Ben Bernanke went on record today calling rising oil prices "A kind of a tax".
http://www.chron.com/disp/story.mpl/business/energy/7412058.html
But before I go into that, I must digress for a minute.
Alan Greenspan commented on the art of "Fed Speak" (AKA Greenspeak) after he stepped down as Chairman of the Federal Reserve. Mr. Greenspan called it "a language of purposeful obfuscation". Its purpose was to avoid answering questions that he either did not want to or "could not" provide answers to. All of this just drips with disgusting elitism. What questions can possibly exist that a supposed public servant like the Chairman of the Federal Reserve "can not" answer? Are the answers to these questions somehow magical in that they would cause Mr. Greenspan to choke should he attempt to utter them?
Here's how the language actually breaks down: "will not" means he does not will to do it. He stands on the 5th amendment. Things have been done which would implicate him personally and he simply will not discuss it. "Can not" is different. “Can not” implies that someone else or something else is hindering him from answering. Can not implies structural problems would result. "Can not" might even suggest that the driving reason for silence is the fear of having a Jimmy Hoffa moment. Either way, the Fed has skeletons it doesn't want exposed and they are not good forAmerica
So here we have Bernanke practicing his version of Fed speak in which half truths are said. Hmmm. Greenspan's words were designed to obfuscate the truth. Bernanke speaks half the truth. What kind of people speak in half truths and purposeful obfuscations? Oh, that's right, CON MEN, grifters and scam artists. That's who is running the show.
One has to wonder why Bernanke needed to say anything at all today but we should never assume it is because the Fed is bored or just babbling. It looks to me like Bernanke is signaling those with eyes to see and ears to hear (i.e. fellow elite) that he expects higher energy prices to come. Notice how he calls it "a tax". Bernanke is not trying to blame higher energy prices on "Greedy Arabs" or problems in theMiddle East . Those people do not have the authority or ability to tax us. Only the government can do that. Higher oil prices are due to inflation and inflation is a form of sneaky taxation.
To recap on inflation, Bernanke is trying to increase the money supply so that it will offset the falling credit. Banks don't want to loan and consumers don't want to borrow. The herd has had a change of heart about all that debt. But if the debt falls then the money supply contracts which leads to lower housing prices and bankrupt banks.
By increasing the money supply Bernanke hopes to achieve best case employment and best case stable prices. But these things are at opposite ends of the scales. Increasing the money supply might increase employment but it is more likely to increase prices of things. Bernanke is trying to sell us down the river in order to save his bankrupt banks from having lower priced housing stuck on their books.
At the same time, Bernanke really has no control over what actually happens. The game is to increase the reserves at banks by printing money from thin air and buying treasuries from the banks. The whole subject of Primary Dealers at the treasury bond auctions is big enough to be several posts on its own but the shell game goes something like this:
http://www.chron.com/disp/story.mpl/business/energy/7412058.html
But before I go into that, I must digress for a minute.
Alan Greenspan commented on the art of "Fed Speak" (AKA Greenspeak) after he stepped down as Chairman of the Federal Reserve. Mr. Greenspan called it "a language of purposeful obfuscation". Its purpose was to avoid answering questions that he either did not want to or "could not" provide answers to. All of this just drips with disgusting elitism. What questions can possibly exist that a supposed public servant like the Chairman of the Federal Reserve "can not" answer? Are the answers to these questions somehow magical in that they would cause Mr. Greenspan to choke should he attempt to utter them?
Here's how the language actually breaks down: "will not" means he does not will to do it. He stands on the 5th amendment. Things have been done which would implicate him personally and he simply will not discuss it. "Can not" is different. “Can not” implies that someone else or something else is hindering him from answering. Can not implies structural problems would result. "Can not" might even suggest that the driving reason for silence is the fear of having a Jimmy Hoffa moment. Either way, the Fed has skeletons it doesn't want exposed and they are not good for
So here we have Bernanke practicing his version of Fed speak in which half truths are said. Hmmm. Greenspan's words were designed to obfuscate the truth. Bernanke speaks half the truth. What kind of people speak in half truths and purposeful obfuscations? Oh, that's right, CON MEN, grifters and scam artists. That's who is running the show.
One has to wonder why Bernanke needed to say anything at all today but we should never assume it is because the Fed is bored or just babbling. It looks to me like Bernanke is signaling those with eyes to see and ears to hear (i.e. fellow elite) that he expects higher energy prices to come. Notice how he calls it "a tax". Bernanke is not trying to blame higher energy prices on "Greedy Arabs" or problems in the
To recap on inflation, Bernanke is trying to increase the money supply so that it will offset the falling credit. Banks don't want to loan and consumers don't want to borrow. The herd has had a change of heart about all that debt. But if the debt falls then the money supply contracts which leads to lower housing prices and bankrupt banks.
By increasing the money supply Bernanke hopes to achieve best case employment and best case stable prices. But these things are at opposite ends of the scales. Increasing the money supply might increase employment but it is more likely to increase prices of things. Bernanke is trying to sell us down the river in order to save his bankrupt banks from having lower priced housing stuck on their books.
At the same time, Bernanke really has no control over what actually happens. The game is to increase the reserves at banks by printing money from thin air and buying treasuries from the banks. The whole subject of Primary Dealers at the treasury bond auctions is big enough to be several posts on its own but the shell game goes something like this:
- Government spends more than it takes in via taxes and thus needs to borrow to cover the difference.
- The treasury creates out of thin air, treasury notes, bills and bonds, collectively referred to as "treasuries". These are debt notes; IOUs.
- So called Primary Dealer banks are market makers for
US - When Bernanke wants to inject more cash into the economy he buys these treasuries from the Primary Dealers. Right now the Fed is out of cash on its books so it prints the money from thin air to make the purchase. This is known as monetizing the debt.
- The banks, having just sold treasuries to the Fed, now have more cash in their reserves and thus have the ability to loan more money into the economy. This is very key to note: The Fed does not print money directly into the economy. It prints money which it gives (either via loans or via Treasury purchases) to banks to hold in their reserves. The banks are then supposed to create credit at a ratio of at least 10: but in current practice more like 20:1 and can often be as high as 60:1. Bear Stearns was forensically determined to be leveraged 32:1. That credit is actually what causes the inflation. The money printed up by the Fed is the great enabler but not the direct source of inflation.
The fed really wants banks to take this enhanced ability to lend and use it to make loans that will create jobs which take gun wielding 22 year olds off the streets of Arizona
The problem with this system (besides the inherent leverage it creates) is that banks don't want to finance the building of more factories when the existing ones can't even pay for themselves. So instead of making loans that create jobs, the banks go gambling with the money for themselves. The invest in stocks and commodities and all manner of things which not only create no jobs, they also drive the prices for these things up. That's great if you have lots of money and a big stock account but if you are living on fixed income with no savings then you do not see rising food, clothing and energy prices as a positive event. In fact, for many people it will be the reason to pull out their 9 mm parabellums and loading their high capacity clips.
And that brings us back to the tax Bernanke was talking about. Government needs to hand out a bunch of food stamps and section 8 subsidized housing. It needs to buy votes and to appease the masses. So it creates the inflation and gets a few bucks into the hands of the treasury but in so doing it puts 10x as much credit into the hands of the banks which they use to drive up the price of bread and oil. There is no way the fed can win this battle over the long run because inflation has a 10x or better leveraged advantage over welfare payments.
Of course, not everyone loses in inflation. Notice how Goldman Sachs is making record profits and its CEO, Lloyd Blankfein, is getting record compensation. These guys can't lose as long as the Federal Reserve is running the show because they get the full inside scoop that allows them to "front run" the Fed's movements. At some point the Fed will run out of gas to juice the economy. It won't be a matter of wanting to stop, the market will simply stop playing along and Bernanke will be standing there trying to push the herd in one direction but the herd will finally have had enough and it will rebel. Food and gas prices will be the main drivers of civil unrest just as they are right now all over the world. Of course Goldman will get the phone call from Ben telling him to duck and run for cover. These elite do not want to be in the way when the stampede begins.
The problem with this system (besides the inherent leverage it creates) is that banks don't want to finance the building of more factories when the existing ones can't even pay for themselves. So instead of making loans that create jobs, the banks go gambling with the money for themselves. The invest in stocks and commodities and all manner of things which not only create no jobs, they also drive the prices for these things up. That's great if you have lots of money and a big stock account but if you are living on fixed income with no savings then you do not see rising food, clothing and energy prices as a positive event. In fact, for many people it will be the reason to pull out their 9 mm parabellums and loading their high capacity clips.
And that brings us back to the tax Bernanke was talking about. Government needs to hand out a bunch of food stamps and section 8 subsidized housing. It needs to buy votes and to appease the masses. So it creates the inflation and gets a few bucks into the hands of the treasury but in so doing it puts 10x as much credit into the hands of the banks which they use to drive up the price of bread and oil. There is no way the fed can win this battle over the long run because inflation has a 10x or better leveraged advantage over welfare payments.
Of course, not everyone loses in inflation. Notice how Goldman Sachs is making record profits and its CEO, Lloyd Blankfein, is getting record compensation. These guys can't lose as long as the Federal Reserve is running the show because they get the full inside scoop that allows them to "front run" the Fed's movements. At some point the Fed will run out of gas to juice the economy. It won't be a matter of wanting to stop, the market will simply stop playing along and Bernanke will be standing there trying to push the herd in one direction but the herd will finally have had enough and it will rebel. Food and gas prices will be the main drivers of civil unrest just as they are right now all over the world. Of course Goldman will get the phone call from Ben telling him to duck and run for cover. These elite do not want to be in the way when the stampede begins.
