US Debt And Bernanke Debt, On The Same Track

URL and to post comments: http://dollarvigilante.com/blog/2014/10/9/ben-bernanke-is-addicted-to-debt-and-gambling-and-he-needs-h.html Thursday,October 09, 2014 “I recently tried to refinance my mortgage and I was unsuccessful . . ." - Ben Bernanke Ben Bernanke is addicted to a drug called credit and he can't get enough.  Former Federal Reserve Chairman Bernanke disclosed this month that he was turned down when he tried to refinance his home. I had to double-check to make sure I was not reading The Onion. I was not. It was Bloomberg. Bloomberg News reported that Bernanke, speaking to a crowd in Chicago, revealed, "I recently tried to refinance my mortgage and I was unsuccessful in doing so." After the audienced laughed, Bernanke responded: “I’m not making that up.” “I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said. As head of the central banking mafia's Federal Reserve System, Bernanke was publicly paid $199,750 per year and earned $250,000 in March for his first public speaking engagement since stepping down in January. Bernanke also apparently received $1 million to write his memoirs. Bernanke has a $672,000 mortage on a three bedroom townhouse he owns near Capitol Hill, a mortgage he has refinanced two times, most recently last September.  He and his wife bought it for $839,000 in 2004.  That means that after ten years Bernanke managed to pay down 24% of the total mortgage amount... meaning, if he kept up that pace, not including compound interest, it would take him more than forty years to pay off his house. Ben is now 60 years old and he wants another 30 years to pay it off!  That means he is hoping to pay it off by the time he is 90.  It's almost no wonder he got declined! The failure to refinance his mortgage is just one part of the Bernanke family's problem with debt, as he recently testified to Congress that his son, who is in medical school in New York, will likely rack up $400,000 worth of student loan debt to get his degree.  It appears he has enough money to pay off the mortgage given his book income and speaking fees (although after tax it may not be enough) and Ben may be just taking advantage of the tax deduction on mortgage payments as well as using his free cash to gamble in a stock market that is a pin prick away from a massive collapse. If that is in fact the case, and the market does collapse by 30-50% (as many like Jim Rickards are expecting), then Ben Bernanke will be wiped out.  Which would be rather appropriate as so would tens or hundreds of millions of others! So, in that respect you do have to give credit (no pun intended) to Ben.  He is walking the talk.  He believes everyone should go into massive debt and speculate in things like the wildly overvalued stock market and he is doing it himself.  As we've said before, Keynesianism is a form of brain damage and Ben appears to have profound Keynesianism dementia. He seems to believe that there should never be a limit to how much debt one should have.  "I think it would be a good thing if we didn't have it," Bernanke once said of the debt ceiling.  His policies at the Fed have caused a large amount of the US public to follow in his footsteps, unfortunately. Overall borrowing by the US consumer rose $13.5 billion in August following a revised $21.6 billion increase in July, the Federal Reserve reported Tuesday. The rise has pushed total consumer debt to a record level of $3.25 trillion. Contrast Bernanke's and the American public's position with that of Ron Paul, whose net worth was calculated at between $2.1 million and $5.2 million in 2012 and has no debt that we can find. The former Texas Congressmen has stakes in companies like Barrick Gold Corp, Newmont Mining Corp and Pan American Silver corp. He has done very well over the years. Paul started investing in the gold sector in the 1970's!  The former congressman's portfolio looks much more like our portfolio in the TDV Newsletter than Bernanke's portfolio of debt. Knowing that helps me sleep at night.  And so, maybe it was a good thing Ben was turned down for yet another refi of his mortgage. He is a man suffering from the plague of two addictions. His addiction to debt which fuels his addiction to gambling. Hopefully one day soon he makes that call to deal with his problems.  Unfortunately, the problems he has created for everyone else in the US by creating easy money and the ability for the US government to go into massive debt will not be so easily fixed.  There is no hotline or remedy for that except what we prescribe here and to get into precious metals and expatriate as much of your wealth (and self) outside of the blast zone of the US as possible. When this debt-fueled gambling spree ends it will end in tears for all except those who prepared themselves for it and protected their wealth and self from its inevitable collapse. Comments? Join us at TDV!

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.

Janet Yellen Against Obama's Man Summers

Summer's End: Obama Inadvertently Buries His Man

Thursday, 01 Aug 2013 04:48 PM

By Larry Kudlow

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The Federal Reserve made news this past week in two separate events. The first came with the Fed’s policy meeting on Wednesday, when the central bank gave no hint that it would taper or slow its QE bond purchases any time soon.

Wall Street believes the Fed will taper in September. My thought is that tapering is likely to come in December, or perhaps not until the New Year. (More on that logic in a moment.)

The other big Fed event occurred when President Barack Obama gave a strong defense of his former top economic adviser, Larry Summers. In front of a full caucus of House Democrats, Obama offered a full-throated rebuttal to the attacks of left-wing and feminist groups who have been coalescing around current Fed vice chair Janet Yellen. Obama told the Democrats “not to believe everything you read in the Huffington Post.”

Of course, with Ben Bernanke’s term ending in January, this all about the debate over a successor to the Fed chair. It’s a timely topic. But here’s the problem for Mr. Summers: Even though Obama has yet to make a choice on the matter, the president’s strong defense of Summers reduces the likelihood that Summers will be appointed. Why? Because Summers now looks like Obama’s man, even if the president hasn’t yet said so.

Consider this: If Summers looks like Obama’s guy at the Fed, what does that do to the all-important principle of Federal Reserve independence? Remember Arthur Burns? Dick Nixon’s guy at the Fed way back in the early 1970s? What a catastrophic inflationist period that turned out to be as Burns pumped money into the economy in order to get Nixon re-elected. Nobody wants to repeat that. And that’s why Obama basically terminated a Summers nomination when he went to bat for him on the Hill. When it comes to appointing Fed heads, I’ve never seen anything like it.

Now, I’m not weeping about any of this. Janet Yellen and Larry Summers, two very smart people, are nonetheless Keynesian fine-tuners when it comes to monetary policy. And we’ve all had enough fine-tuning from Ben Bernanke. It’s probably not going to follow from a Fed nomination by a Democrat president, but what U.S. monetary policy really requires is a clear set of rules to stop the ad hoc, pillar-to-post nature of Federal Reserve operations.

Maybe Bernanke will turn out to be right. Maybe he’ll go down in history as our economic savior. But in the long run, whether it’s a dollar backed by gold and commodities, or a nominal GDP target, or the John Taylor rule, confidence in the U.S. dollar and economy will be greatly enhanced if monetary policy is guided by a clear set of rules. Neither Yellen nor Summers will provide that.

Turning back to the issue of Fed tapering (or tightening), I think the central bank is going to take its time. Indeed, the economic trends suggest there should be no rush to end quantitative easing. Like many conservatives, I didn’t like QE in the first place. But we’re stuck with it. And the trick now is to get out of it without inflicting more economic damage. My suggestion is simply this: Go slowly. 

The Fed policy committee made no mention of tapering in its published directive this week. And the recent economic trends show an extremely weak recovery. Over the past year, real GDP has grown by only 1.4 percent, with inflation at 1.5 percent, according to revised GDP reports. Nominal GDP growing at only 2.9 percent is virtually a post-WWII low. It’s a rate that’s more appropriate for recessions than recoveries.

And the Fed itself slightly downgraded the economy this week. It also noted that inflation is below target and is worried that the recent rise in long-term interest rates has damaged the recovery in housing and auto sales.

Yes, there has been better news on the jobs front. But business capital equipment investing, which is the heart of job creation and growth, remains anemic. The 2013 spending-cut sequester has not produced economic catastrophe, but the economy is facing substantial tax increases on upper-end earners and investors. That’s a big headwind.

So let us hope the second half of 2013 produces better growth than the first half, as many economists predict. But until that evidence comes in, let’s also hope the Fed holds its fire and leaves the tapering idea alone.

Then perhaps Mr. Obama will consider a Fed candidate who understands the importance of policy rules and consistency for a strong King Dollar and a much more confidant recovery.

Who Will Be The Next Fed Chair

Who will win the Fed Chairman/woman is coming down to two people.  In the following post by Nicolas Wapshott, he discusses the pros and cons of each.

We however believe there must be better choices. We especially are not enamored by Larry Summers as he was the former Harvard President who was kicked out due to sexually related matters. In the time of former Representative Weiner--we don't need more of that discussion. Additionally, he was responsible for loosening of the Glass-Stegal Act which allowed banks to own just about anything they desired. This lead to the 2008 collapse. He is not a good choice.

As far as Janet Yellen, she has not had enough experience to take on this very pivotal economic role and she would probably follow the same misplaced and poorly executed QE programs for which we will pay dearly in the not so distant time. And before anyone complains about this--we are considering her on HER merits. Her sex makes no difference to us.

We need an original thinker, someone who will work in the best interests of the entire country and not what is popular. We are entering a time in this country where problems that faced Greece and Cyprus might become our  conundrums.  We do not need a political hack or a warmed over theoretician.  We will need original ideas and out-of-box thinking combined with the leadership to make it all work.

Can someone recommend another person that would fill this role?

Conservative Tom

COLUMN - Despite flaws, Summers is the best candidate for Federal Reserve chair

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Analysis & Opinion

• Despite flaws, Summers is the best candidate for Fed chair
• Publicis Omnipresent

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Tue Jul 30, 2013 12:12pm EDT

By Nicholas Wapshott

(Reuters) - The two-horse race to replace Ben Bernanke as the Federal Reserve chairman appears to have come down to gender. In a letter to the president, about a third of Senate Democrats have made clear they would like Bernanke's deputy Janet Yellen to replace him, primarily, though they do not openly say it, because she is a woman.

The White House, it seems, would prefer Larry Summers, Bill Clinton's U.S. Treasury Secretary who was also director of Barack Obama's National Economic Council. Summers is a distinguished economist, a former chief economist of the World Bank and briefly, until he was subsumed by controversy, president of Harvard University. (Summers writes a monthly column for Reuters.)

It is true there are not enough women in top positions. It is true, too, that Janet Yellen is a distinguished economist with considerable central bank experience. But her gender should not in itself be enough qualification for her to be awarded with one of the most important jobs in the nation.

The Fed chairmanship has always been a powerful position, but when there is gridlock in government thanks to the Republican majority in the House deciding to pass no new measures whatever, the Federal Reserve is the sole provider of economic policy. For that pivotal post we need the best person for the job.

There is a strong case for giving the job to Summers. He is not only a distinguished theoretical economist but an original thinker at a time when what we need above all is ingenuity. He is hard to pigeonhole. He has firm views and is headstrong, which should commend him to those who believe the Fed has become obedient to the executive branch. Although a lifelong Democrat, Summers rarely follows the party line.

His views on taxation are far from the tax-and-spend mantra many in his party hold. On the contrary, he is skeptical of the efficiency of capital gains taxes, believes that unemployment insurance, which is a form of tax, and welfare payments make long-term unemployment worse.

The first issue to confront the next Fed chairman is what to do about the unconventional monetary policy known as quantitative easing (QE) or buying of securities. Yellen is expected to follow closely in the footsteps of Ben Bernanke, the current chairman whose principal remedy for the L-shaped recovery we are currently enduring is to keep money cheap to the horizon until unemployment is tolerable. That means more QE. Even to mention that there may be a "tapering" of QE caused the markets to panic, so weaning the nation off cheap money and raising interest rates is not going to be easy.

Yet QE is a one-note samba. By now it has lost its potency. What does Yellen have in mind? We don't know. She, too, is an academic economist who, after a brief spell as chair of Clinton's Council on Economic Advisers, has spent the last nine years in the closed world of reserve banking. She has followed the reserve bankers' understandable reluctance to say too clearly what she thinks so as not to alarm the markets.

On the assumption he was in the running for the Fed chairmanship, Summers has also kept mum recently about what he would do to replace QE. In April, however, he was candid and clear. "QE in my view is less efficacious for the real economy than most people suppose," he said. He is concerned the economy will settle down into a "new normal" where we accept sluggish growth and high unemployment. He therefore recommends altering QE and allowing interest rates to rise.

"If we have slow growth, we are not going to keep thinking that 5.5 percent unemployment is normal," he told the Financial Times. "We are going to decide rightly or wrongly that the potential of the economy is less and therefore we are going to decide that we are closer to that potential and that is going to operate in favor of suggesting that we should normalize interest rates." What is needed is a subtle manipulator of the money supply at the Fed, which would recommend Summers to replace Bernanke.

So long as the Fed offers bold, confident leadership, Summers is bullish about the economy. "I think the market is underestimating the pace at which the Fed will alter its current course and the consequences of that for interest rates," he said. That does not mean money will become expensive to borrow, nor does he expect the current easy money regime will lead to inflation. "I think we are a long way from tight labor markets and therefore that the risks of acceleration in inflation are substantially less than many people suppose," he said.

Yet Summers comes with baggage. The least important is that since leaving government employ in 2010 he has been hired by Wall Street firms to proffer advice. This criticism comes from a most unlikely source, the Wall Street Journal, which, in a front page story, tried to make mischief by suggesting there was something wrong with being paid by Citigroup, NASDAQ, hedge fund D.E. Shaw, venture capitalists Andreessen Horowitz, and asset managers Alliance Partners. The paper even suggested there was something not quite right about him taking speaking fees.

Since the Chinese walls between church and state were torn down at the Journal by its new owner,Rupert Murdoch, muddying the waters between opinion and news, it is hard exactly to fathom whether this ad hominem criticism of Summers is policy-driven or merely vindictive. One of Summers's principal qualifications to lift the economy out of the doldrums is that he is welcome in Wall Street boardrooms and they highly value his opinions. He is no ivory tower theorist but a practical economist who wants private enterprise to lead the nation to prosperity.

It was telling the Journal could not resist reminding its readers in the second paragraph that Summers "remains on the Harvard University faculty after a tumultuous tenure as the school's president." The reference is not so much to his part in investment decisions that ended up losing Harvard $1 billion, but to his criticisms of faculty member Cornel West that caused the head of the African American Studies department to decamp for Princeton, and his questioning of why women do not prosper in science and engineering, which many interpreted as male chauvinism. Summers's ability to provoke argument and take unpopular positions will be used against him, but it provides further evidence of the independence of thought and action that would prove useful as head of the Fed.

More pertinently when discussing the Federal Reserve, Summers and former Fed chairman Alan Greenspan helped free the financial industry from the clutter of inhibiting regulations, a relaxation of the 1933 Glass-Steagall rules imposed during the New Deal that many believe contributed to the financial crash of 2008. That is a pertinent line of enquiry for senators to pursue if Summers is placed before them for confirmation. It is on his answers to that thorny subject rather than on trumped up charges about race and gender that he should be judged.

Yellen is the safe choice. Summers a gamble. Yellen's appointment will sail through the Senate. Summers will have to survive some tough grilling. Yellen has little experience living in the harsh limelight that comes with high office. Summers is an old soldier who will keep pounding on come what may. It would be far easier for the administration if Obama chose Yellen and that fact alone should commend the talented if tricky Summers.

(Nicholas Wapshott is the former New York bureau chief of The Times of London. Previously, he was editor of the Saturday Times of London, and founding editor of The Times Magazine. He is a regular broadcaster on MSNBC, PBS, and FOX News. He is the author of "Ronald Reagan and Margaret Thatcher: A Political Marriage" (2007). His "Keynes Hayek: The Clash That Defined Modern Economics" was published by W.W.Norton in October. )