STAFF NEWS & ANALYSIS
DB Briefs: Don't Blame Bernanke / China Will Be OK and Prosperity Will Continue / Vick Is Repentant But Not Forgiven
By Staff News & Analysis - September 12, 2011

Don’t Blame Bernanke … The scapegoating of Ben Bernanke … Among Republican presidential hopefuls, bashing Ben has become a sport of choice. That’s Ben Bernanke, chairman of the Federal Reserve Board. First, Texas Gov. Rick Perry said it would be “almost treasonous” for Bernanke to embrace the so-called Quantitative Easing 3 (QE3). Then former House speaker Newt Gingrich said at Wednesday’s GOP debate that he’d fire Bernanke, calling him the most “dangerous and power-centered chairman” in Fed history. This rhetoric is beyond over-the-top. Its distortions are so grotesque and its judgments so poor that they should suggest disqualification for the White House. – Washington Post

China Will Be OK and Prosperity Will Continue … China Strength Defies Hard Landing Scenario … China’s record imports and a rebound in lending signaled strength in demand that offers a bright spot in a global economy contending with Europe’s debt crisis and weakening U.S. job gains … The data may bolster confidence that the world’s second- largest economy is weathering both Premier Wen Jiabao’s campaign to defuse price pressures and financial turmoil abroad. Group of Seven finance chiefs vowed “a concerted effort” to support expansion on Sept. 9 as Europe’s debt woes and zero jobs growth in the U.S. increase the risks of a renewed recession. “This all points to a robust economy, and a hard landing looks an increasingly distant scenario,” said Liu Li-gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd. who previously worked for the World Bank. – Bloomberg

Vick Is Repentant But Not Forgiven … A significant collection of anti-Vick demonstrators protested the quarterback’s involvement in the illegal dogfighting ring that landed him in federal prison. The group set up shop across from the Edward Jones Dome where Michael Vick and the Eagles opposed the St. Louis Rams Sunday in St. Louis. It wasn’t immediately known if Vick saw the protestors and signs including “No More Vick-Tims” and “Abusers Have Regret Only When They Get Caught!!” The demonstration was right near the entrance to the bus dropoff, however. It was one of the largest game day protests of Vick and his troubled past. Vick served 18 months in federal prison for crimes against dogs and lying to authorities about it. – Daily Times

Don’t Blame Bernanke

The scapegoating of Ben Bernanke … Among Republican presidential hopefuls, bashing Ben has become a sport of choice. That’s Ben Bernanke, chairman of the Federal Reserve Board. First, Texas Gov. Rick Perry said it would be “almost treasonous” for Bernanke to embrace the so-called Quantitative Easing 3 (QE3). Then former House speaker Newt Gingrich said at Wednesday’s GOP debate that he’d fire Bernanke, calling him the most “dangerous and power-centered chairman” in Fed history. This rhetoric is beyond over-the-top. Its distortions are so grotesque and its judgments so poor that they should suggest disqualification for the White House. All presidents want to create economic confidence. Indeed, improving confidence is crucial to boosting today’s lackluster recovery. The easiest way to destroy confidence is for the White House and Fed to get into a public brawl. By law, the Fed is “independent.” The Fed chairman, for example, is not a member of the president’s Cabinet. The reason is to insulate the Fed from short-term political pressures. It is to allow the Fed to take actions that, though perhaps initially unpopular, are judged necessary for the economy’s longterm health and stability. – Washington Post

Dominant Social Theme: Leave Ben alone. He’s just trying to do his job.

Free-Market Analysis: And what a job it is. Here and there, Bernanke opens up the spigots and releases US$10 or $20 trillion into the pockets of various cronies under the guise of “saving the system.” The amounts are literally impossible to conceive of, and the Washington Post in the excerpt above entirely misses the point. As we have written on many occasions, the TARP bailout and the larger 2008 bailout courtesy of the Fed were conducted in the Internet era.

There was no hiding these sums or who they went to and why. It is a moral issue, not subject to argument. Tens of millions of people in Europe and America are quite aware of this impossible spate of money printing. The system has done itself in. One can complain that Bernanke is being scapegoated, but there are lots of people throughout the West losing their jobs and homes. They wonder rightly why Bernanke is releasing trillions to his colleagues and cronies.

This is the moral dysfunction that is eating away at the economic system like a kind of cancer. The Washington Post doesn’t have to acknowledge it – in fact, the powers-that-be CANNOT acknowledge it. But the damage has been done. Central banking was portrayed as a kind of secular religion. But in the era of the Internet reformation/revolution it has been seen to be corrupt.

When this happened during the Protestant Reformation, the Catholic Church schismed and lost power. This may happen to the Fed – and to central banking generally. No argument can much affect a public perception already formed.


China Will Be OK and Prosperity Will Continue

China Strength Defies Hard Landing Scenario … China’s record imports and a rebound in lending signaled strength in demand that offers a bright spot in a global economy contending with Europe’s debt crisis and weakening U.S. job gains … The data may bolster confidence that the world’s second- largest economy is weathering both Premier Wen Jiabao’s campaign to defuse price pressures and financial turmoil abroad. Group of Seven finance chiefs vowed “a concerted effort” to support expansion on Sept. 9 as Europe’s debt woes and zero jobs growth in the U.S. increase the risks of a renewed recession. “This all points to a robust economy, and a hard landing looks an increasingly distant scenario,” said Liu Li-gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd. who previously worked for the World Bank. “China is less reliant on external demand and more dependent on investment and consumption, so the deteriorating global outlook will have less of an impact than during the previous financial crisis.” – Bloomberg

Dominant Social Theme: Thank goodness all is well with China.

Free-Market Analysis: We are most relieved that China shall not have a hard landing. But we are not sure we believe it. Food prices are up hard, as are real estate prices. The numbers that Chinese officials quote are not to be believed; the banking system is dysfunctional. The idea that Chinese officials can somehow persuade the Chinese to purchase internally the consumer items that the West – in continual recession – will not itself purchase, is ludicrous as well.

Chinese officials are building entirely empty cities and skyscrapers to ensure they meet their numbers for quarterly industrial expansion. Nothing in China is as it seems at the moment. Even in the West, soft landings are mostly fiction. When economies crash due to over-printing of fiat money, they crash. The idea that the landing can be cushioned by skilled central bankers is just one more dominant social theme. China is headed for the rocks, in our opinion. We can’t predict the timing, but the signs are fairly evident.


Vick Is Repentant But Not Forgiven

A significant collection of anti-Vick demonstrators protested the quarterback’s involvement in the illegal dogfighting ring that landed him in federal prison. The group set up shop across from the Edward Jones Dome where Michael Vick and the Eagles opposed the St. Louis Rams Sunday in St. Louis. It wasn’t immediately known if Vick saw the protestors and signs including “No More Vick-Tims” and “Abusers Have Regret Only When They Get Caught!!” The demonstration was right near the entrance to the bus dropoff, however. It was one of the largest game day protests of Vick and his troubled past. Vick served 18 months in federal prison for crimes against dogs and lying to authorities about it. – Daily Times

Dominant Social Theme: Once a killer, always a killer.

Free-Market Analysis: We have followed the Michael Vick saga because we always believed that what happened to Vick was unfair. Certainly, hurting animals is cruel and dogfighting is a mean and merciless sport. But Vick was put in jail for almost two years, lost a US$130 million contract, had to declare bankruptcy and ended up owing about US$20 million to creditors. This was a severe punishment. Dog fighting exists and it was something Vick was familiar with from childhood.

Also, it seemed to us hypocritical that people are so exercised about Vick hurting dogs when the same people are likely meat-eaters. The pain and suffering inflicted on animals led to slaughter is certainly in many cases no less than what Vick inflicted on his dogs. The difference is that he lost everything. It was a case, we believed at the time, of federal over-reach. We are glad that Vick has managed to regain much of what he lost; but we note that many sportswriters and others still have reservations over Vick and the “crimes” he committed. The demonstrators obviously do.

We can’t help thinking this is a dominant social theme of sorts: The federal government stood up for what’s right in putting Vick in jail, and Vick is continuously apologizing for what he did. This is the way that modern justice works. It makes examples of powerful people in order to prove that “no one is above the law.” But in doing so, American justice is verging on the arbitrary. Vick is an example of that arbitrariness.

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