Busted: Bankers and The Global Economy

June 3, 2008

Bernanke: Investor Profiteering Runs Amok

Ben Bernanke, Federal Reserve chief did an economic assessment for the International Monetary Conference is Barcelona, Spain. In his speech, he cleverly outlined, but separated the causes of the global financial crisis so as to not create any blame or responsibility. He outlined:
1. The U.S. housing boom,
2. A credit boom created by innovative lenders and investors,
3. unprecedented growth in developing and emerging market economies.

Bernanke spent an entire paragraph on blaming emerging nations, resulting in additional deficit in the industrial countries like the United States. Nowhere does Bernanke mention the burgeoning national debt of the United States, a huge flotsam of borrowed credit that continues to hold citizens of the United States and their children prisoner.

Bernanke noted “an increased appetite for risk-taking–a “reaching for yield”–stimulated some financial innovations and lending practices that proved imprudent or otherwise questionable. Regulators identified some of these issues in real time; for example, federal banking regulators issued new guidance on nontraditional mortgage lending and on commercial real estate lending.”

Strangely, bureaucrats of all kinds always suggest the panacea of additional regulation. The United States is full of endless rules, both effective and ineffective. How regulations are enforced or if regulations are enforced determines the effect. Yet, you will never hear of this truth. Lawlessness begets more lawlessness, not structure.

Bernanke rightly states that the housing boom came to an end because housing became unaffordable. Even creative financing could no longer sustain or bolster the market which was artificially inflated by “creative financing”.

Bernanke mentioned that “highly-rated corporations retain good access to credit, but credit conditions generally remain restrictive in areas related to residential or commercial real estate.” Highly-rated corporations, including corporate multinationals have achieved independence from national sovereignty and are largely unencumbered by financial credit access, much like the central bankers of the world. Multinationals can simply pick their deal from any country in the world. They are above, at least for the moment, the plight of economically strapped nations and are tied directly any nation of choice as it suits them.

Bernanke also notes that inflation remains high, but he fails to state the truth about how high inflation really is. TNTalk! notes that food price inflation is at 45% in the last nine months. That is a cruel inflation rate that most economists fail to deal with, let alone talk about. The Fed and U.S. federal government repeated fail to come clean by admitting theft by inflation.

Bernanke also points at futures commodity markets as the cause of price instability. “A rough stabilization of commodity prices, even at high levels, would result in a relatively rapid moderation of inflation, consistent with the projections of Federal Reserve governors and Reserve Bank presidents for 2009 and 2010… Another significant upside risk to inflation is that high headline inflation (perhaps referring to hyperinflation), if sustained, might lead the public to expect higher long-term inflation rates, an expectation that could ultimately become self-confirming.”

The paper tiger is unable to suggest a way to lessen the effect of profiteers in commodity markets. It would seem that investor profiteering is running the world amok.

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