The Lesson of Ben Bernanke: You Can Always Fail If You Work Hard Enough At It

Although it bodes ill for our future, the following from Michael Pento is as succinct summary of our Fed’s recent actions as one could want:

It now appears that the United States has finally succeeded in its efforts to destroy confidence in the US dollar. Given the currency’s reserve status, its ubiquity in financial markets, and the economic power and political position of the United States, this was no easy task.

However, to get the job done Washington chose the right man: Federal Reserve chairman Ben Bernanke. Thanks to Bernanke’s Herculean efforts, investors across the globe have now been fully weaned from their infantile belief that the US dollar will remain the ultimate safe haven currency.

The proof of Ben’s success can be seen in comparing how the foreign exchange markets reacted to the recent crisis in the Middle East with how they reacted to the financial crisis of 2008. Three years ago, investors looking for safety abandoned their foreign currency positions and piled into the US dollar (the market for US Treasury bonds in particular). As a result of these fund flows, the US dollar surged 20% from August to November 2008.

However, during this latest round of global destabilization the dollar experienced no such rally. In fact, the greenback has shed about 5% of its value since the Tunisia revolution began in December of 2010.

The reason should be clear; the Fed has placed international investors on notice that it will unleash even greater doses of dollar debasement at the first whiff of additional economic weakness, deflation threat, or dollar appreciation.

The Christian men’s ministries leader Patrick Morley likes to say that no one plans to fail.  And that’s true here too.  Obviously Bernanke’s objectives are to inflate our outsized debt into a repayable sum, to cheapen our exports so that we can reverse our balance of payments, and to reduce our standard of living so that we consume less (that comes from his boss, a goal of the left since the 1960’s at least).  And to do all of this so that, when all comes to pass, they have plausible deniability for how it came to pass.

But the success of this agenda is failure.  The Chinese for their part will finally be forced to allow the yuan to appreciate, but in the long run they’ll benefit too.  Americans just haven’t figured out what you become when you lose your credibility because they don’t know what that’s about on a national scale, but we’re just about to find out.

Leave a Reply