The Great Depression Online




Great Depression Online Archive Issue:

Uncle Ben, The Benevolent One

Great Depression Online
Long Beach, CA
December 04, 2009

Inside This Issue You Will Discover…

*** Bernanke’s Performance Review
*** Making a Mess of Things
*** Uncle Ben, The Benevolent One
*** And More

Bernanke’s Performance Review

Yesterday was Federal Reserve Chairman Ben Bernanke’s performance review.  Standing before the Senate Banking Committee, in an attempt to win confirmation to another four-year shift, he defended his actions on the job.

“We played a central role in efforts to quell financial turmoil,” said Bernanke.  “The outcome could have been markedly worse.”

We find it quite comical: Bernanke defending how he monkeyed around with the money supply.  How he added a trillion dollars to the Federal Reserve’s balance sheet…doubling its liabilities.  How he cut the federal funds rate to practically zero.  How he bailed out ‘too big to fail’ banks while many American’s flailed into unemployment and foreclosure.

What kind of performance review was this…really?

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For many of us, performance reviews consist of real standards.  Did we meet our margins?  How much new business in did we bring?  Did we follow corporate contracting and safety policies?  Did we mentor and grow junior staff?  Did we execute and deliver top quality work ahead of schedule and under budget?  Did we exceed client expectations?

How well we performed against these benchmarks determines how well we’re compensated.

But for the man tinkering around with the nation’s money supply, his performance review consists of academic conjecture.  Perhaps that’s because his job shouldn’t exist to start with.

Making a Mess of Things

The Nation did just fine without a central bank for its first 137 years.  Yet for the last 96 years there’s been a stooge manipulating the money supply and wreaking mischief on the lives of everyone.  In fact, since the Federal Reserve’s been at the helm, they’ve successfully watered a dollar down to the buying power of five cents.

For that alone they should be disparaged.  But why does the job exist in the first place?

Before the Federal Reserve, the price of the economy’s most essential component – the basic element of markets and trade – was determined by the free market…between two willing participants engaged in a business transaction.  Yet since 1913 the Federal Reserve’s been fixing the price of this critical building block of the economy by way of committee.

What is it exactly we’re talking about?

Money.  And not only just money…your money.  More precisely, the price of money as determined by the rate of interest in return for credit. 

The Federal Reserve’s been monkeying around with the price of money like drunks tossing horseshoes in the rain for the last 96 years.

With all their charts, graphs, and statistics, have they ever gotten it just right?  Are they somehow all knowing?  Does their policy somehow improve on the knowledge aggregated by millions of individuals making billions of transactions each and everyday?

Of course not; rather, they make a mess of things.

Uncle Ben, The Benevolent One

When the price of money – like the price of toothpaste or toilet paper – is fixed by a central planning bureaucracy, how can a free market still exist?

In our modest estimation…it can’t.

Here at the GDO we consider the actions of the Bernanke to be that of a benevolent uncle.  For he gives the world exactly what it wants…lots of money.  Regrettably, however, giving the world lots of money has consequences.  Particularly, when it’s in the form of cheap credit.

For example, a seemingly endless amount of cheap money encourages spending and consumption and discourages savings and investment.  Asset bubbles bloom, inflate, and burst…over and over again, having a remarkably disruptive effect on employment and the economy.  Gargantuan trade imbalances emerge.  Everyman becomes a speculator – $1,200 Gold; DOW 36,000.

Eventually, though, given enough rope, people borrow themselves to the end of it…where they hang themselves.  Yet they still want more.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  More than 130 banks will have failed by the end of 2009.  What if your bank fails?  Did you know you could be left in the lurch for days, weeks, or even months before you get your money back from the FDIC?  What happens if the FDIC can’t cover your funds?  How do you find a safe bank to protect your deposits right now?

The Safest 100 U.S. Banks

 

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