Liberty Maven

In an unprecedented interview, Fed Chairman Benjamin Bernanke sat down to talk to 60 Minutes.  Right off the bat, he was asked “when does this end?”

Bernanke replied, in part: “The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We’ve seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we’re not gonna see recovery.”

His concept of “operating normally”, though,  is to continue the unsustainable  exponential growth that is absolutely required for the Ponzi-like banking and monetary system we have now.

Of course, common sense dictates that nothing can grow exponentially forever.  It simply defies logic.  Our only true way out is to start over from scratch, and get rid of disastrous ideas such as fractional reserve banking and central economic planning (by such entities as the Federal Government and the Federal Reserve — and put people like Bernanke out of a job).

Bernanke gives a short history lesson, stating: “The Fed was created by Congress in 1913. And its original purpose was to deal with financial panics, which is what we’re doing right now.”

But is the existence of such a job a good idea?  After the Fed-induced Panic of 1920 (which few people know about, and which is described nicely in Tom Woods’ excellent new book, Meltdown), there was no government intervention to try to avert the crisis and prop things up.  Things crashed hard, and banks and businesses disappeared.  But it was all over quickly, roughly within a year, and the economy began to flourish again.  But when it happened again in 1929 the Fed and the Federal Government intervened.  This time, the downturn lasted more than a decade.  But Bernanke seems to thinks that the feds didn’t intervene enough, so this time they plan to do much, much more.  (I can only hope that this won’t mean that the current depression won’t last several decades, but I suspect this to be the case).

Surprisingly, Bernanke displays his disappointment (and even anger) that the Fed bailed out the global insurance giant, AIG, a total of four times so far.

“It makes me angry. I slammed the phone more than a few times on discussing AIG. I understand why the American people are angry. It’s absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but the stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy.”

Interesting.  Then why isn’t he angry that money was thrown at Fannie May, Freddie Mac, Citigroup, Bank of America, and others.  Those institutions got into trouble for massive leveraging and credit default swaps (i.e. “terrible bets”), so why was/is he so insistent upon failing them out?

And for those who have stated that the Federal Reserve has not yet begun the inflationary policy of “printing money”, Bernanke admitted to doing so quite directly, by giving money that doesn’t exist to banks:

The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money than it is to borrowing.

Bernanke also stated categorically that the Fed will not let any more banks fail.  This means that much more quantitative easing (printing money) is in the works.

It’s clear that since the Fed’s goal is to get things back to “normal”, which is continued exponential growth, the policy is doomed to eventual failure.  For a clear explanation of this, Chris Martenson’s free Crash Course is highly recommended.

See the full interview with Ben Bernanke here.