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Bernanke Fiddles
In the Friday June 27 "The King
Report" Bill King cuts right to heart
of the matter in the wake of the Fed's
recent weak-kneed non-decision. The
'horns' of Bernanke's dilemma grow
sharper and more urgent with each
missed opportunity to act like a
grown-up.
God help us all!
Bill King, excerpted from "The King
Report" Friday, June 27, 2008:
"The most important fact about the
FOMC soiree (June 24-25) was the Fed/Bernanke
chose not to act on inflation because
it believes, or is using as an excuse,
that inflation will soon ebb because
the economy stinks. But this has been
Bernanke's strategy since he took over
the Fed - 28 months ago.
While Bernanke fiddles, an
inflationary fire is consuming the
globe
and it is intensifying because real
interest rates are decisively negative
and get more negative each passing
day.
"Bernanke has not hiked rates because
he fears the US financial system is
too fragile.
Yet when he did nothing to arrest
inflation, commodities surged and the
dollar tanked; this will exacerbate
inflation. If there was even a
hint of a beneficial tradeoff for
ignoring inflation, Ben's inertia
might be justified.
"However, stocks collapsed, led by
financials; and leading US companies
are now face increasing bankruptcy
concern. And we know from recent
experience that fear of bankruptcy can
become a self-fulfilling prophecy.
"Ergo, Bernanke is faced with a
choice. He can remain inert and watch
the inflationary recession intensify
with commensurate financial duress and
a dollar collapse or Ben can try to
legitimately boost the dollar and
arrest inflation, which will worsen
economic and financial conditions.
"Ben's choice is to watch conditions
worsen and have the dollar collapse or
to save the dollar and watch
conditions worsen. It's conceivable
that a dollar collapse would produce
even worse conditions than hiking
rates and restricting credit to save
the dollar. It seems like a
relatively simple choice, especially
when one considers the calamity that
could develop with a dollar collapse."
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