Sunday, November 7, 2010

The Case for Impeaching Ben Bernanke

The recent act of $600 billion in further Quantitative Easing has created another celebration in the stock and commodities market and why shouldn't it?  The Fed has come out and indicated it was going to support all the speculation the banks could bring into these markets, paving the way for more liquidation of public positions and more paying of massive bonuses to Wall Street players.  The problem is that the bubbles have already burst and it has been shown repeatedly that making money for insiders under fictional values has done nothing for the common American, nor has it increased their purchasing power.  When the end of the bubble comes, we are stuck with the collapse of former high flying entities and harm to the economy at large.  Yet, the Fed is either blind to this fact or it is engaged in conspiracy of sort against the American economy in support of otherwise bankrupt bankers and institutions.  All the while, the prime players suck more compensation out of a broken system, leaving the losses for the economy at large and Americans in general to absorb.

The real holders of the capital in the United States are being penalized to the extent their income from savings suffers or to the extent that they suffer future losses that are sure to come once the commodity corners collapse or the junk bonds seek their proper value of zero.  Also, common Americans are being sent a bill for these corners and manipulation through higher temporary prices for any commodity or good that can be squeezed by these corners.  Bernanke has done nothing more than add additional funds for bankrupts to push prices for common Americans upward, allowing the speculators to play at little or no current cost.  The delusion that one can finance something forever at zero throws out the level of debt that eventually has to be liquidated.  But, in the short term, the corners can push up the prices of what they hold and extract from the economy a toll.  The goal is to extract a fee from the use of everything from housing to food by a group that does absolutely nothing in the long term to create additional or current supply.  This stealing on the margin cannot go on without cooperation from the banking system.  Very little money of the players is at risk and the bills for failure after a temporary success will fall on the taxpayer.

The lower the return on pension assets, the more money is needed to fund pensions.  A person who has saved money all their lives will find their savings to be insufficient once interest rates are cut to zero or the risk of seeking artificial returns hits the assets.  The mortgage bubble is merely the first layer of loss that will eventually show up in stocks, junk bonds and other alternative investments.

The biggest crime of all is the front Bernanke is providing for the big banks at the expense of their depositors. The big banks are insolvent, but the Federal Reserve money allows them to continue to write hot checks to continue the frauds they have perpetuated in the past and the new ones they are engaged in the present.  For every liability on the books of the banks in the form of deposits and bonds, there is a corresponding asset.  Calling the asset cash doesn't further increase the capacity of the banks to make their other assets good.  At best they get to play more speculative games, attempt to draw more interest out of an over-indebted world and pay their management and key employees more bonuses based on temporary gains that will turn to losses.

The point is the depositors own the big banks, not the bankers or the shareholders and the actions of Bernanke are designed, not to re-establish the banks, but to allow the bankers to resume looting their depositors.  When this all collapses, which it will, the depositors will get the bill.  There won't be a bailout, but instead a debt that only the depositors can pay to themselves.  In the meantime, speculative US credit is flowing around the world to produce more bubbles for the bankers to exploit for profits that will turn to losses.

If this was indeed a program to rescue the US economy, it wouldn't be the crime that I propose it is.  I contend that there were no reserves in the banking system when this mess began, only cashed checks and interbank credit based on the creditworthiness of the banks.  Minsky wrote in the 1980's that the assets to produce new money had been gone since the 1970's and the banks were using financial gadgets to balance their books.  These gadgets were no better than the solvency of the banks themselves.

We don't have a liquidity problem, but a solvency problem in banking.  Bernanke seems to think he can invent capital by providing credit, but at best he is taking the best assets out of the system and doing nothing to restore the balance sheets.  This provision of false solvency is making the problem worse, because the banks aren't earning what they claim to be earning, but instead are hiding losses behind this liquidity.  In the meantime he is providing a means of capital flight from the United States in search of speculative profits that will disappear as Eugene the Jeep disappeared in Popeye cartoons.

So, it is this aiding and abetting of continued criminal fraud, the looting of depositors to support continued criminal activity and the creation of another asset bubble that only a few will profit from and scores will sustain massive and in some cases, total losses that I propose Mr. Bernanke be impeached.  Acting in a capacity to continue fraud in action and to convert the property of one to another is a crime.  This act is far from covert, but is being done in front of God and everyone.  The future of the United States depends on the United States government moving to prevent such activity, not to support it.  The future of the American middle class should not be sacrificed on the altar of central bank schemes to protect bankers and their ill-gotten wealth.


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pandora said...

A great piece, and sadly, you are right. You may have already seen this Quantitative Easing Explained video on you tube, but it's still good!

By the way, came to your site via your comment on Acting Man - again I agree with every word you wrote.

I remember reading Jarad Diamond (Guns Germs and Steel and Collapse) - he maintains that societies/countries/regimes will collapse governed by seven key indicators - one of which is the failure of the elite to feel or experience the predicament or suffering of the broader group - alas this is exactly what is happening now.