinion of both men, the facility itself is blameless. The problem is the fallible human at the helm. Here's more from the Bloomberg article on Plosser:
Federal Reserve Bank of Philadelphia President Charles Plosser said new bond buying announced by the Fed this month probably won't boost growth or hiring and may jeopardize the central bank's credibility.
"We are unlikely to see much benefit to growth or to employment from further asset purchases," Plosser said in a speech today at the district bank in Philadelphia. "Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed's credibility."
"I opposed the Committee's actions in September because I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment," Plosser said. "Every monetary policy action has costs and benefits, and my assessment is that the potential costs and risks associated with these actions outweigh the potential meager benefits."
The FOMC also said this month it will probably hold the federal funds rate near zero at least through mid-2015. The Fed had forecast since January that rates will stay low at least through late 2014.
By enunciating his concerns, Plosser promotes the idea that central banks are "inflation fighters." We've lost track of the "hawks" who are worried about Fed printing and want money to be scarcer and more valuable. In fact, one of the biggest promotional elements of central banking is that its good, gray men are inflation fighters.
Of course, how can this be when central banks are responsible for printing the money that causes inflation in the first place?
By constantly confronting central bank decisions, those involved in the process make it look fairly clinical. The system itself is never questioned, only outcomes.
Plosser said in response to audience questions that he's "worried that the actions we are taking to make our balance sheet bigger entail risks and those risks could be quite substantial." The central bank may "be forced into selling assets in the open market" when it needs to reduce stimulus, he said. Policy makers "must be aware of the consequences," from their decisions.
Note how carefully the article refers to Plosser, et al. as "policy makers." It is a clinical phrase and one that appeals to those who want to believe that "monetary policy" is a technocratic venture.
It is not, of course. Wielding the power of trillions, the elites who want to remake the world start wars, create depressions and generally keep people in a state of fear and depression via scarcity memes.
The world is running out of everything and too many people are crammed into a tiny planet. Never mind that the world's population could fit into the tiny state of Connecticut with room to spare. There are too many of "them" ... (us).
The efficacy of fiat-money monoply printing is a foundational dominant social theme of the elite and one that is assiduously cultivated. Those like Plosser and Corker who enunciate its advantages may even believe in the institution and its dynamics. Sincerity surely helps provide credibility.
And such arguments are repeated, broadcast and otherwise disseminated with the idea that it is people that are at fault, not the larger institutions.
The idea of technocracy is unfortunately a beguiling one. Since the Age of Reason, we've been taught that man is fallible but if He erects the proper institutions, we can somehow aspire to perfection.
Nowhere has the technocratic meme been more forcefully applied than to central banking and its acolytes. We shall see as the 21st century unwinds whether this meme proves resistant or begins to crumble under the exposure of the Internet's alternative media.
Conclusion: Our perspective, presented here many times, is that the theme of central banking as a necessary component of modernity is already beginning to unravel. The next great battle may be over what the elites intend to replace it with.
Posted by Bischoff on 09/30/12 12:39 AM
@ Danny B
While the USD/FRN has been "fiat" for American citizens since March of 1933, post August 15, 1971 the USD/FRN currency has been "fiat" worldwide.
Fiat currency is a means to manage and control economic activity. However, economic activity is a spontaneous action on the part of families and other groups which is resistent to central government control and management. When spontanaity clashes with government control sparks fly. Is it therefore any wonder that there is internal and international strive... ???
Only netting currencies in conjunction with the gold standard (or the silver standard as a bone to the DB) can accommodate spontaneous economic activity.
Posted by Joe on 09/27/12 06:17 AM
Nick Clegg is the leader of the Liberal Party here in the UK. They are part of the coalition government. Yesterday in his keynote speech to his party he stated that 'bailing out the banks' helped the poor, the old and infirm on fixed incomes and this was broadcast to the whole country in all the mainline media. This statement was not criticised or questioned by anyone (AFAIK).
Free-Market Analysis: that show us just how pervasive the meme of central banking is and how hard it is to eradicate.
Posted by Saffire29979 on 09/27/12 01:27 AM
Even CNBC can't hide it anymore, and they regularly invite people like Ron Paul and Peter Schiff on due to popular demand. They can't make fun of the people who hold gold, because that goddamn metal won't cooperate and drop in price.
Posted by Danny B on 09/26/12 11:45 PM
It's pretty damn funny to hear that the FED are inflation fighters... . at the same time that the presses are smoking from overuse.
GIVEN THE SITUATION, the FED is doing a pretty good job. All the dollar contracts in Europe were going to go up in smoke,,, the FED printed to forestall this.
The banks here were loaded with toxic junk,,, Bernanke bought it.
The private debt here was $ 46 trillion and shrinking FAST.
The public debt was $ 13 trillion and Berwanker pumped in trillions to offset the shrinkage from the private sector.
Take the perspective from 1964.
The FED didn't start the war in Viet Nam. The FED didn't initiate the "Great Society".
The FED accommodated by printing.
The FED didn't start the war in Korea.
The French saw that gold was cheap and bought it up.
That caused Nixon to close the gold window.
Once that happened, the presses went into warp drive.
The house of Representatives originates spending bills,,, not the FED.
The FED didn't lie about WMD.
The FED didn't build 750 military bases.
While it's true that the FED is a bunch of bankers, that doesn't automatically mean that the FED is up to their necks in all the dirty work. There are valid arguments that CBs and war go together like chips and beer.
Click to view link
Just the same, congress passed the prescription drug plan,,, not the FED.
Same is true for Medicare, war on terror, war on drugs,,, ad infinitum.
This isn't an attempt at justifying the FED.
The current actions of the FED are pretty good considering the situation and congress.
American wages are at a 50 year low as a percentage of GDP. Those are market forces at work. How can the FED fight that?
Click to view link
The FED prints to accommodate congress. Congress is calling for more control because the FED is getting cold feet on the printing.
Which is worse?
The FED printing for the bankers OR
Congress printing for every special interest group that walks through the door?
Not an easy question.
Reply from The Daily Bell
"Which is worse?"
Danny B, it is not difficult. Without the Fed there would be no modern warfare/welfare state. End the Fed ...
Posted by dave jr on 09/26/12 10:59 PM
"Corker said the Fed's asset purchases have alleviated pressure on Congress to come up with a credible fiscal plan that in his view would provide a basis for long-term economic growth."
Yes again, like government can provide any economic growth less than crushing it. Hey Corker, how about a balanced budget for a credible fiscal plan... moron. Get some ethics. Grow up!
Then he says, "If you saw markets swooning downward because we weren't acting, I think you would see us acting."
Ya, I've seen enough of a large portion of the congressional district, the premium call girls acting.
Listen to him. "If you focus on the Fed's role as it relates to price stability, you can understand QE2," Corker said. "I do think we have gotten out of bounds now."
He said WE! "We" have gotton out of bounds. Did your constituents ask for QE? And you were never invited inbounds, nor your cohorts. But I understand, you have gunmen.
And I agree with DB. Plosser isn't any better. He is worried about Fed credibility. He talks of risks. Yes, the risk that the market may understand the Fed manipulations and the risk of intolerance.
There will be a correction. But why does it have to include fire and mayhem? Congressmen like Corker are way past annoying.
Posted by runderwo on 09/26/12 10:54 PM
Assange just dropped a doozy at his UN speech (!), giving thanks to UN protocols for saving him from all those Westphalian nation-states that have been persecuting him.
Click to view link
Posted by Don from the Republic of Lakotah on 09/26/12 11:27 AM
Corker needs to put a cork in it. The Fed creates dollars to give away and nothing else.