Global Economic Crisis

The brief reassurance from Bernanke that the Fed’s printing presses were contributing most of the bailout money being injected into Wall Street as opposed to taxpayers was the single most important revelation from the otherwise monotonous propaganda broadcast on 60 Minutes. For those familiar with technical terminology as applied to monetary policy, Ben Bernanke was indirectly conceding that America’s semi-private central bank was engaging in quantitative easing, on a massive scale.

What is quantitative easing? In essence, it is printing money. In other words, the Federal Reserve, by virtue of the congressional legislation that led to its establishment in 1913, has the sole power and authority to print U.S. currency, at will. At any time. Without congressional or even presidential supervision or consultation. In unlimited quantities. There are some of us that believe that the power to engage in unregulated quantitative easing by the Fed amounts to nothing more than legal counterfeiting. Yet, that is exactly what is going on at the Federal Reserve, and Ben Bernanke confirmed it, though the meaning of his admission was probably rendered opaque to many viewers due to the saturation of praise heaped on the intellectual acumen of Chairman Ben Bernanke.

Largely unseen by the American public, their nation’s Federal Reserve is engaged in a massive expansion of the U.S. money supply. No one outside the Federal Reserve knows all the details, probably not even President Barack Obama. But it must be in the hundreds of billions of dollars, and perhaps in the trillions.

Not only is this manufactured money being used to recapitalize Wall Street firms and cover AIG payments to counter-parties; it may be the means by which the Fed and Treasury Department collaborate in covering the cost of America’s massive and never-ending budgetary deficits. As foreign sources of credit dry up in the midst of the Global Economic Crisis, the Treasury Department seems to be working with the Fed to monetize the debt. This is in essence a Bernie Madoff form of national finance. The U.S. Treasury Department sells its Treasury bonds to the Federal Reserve, and in return receives the output of the Fed’s printing presses.

What is so dangerous about the path that Bernanke seemed to hint at during the 60 Minutes profile of him is that the inevitable outcome is hyperinflation. In fact, behind the scenes, a growing number of expert economists are suggesting that the accumulating national debt of the United States will be so titanic in scope due to the multi-trillion dollar annual deficits the Obama administration is planning for years to come, the only means of rendering such a debt burden sustainable will be to use inflation as a tool to significantly erode its real value.

This approach, in a word, amounts to hyperinflation. It is a road to fiscal calamity, being cheerfully mapped out by Ben Bernanke and company. If anyone still thinks Bernanke’s path will lead to economic recovery, just look at the German Weimar Republic of the early 1920s or Mugabe’s Zimbabwe of today, to comprehend how bad an idea this really is.

Perhaps it would have been best not to have had Ben Bernanke and the Federal Reserve propagandized on 60 Minutes. Far from being reassured as to the competence and skill of the men of destiny leading the U.S. economy, I am even more convinced that the outcome that awaits the U.S. economy is not a happy one. Perhaps this is what Chinese Premier Wen meant when he suggested at his recent news conference that he was worried about the safety of China’s investment in U.S. Treasuries. If the Fed is planning to engineer hyperinflation through quantitative easing and debt monetization, China’s trillion-dollar investment in U.S. public debt could loose most of its value. However, China won’t be alone. As history has shown time and again, a nation’s middle class and many of its wealthy citizens stand to loose much of the real value of their assets denominated in currency undergoing quantitative easing.

Does anyone serving in the U.S. Congress actually understand what the Federal Reserve is planning for the U.S. economy?