Posts Tagged ‘ben bernanke’

Alan Greenspan, Ben Bernanke and the Coming Economic Depression

April 5th, 2010 Comments off

Ben Bernanke, Larry Summers and Timothy Geithner, the Obama administration’s economic triad, are predicting a steady recovery from the Great Recession. The March employment numbers, suitably manipulated by PR spin masters, are being heralded as proof that the recession is over. Should we believe them? Well, let’s look back at recent history.

Just a few weeks ago, Bernanke’s predecessor as chairman of the Federal Reserve, Alan Greenspan, stated that “nobody” predicted that the subprime housing situation in the United States would lead to a financial and economic implosion. Greenspan said, “Everybody missed it, academia, the Federal Reserve, all regulators.”

Not everybody. Actually, a number of observers predicted what would ensue, well in advance of the financial disasters of 2008, which culminated in the downfall of Lehman Brothers. I include myself in that list which the former Fed chairman wished everyone would ignore. In a book published in 2006, two years before all hell broke loose on Wall Street, I wrote the following:

“The American economy will almost certainly, in the next presidential administration, come to a very hard landing. The decline in housing prices, which while ascendant created the illusion of national prosperity, is a clear and foreboding marker to a dark and austere future for the American people.”

Now that Bernanke, Geithner and Summers are preaching the gospel of economic green shoots, I published my own prediction in my book, “Global Economic Forecast 2010-2015: Recession Into Depression.”  The essence of my prediction is that massive U.S. government deficits, replicated in other major economies, will precipitate a devastating sovereign debt crisis by 2012, plunging the world into a synchronized global depression. If I am proven right, however, don’t expect the potentates of the Federal Reserve and U.S. Treasury to utter any mea culpa. If an economic depression does afflict us,  Ben Bernanke will likely mimic Alan Greenspan’s lame protestation that “nobody” could have seen such a disaster coming.

AIG Continues To Haemorrhage Bucket Loads of Cash

February 28th, 2010 Comments off

Just over a year ago, simultaneously with the implosion of Lehman Brothers, the U.S. Federal Reserve and Treasury Department decided not to let American International Group  fail, no matter the cost. That bill has been heavy; $182.3 billion of U.S. taxpayers money has been injected into AIG to ensure its survival amidst massive losses on its London-based credit default swap business. Each and every citizen of the United States has been billed more than $600 to cover AIG’s losses. In effect, the Fed and U.S. Treasury have used the zombie-like subsidized life support of AIG as a pass-though, transferring billions of dollars to investment and foreign banks. The largest recipient of American taxpayers money transferred through AIG was Goldman Sachs, which received a $12.9 billion payoff, which seems to have gone straight into bonuses for its senior executives. Was it mere coincidence that Goldman Sachs CEO Lloyd Blankfein sat in on a meeting with Ben Bernanke and Hank Paulson to decide on the scope of the taxpayer’s subsidy to AIG?

The Fed and Treasury, which decided on their own to effect a bailout of AIG without any input or sanction from Congress and the American people, have assured us that their infallible judgement can be relied on to make the correct decision for the U.S. taxpayers. Well, that “infallible” decision-making has left the American people tied ball and chain to a private corporate entity that is still losing vast amounts of money. AIG has recently reported its Q4 results: a loss of $8.9 billion. This may be a sign of more red ink to come, as the global economic recovery falters amid mounting concern over high unemployment and sovereign debt crises. AIG apparently is not done as a costly financial liability for the citizens of the United States, despite the fact that not a single one of them had the opportunity to vote in favor of this hideously expensive experiment in corporate socialism.

Ben Bernanke Wins; America Loses

January 29th, 2010 Comments off

Despite all the rhetorical flourishes and grandstanding engaged in by that once august body, the U.S. Senate, when it came time for the rubber to meet the road, they voted overwhelmingly to reappoint Ben Bernanke to a second term as chairman of the Federal Reserve. Let us be clear as to what those 70 senators voted for, in deciding to support President Obama’s preference that Bernanke remain at the helm of the Fed. Failure on a monumental scale has been conspicuously rewarded.

While Bernanke’s predecessor has been rightly condemned for his loose monetary polices and dogmatic conviction that unregulated market fundamentalism is always correct, the current Fed chairman has demonstrated continuity with those now discredited policies, along with a numbing myopia in failing to see a train wreck coming, despite ample warning.

In October 2005 Ben Bernanke appeared before Congress, only days before being nominated to succeed  Alan Greenspan.  Growing concern had already emerged regarding the unsustainability of what was obviously a massive housing asset bubble,  in large part facilitated by  the Fed’s easy monetary policies, fully supported by Bernanke. When questioned on the perception that the residential housing market was a growing danger to the nation’s economic health, the supposedly brilliant and perceptive Ben Bernanke stated that the escalation in U.S. housing  prices did not constitute an asset bubble, and was in fact based on sound economic fundamentals.

Sound economic fundamentals?

In an earlier post, I described Bernanke’s statement to Congress in 2005 as the worst economic prediction in recorded history. Yet this same flawed individual has now been  anointed by the U.S. Senate to have another go at deconstructing the U.S. economy.  A proven failure  now has another four years as head of the world’s most powerful central bank, with executive powers that in may respects exceed those of the president’s, with virtually no meaningful legislative oversight.

The justification for reappointing Ben Bernanke rests on a flimsy pretext. He supposedly saved the world from a global financial meltdown after the collapse of Lehman Brothers in the fall of 2008. This ignores his conspicuous role as a principle architect of the global financial and economic crisis. In effect, he is glorified for indebting  generations of Americans yet unborn for covering the costs of his colossal errors in judgement. Furthermore, the Senate has failed to take cognizance that the very debt load they salute Bernanke for creating  as part of his “heroic” rescue mission has laid the seeds for a far more dangerous  phase of the global economic crisis. The risk of a paralyzing sovereign debt crisis is growing, raising the threat of national insolvency. The current fiscal crisis in Greece, and the economic purgatory being experienced by the people of Iceland, are clear warning signs on the economic horizon of what lies in wait for the American people. Maintaining Bernanke as Fed chairman magnifies the risk that a sovereign debt explosion will occur, creating a whole new level of economic devastation across the United States.

The lopsided vote by the U.S. Senate in favour of reappointing Ben Bernanke was  a clear triumph for the disaster-prone Ben Bernanke. As for the American people, this result is nothing less than a total, unmitigated defeat.

U.S. Real Estate Market Still Looks Weak

January 26th, 2010 Comments off

The global economic and financial crisis was unleashed when the American real estate bubble, especially in connection with sub-prime housing mortgages, burst. Among several factors that facilitated this disaster, one of the prime ones was the loose  monetary policies of Ben Bernanke, chairman of the U.S. Federal Reserve. While speculation continues on the probability that the Senate will/will not reconfirm Bernanke for a second term as Fed chairman, the same level of monetary indiscipline is still in practice at the Federal Reserve, complemented by the easy fiscal polices of the Obama administration as well as Timothy Geithner`s Treasury Department. Meanwhile, signs that the real estate market in the USA remains very weak continue.

A report on existing home sales has just been released, indicating that in December there was a decline of 16.7%. Sales rose in the previous three months, but that was only due to significant tax credits, courtesy of the  taxpayers of tomorrow, who will be burdened with staggering levels of national debt. Using borrowed money to fund short-term gimmicks cannot provide a cure for long-term structural imbalances in the U.S. economy.

Another jolt points further at commercial real estate’s accelerating descent in valuations and rising rates of foreclosure. In 2006, Tishman Speyer, a major CRE investment firm located in New York City, put together a deal with a consortium, purchasing Manhattan’s giant Stuyvesant Town and Peter Cooper Village apartment complexes from Metropolitan Life for $5.4 billion, the largest real estate deal at the time of its consummation. Over the weekend, Tishman Speyer went into default on the property, handing it over to its creditors. The number of investment interests that have lost money on this deal ranges far and wide, not only in the United States but across the globe. Among the losers is the Church of England, which has just seen £40million go down the proverbial  rat hole. In October, the Fitch ratings agency valued Tishman Speyer’s original $5.4 billion property as having a current value of a mere  $1.8 billion. This represents a loss of  two thirds in valuation in less than four years, a metaphor I should say for the entire U.S. residential and now commercial real estate casino marketplace.

Economic Projection 2010: Iran is the Wild Card

January 11th, 2010 Comments off

The global economic crisis has already inflicted crippling blows on major advanced and emerging economies. Only massive levels of public indebtedness, and wanton quantitative easing by central banks, has prevented (temporarily, in my view) the onset of another Great Depression. However, geopolitical events of an unpredictable nature can  upset even the best laid plains of a Ben Bernanke, Timothy Geithner and their counterparts across the globe. The wild card in the mix is undoubtedly Iran.

I have commented before on the Iranian nuclear program, and the possibility of an Israeli pre-emptive strike on Tehran’s nuclear facilities. I’ll repeat my earlier conclusion, which is, apart from the demerits or merits of using military means to address the Iranian nuclear challenge, the inevitable response by Iran’s regime will create economic havoc, particularly with respect to oil prices.

The current issue of The Economist has an illuminating piece, entitled “The gathering storm,” which makes a persuasive case for 2010 being the year that something definitive will happen on the Iranian nuclear front. Should that prove to be the case, the resulting geopolitical reverberations may be the final nail in the coffin of the global economy. Worst case scenario: regional war in the Middle East, massive disruption of oil shipments from the Persian Gulf, resulting in a severe global economic depression. Not even money-printer Ben Bernanke will be able to dodge that bullet.


Fed Chairman Ben Bernanke Named Time’s “Person of the Year”

December 17th, 2009 Comments off

The American weekly news magazine, Time, has an annual ritual of naming the man, woman, or people of the year. Its selection for 2009 is now official, and it is none other than  the Chairman of the U.S. Federal Reserve, Ben Bernanke. Here is Time magazine’s rationale for picking Bernanke:

“The main reason Ben Shalom Bernanke is Time’s Person of the Year for 2009 is that he is the most important player guiding the world’s most important economy. His creative leadership helped ensure that 2009 was a period of weak recovery rather than catastrophic depression, and he still wields unrivalled power over our money, our jobs, our savings and our national future. The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world.”

I think the praise being heaped on Bernanke by Time is premature, to say the least. No doubt, the massive borrowing and money printing facilitated by the Fed did prevent a total financial collapse in 2008, after the collapse of Lehman Brothers-a disaster that Time conveniently forgets Bernanke’s monetary policies helped to facilitate. The consequences of Bernanke’s policies, all born of extreme desperation, are totally off the radar screen as far as Time Magazine is concerned. In my view, Bernanke has sown the seeds of a far worse economic catastrophe than that which he is praised for preventing. Bernanke has begun a process that will destroy the U.S. dollar, and bring about the sovereign fiscal collapse of the United States. In effect, Ben Bernanke has not saved the economy; he has postponed one disaster in order to enable a catastrophe that will be far worse.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,   

More On Fed Chairman Ben Bernanke and His Disastrous Economic “Forecast”

October 17th, 2009 Comments off

It is said that those whom the Gods intend to destroy they first drive mad. Is it not madness to reappoint to a second term leading the most important financial and economic institution on the planet, the Federal Reserve, a man with a forecasting record as disastrous as that of Ben Bernanke?

As a follow-up to my recent post on economic forecasting, below is the original Washington Post article by staff writer Nell Henderson, describing the intellect of Ben Bernanke in action during his presentation before Congress just prior to his nomination by President George W. Bush to succeed Alan Greenspan as Fed Chairman.
Read this article in wonderment, and try to comprehend how the author of such a catastrophic forecast on the implications of the housing price boom in the U.S. could be chosen by President Barack Obama to serve another term.



Bernanke: There’s No Housing Bubble to Go Bust
Fed Nominee Has Said ‘Cooling’ Won’t Hurt
By Nell Henderson
Washington Post Staff Writer
Thursday, October 27, 2005; Page D01
Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.

Bernanke’s thinking on the housing market did not attract much attention before Bush tapped him for the Fed job Monday but will likely be among the key topics explored by members of the Senate Banking Committee during upcoming hearings on his nomination.

Many economists argue that house prices have risen too far too fast in many markets, forming a bubble that could rapidly collapse and trigger an economic downturn, as overinflated stock prices did at the turn of the century. Some analysts have warned that even a flattening of house prices might cause a slump — posing the first serious challenge to whoever succeeds Fed Chairman Alan Greenspan after he steps down Jan. 31.

Bernanke’s testimony suggests that he does not share such concerns, and that he believes the economy could weather a housing slowdown.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,

Predicting Economic Trends From Nostradamus to Ben Bernanke

October 13th, 2009 Comments off

History is littered with flawed forecasts on economic trends. And where some have proven to have been surprisingly accurate in their glimpse into the financial and economic future, these projections have usually been scorned, until too late. Our current global economic crisis is a case in point.

In  my view, the most accurate long-term economic forecast of all time was provided by the legendary Renaissance French seer, Nostradamus, usually more renowned for his prophecies on the end of the world. In 1548, Nostradamus predicted, “From Albion’s shore shall come a marvellous contrivance: a carriage of silence bearing the arms of Rolles de Roi.”  Apparently, Nostradamus saw the creation of the Rolls Royce motor car in England, and its reputation for silent and prestigious personal transportation, more than three centuries before the invention of the internal combustion engine.

In contrast, one of the most inaccurate and inept economic forecasts of all time was delivered relatively recently, by the Chairman of the U.S. Federal Reserve, Ben Bernanke. In October 2005 Bernanke, who had recently succeeded Alan Greenspan as chairman of the Fed, issued a confident prediction that the unprecedented rise in U.S. home prices did not constitute an asset bubble, and was based on sound economic fundamentals. Oh well.

Forecasting economic trends is both highly difficult yet absolutely essential. Operating complex economies and businesses without accurate trend analyses is like flying blind without instruments. A major difficulty with many recent economic forecasts is that they are mired in ideology.

In the near future, I will be offering my own long-term economic forecast. It should be finalized within a few weeks. Readers of my blog should stay tuned for further information.

Lehman Brothers One Year After Its Collapse

September 7th, 2009 Comments off

On September 15, 2008 the supposedly safe, perpetually prosperous world of post-industrial capitalism blew itself up when Lehman Brothers filed for Chapter 11 bankruptcy. The iconic Wall Street investment bank was forced into this act of extremis when the collapse of the subprime mortgage market in the United States turned the securitized mortgage backed debt obligations engineered by the wizards on Wall Street into toxic assets, in the process extinguishing most of the storied investment banks in the United States, including Bear Stearns and Merrill Lynch. In those previous cases, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke cobbled together a pseudo rescue, whereby these two firms were absorbed by JP Morgan Chase and Bank of America respectively, with massive financial aid and guarantees against bad debt generously provided courtesy of the American taxpayer. However, when Lehman Brothers stood on the precipice, the economic policymakers in Washington were confronted by the issue of moral hazard, and the growing public distaste with the concept of “too big too fail,” the justification previously issued by Paulson and Bernanke to prop up failing Wall Street firms.

The U.S. Treasury and Federal Reserve made a decision to allow Lehman Brothers to fold, assuming its demise would not pose a systemic risk to the global financial system.  Shortly afterwards, AIG was also on the verge of bankruptcy, due solely to the exposure of its Credit Default Swap operation spearheaded from its London office. Treasury Secretary Paulson stated that AIG was so large a factor in the global financial system, its business liquidation could not be allowed to occur, regardless of the subsidies required to keep it afloat. Through the middle of 2009, the U.S. government would inject in excess of $180 billion dollars into AIG.

The calculation made by Bernanke and Paulson that Lehman Brothers was expendable, especially in light of the measures taken to save AIG, Merrill Lynch and Bear Stearns, not to mention Fannie Mae and Freddie Mac, was destined to be proved fatally flawed, and in rapid order. As with so much else about the Fed and Treasury Department in terms of assessing the systemic impact of the collapse of the subprime mortgage market and its related financial derivatives, they badly underestimated the destructive forces that had been unleashed upon the global financial system by the collapse of Lehman Brothers. When Lehman Brothers imploded, its debris virtually froze the entire global interbank lending mechanism, and brought the flow of credit to a virtual standstill.

An immediate consequence of the disintegration of Lehman Brothers was the accelerating rise in the LIBOR and Ted Spreads, reflecting frozen global credit markets saturated with counterparty risk aversion. Money market funds were being depleted at a dangerously rapid pace, and economic indicators across the globe were heading south at a pace that soon became a free fall. The possibility of another Great Depression was openly being talked about, as it became abundantly clear that Lehman Brothers and its derivatives were far more embedded with the global financial system than the supposedly smart men of finance and economics who ran the Treasury and Federal Reserve had led themselves and the public to believe.

The rest was history. Paulson and Bernanke, in a state of panic, compelled a terrorized Congress to borrow $700 billion and hand it over to Treasury, supposedly to buy up toxic assets polluting the balance sheets of the nation’s banks, under the auspices of a program that came to be known as TARP. Once Paulson got his money, he changed direction, choosing to inject the TARP funds directly into the banks, as opposed to buying toxic assets. The Fed engaged in an unprecedented degree of monetary measures, becoming the lender to Wall Street and corporate America of last resort.

The collapse of Lehman Brothers undoubtedly was a major factor in the November 2008 presidential election, which witnessed the historic triumph of Barack Obama. The new president maintained many of the policies put in place by Paulson after the collapse of Lehman Brothers, reappointed Ben Bernanke as Federal Reserve Chairman, and brought in a $787 billion economic stimulus package, also based on borrowed money, to help reverse the worst recession the United States has endured since the Great Depression.

One year after Lehman Brothers disintegrated, the entire world is in the grips of the most severe synchronized global recession since World War II. We are told, however, that things could have been much worse, if the “brilliant” policymakers who had initially misjudged the extent of the economic and financial crisis had not taken such radical steps, all of which have involved an unprecedented level of public debt, and the bailouts generously awarded to the most reckless Wall Street firms. Also, one year afterwards, the extravagant executive bonuses are still being sprinkled on the Wall Street crowd, at levels that rival pre-meltdown levels.

Unquestionably, the demise of Lehman Brothers was a seminal point in global financial and economic history. I do not believe, however, we have witnessed the full consequences of its collapse. I fear that the worst is yet to come.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,

The Federal Reserve Suffers a Rare Defeat

August 25th, 2009 Comments off

Under the tutelage of Chairman Ben Bernanke, the Federal Reserve system has achieved the heights of power, while simultaneously the economy it  presides over has descended to the depths of  despair. This Zen paradox sums of the inexplicable success of Ben Bernanke. Having ignored or mistakenly assessed all the warning signs that the American housing bubble had burst and was set to take down the Wall Street investment banks, the panicky and massive policy measures undertaken by Bernanke in the wake of the collapse of Lehman Brothers last year have made him the improbable hero of the global financial and economic crisis. With Bernanke set to be reappointed as Fed Chairman by President Barack Obama, it seems both he and the Federal Reserve have successfully consolidated their monetary and economic omnipotence.

Yet, some cracks in the foundations of the Fed’s  previously unassailable power have begun to emerge. Manhattan Chief U.S. District Judge Loretta Preska has issued a ruling in the case of Bloomberg LP v. Board of Governors of the Federal Reserve System that marks the first challenge to the virtual dictatorship on monetary policy that Bernanke has been able to impose on Congress and the media. The lawsuit had been filed by the Bloomberg news organization after the Federal Reserve refused to disclose the recipients of $2 trillion in emergency loans it provided to troubled banks. The rationalization used by the Federal Reserve for its refusal to follow the legal requirements of the Freedom of Information Act truly defines the meaning of arrogance. If the American taxpayers, who are ultimately on the line for the loans, were to know the identity of the banks receiving financial aid from the Federal Reserve, they would act irresponsibly and perpetuate a run on those very institutions, claim Bernanke‘s minions. In other words, Nixonian logic applied to the massive indebtedness of the American taxpayer, who is not entitled to know for whom the balance sheet of the Federal Reserve is being overloaded with toxic assets.

In its lawsuit, Bloomberg stated that disclosing the beneficiaries of the Federal Reserve‘s largesse is “central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression.”  However, Bernanke and company are not interested in illuminating the public in their understanding of the government’s role in the crisis, especially that of the Federal Reserve. Full disclosure might very well contradict the image being crafted by the Fed’s aggressive public relations program to portray Ben Bernanke as the saviour of the American economy and global financial system.

The Fed may still appeal Judge Preska’s ruling. However, if the ruling prevails and becomes precedent, it will mark a rare but important defeat for the Federal Reserve’s cone of silence and lack of transparency.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,