Great Depression Online Archive Issue:

Mountebanks and Morons

Great Depression Online
Long Beach, CA
June 26, 2009

Inside This Issue You Will Discover…

*** Still Fumbling with the Monetary Controls
*** Notably Ambivalent
*** Mountebanks and Morons
*** And More

Still Fumbling with the Monetary Controls

On March 28, 2007, before the Joint Economic Committee of Congress, Federal Reserve Chairman Ben Bernanke testified that “…the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”

Then on May 17, 2007, while addressing a conference on bank structure, Federal Reserve Chairman Ben Bernanke said, “…the effect of the troubles in the subprime sector on the broader housing market will likely be limited.”

We bring this up to point and laugh.  For here, on the eve of the biggest financial bust since the Great Depression, the world’s most powerful banker was clueless to the damage the subprime iceberg had already caused to the economic titanic.

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What’s more, two years later, and after Bear Stearns and Lehman Brothers went belly-up…after the $100 billion AIG bailout…after the DOW crashed 55 percent…after a few stimulus bills…and after the U.S. economy’s lost 6 million jobs, Bernanke’s still fumbling with the monetary controls.

Does he now have a clue?

Notably Ambivalent

On Wednesday the world stopped for a moment to listen for an utterance.  The Federal Open Market Committee, Chaired by Bernanke, had just finished its two day meeting and it was time for the official edict…

“Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing.

“In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 0.25 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds for an extended period.”

But that’s not all…

“As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year.  In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.”

Translation: Despite many claims otherwise, this economy still stinks.  So we’ll continue to let banks borrow money for practically free and we’ll attempt to suppress mortgage rates until we engineer another bubble to bail us all out.

Following the FOMC statement, no one seemed to care much…particularly Wall Street, which was notably ambivalent.  Ten-Year Treasury yields ended the day up 0.03 percent and the DOW fell just 23 points.

Mountebanks and Morons

Lastly, House Representative and Presidential Candidate Ron Paul, in his weekly radio address Monday said…

“An economic collapse seems to be the goal of Congress and this administration.”

“Paul,” reported Newsmax, “noted that, as Americans struggle through the worst economic downturn since the Great Depression, the foreign aid and International Monetary Fund appropriations in the spending bill passed last week can be called an international bailout.

“The emergency supplemental appropriations bill sends:

- $660 million to Gaza
- $550 million to Israel
- $310 million to Egypt
- $300 million to Jordan
- $420 million to Mexico
- $889 million to the United Nations for so-called “peace-keeping” missions
- $1 billion overseas to address the global financial crisis outside U.S. borders
- $8 billion to address a potential pandemic flu, which he said could result in mandatory vaccinations “for no discernable reason other than to enrich the pharmaceutical companies.”

“Perhaps most outrageous, Paul said, is the $108 billion loan guarantee to the IMF.”

Here at the GDO we’re not convinced Congress and the administration are sinister enough to pursue the goal of economic collapse.  But Paul does have a point…this spending is outrageous, especially when we’re giving money to other countries that we don’t have.

Instead we believe Congress feels they’re acting with the best of intentions…with benevolence and generosity.  It’s also in line with their Keynesian orthodoxy…that somehow, someway, we can spend our way out of debt.

We know it’s absurd.  But they love the idea.  And they’ll do everything to prove it right…even if it ends in economic collapse.

But what should we expect…

Congress are ninety percent mountebanks…and the other half are morons.

Sincerely,

M.N. Gordon
Great Depression Online

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