Friday, April 20, 2012

Did Bernanke Prevent Another Depression?

Did Bernanke Prevent Another Depression?

Yes, likely.  But one that would have run its course within 12- 18 months if left alone to clear by market forces.

He also acknowledged that the supervision by the Fed was inadequate.

Why wasn’t he fired for this?  Perhaps because those he “supervised inadequately” pay him for exactly this level of supervision.

Once the pool of real savings starts stagnating, or worse, declining, the illusory nature of the Fed's policy will be revealed — note that the economy follows the state of the pool of real savings.

This is where we are headed under current central banking and fiscal policies.  Then the real depression will then appear in all of its force.

The actions of Bernanke to revive the economy run contrary to the basic principles of running a company. For instance, in a company of 10 departments, 8 departments are making profits and the other 2 losses. A responsible CEO will shut down or restructure the 2 departments that make losses…

Bernanke’s job is to save the banks.  His job is to save the two departments that are losing money regardless of the cost to the eight departments that are profitable.

The financial sector does not have a life of its own; its only role is to facilitate the real wealth that was generated by the wealth producers.

This was true once upon a time.  It is no longer true.  This truth has gradually eroded with the last remnant disappearing in August 1971.  The financial sector DOES have a life of its own, and it is only for illusion that the premise that banking exists to support the economy still is maintained.  I have commented on this previously here:

For those who don’t want to click through, a brief snippet:

Imagine an industry where raw materials can be produced for free by the producer, cost almost nothing for the middleman to acquire, who can also get his hands on as much of the raw commodity as desired.

Further, there are no physical limitations on the throughput of said raw materials: one worker can process 1,000,000,000 units just as easily as 1,000,000. No physical, mechanical, computing, or energy differences regardless of throughput.

Finally, the members of this industry can exist solely by trading by and between each other. While they also go outside of the industry for revenue streams, this is not necessary. Swaps, derivatives, etc., all are created and can be traded, if not solely within the cartel, certainly primarily within the cartel.

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