Wednesday, October 31, 2012

Ben Bernanke: Hamburger Manipulator

Just kidding. The title of the subject article by author Mary Anastasia O’Grady is “Ben Bernanke: Currency Manipulator.”  I only offer hamburgers to make a point – where else in the economy is one person tasked with complete authority to manage a single commodity, the single-most important commodity necessary to enable our division-of-labor dependent standard of living? 

Even the OPEC cartel does not hold this much control over oil – and as important as oil is, it pales in importance to the economy relative to the importance of money, credit, and currency.

Of course, Bernanke IS a currency manipulator, but inherently that is the job description.  There is no other commodity on earth subject to the manipulation that currency is subject to – even in other areas supported by a heavy government hand, the manipulation isn’t so thorough.

I haven’t read any articles that take to task the hamburger manipulator.  There isn’t one.

The author uses this opportunity to chide Romney about his promise to take China to task on day one for manipulating its currency:

To be consistent, Mr. Romney should call out the Federal Reserve on day two for engaging in its own currency manipulation by way of "quantitative easing"….

The author goes on to identify some of the damage done by Federal Reserve currency manipulation.  Primarily, the focus for this author is the damage done to third world economies by the Fed actions.  The author dutifully suggests that Bernanke should more properly take into account the global ramifications of his actions. 

In Tokyo, Mr. Bernanke spoke to the world the way former U.S. Treasury Secretary John Connally spoke to the G-10 in Rome in 1971 after the U.S. abandoned the Bretton Woods agreement that had tied the dollar to gold: Get over it. We do what we want.

That attitude wasn't constructive for Americans or the rest of the world. If some future U.S. president intends to restore American prestige in economic leadership, restoring Fed credibility as a responsible manager of the world's reserve currency is a necessary first step.

Can adult human beings, supposedly trained in economics, write the words “a responsible manager of the world's reserve currency” without falling over in laughter?  It may not be Bernanke, but somewhere on earth there is someone knowledgeable and wise enough to be the responsible manager over the quantity and price of the singularly most important commodity ever devised by man.  The one commodity that makes life on earth as we know it possible.  The one commodity more important that energy, steel, wheat, or football (soccer to my Yankee friends).  Well, maybe not football.

Somewhere on earth there is a man wise enough to know more than all the market actors on earth combined on this subject of money.  He just hasn’t been found yet.

That such a phrase can be written with a straight face – and read approvingly by countless millions with an equally straight face – is a damnation of the level of education in society.  And it is a testament to the level of control that those in power have achieved via the purposely inept education system.

The currency manipulation is inherent in the institution.  Either the author doesn’t understand this, or the author doesn’t want her readers to understand this.  The author supports the institution of central banking – only it should be central banking without manipulation. 

Such a central bank is impossible to establish.  Inherently, when giving monopoly power to an institution – by definition, a monopoly established and supported by government force – manipulation of the commodity subject to the charter will occur. 

For what other reason is the monopoly established?  Those in power do not like the way in which the free market deals with subject X.  Therefore they establish a monopoly entity to manage subject X in a manner different than would the market.

This is manipulation.  It is inherent in any monopoly.  The author is complaining about something that cannot be “fixed” with supposedly better policy.  The flaw is in the establishment of the institution.

There is only one solution for this manipulation:  End the Fed.

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