Bernanke's Dark Kingdom

by: Shalom Hamou

The Dark Kingdom of Central Banks.

"Any intelligent fool can make things bigger, more complex, and more violent.
It takes a touch of genius -- and a lot of courage -
- to move in the opposite direction."

Albert Einstein
March 14tn, 1879 – April 18tn, 1955

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I am going to show here that central banks have excessive powers which are coherent neither with democratic principles nor with morality. Their existence can not be justified from a mathematical point of view.

Worse, in light of the exercise of their extraordinary power by Bernanke, I argue that they can pose a real threat to peace, privacy and individual freedom.

Because of the dangers that are evoked in these lines I strongly suggest that you reproduce my deeds.

Money Supply:

In a capitalist system money is emitted when the central banks lend it to banks, which, in turn, lends it to their best customers, the wealthiest among them.

Why the central banks should loan our own money to the banks is an intellectual challenge for me. Why they would lend it to us with a premium should be a puzzle to any pragmatic individual.

The fact that it does proves that the central bank is not a public system but at the service of private vested interests.

Another misery is the mandate of central banks, which is both to keep a low level of inflation and optimize economic output.

Any mathematician knows that it is impossible to optimize two parameters, you can optimize one under constraint of another but you can't optimize two variable at the same time. By giving the central banks an impossible mission the executive and legislative body in effect gives it the freedom of doing whatever it chooses.

We have seen that inflation is an illusory concept [Confer The Myth of Inflation.] and that keeping it at a low level was only a way to preserve the scarcity of money and a high level of interest rates [Confer The Fallacy of Monetarism.]. However, the mandate to keep a low level of inflation was the argument the bankers chose to justify the independence of the central bank.

Its choice to give predominance to inflation over growth produced a much lower level of economic output than that would otherwise be possible.

The central banker, although designed by the executive and/or legislative body gets a mandate whose length makes it go through several mandates of the legislative and executive, which increases its independence.

In effect, this makes the central bank a state within the state at the service of vested interest. They have succeeded in reproducing a feudal system in which the king is the chairman of the central bank, the systemic bankers are the marquis, the big corporations are the earls. They each decide arbitrarily and according to the hierarchy, who will get the money and how much money they will get. Till Bernanke Rule that decision was made purely by setting discriminatory interest rates.

A kingdom can be a good thing with an enlightened king like Alan Greenspan, who voluntarily restrained his powers, used transparent rules for the exercise of his power, applied a policy which, given the scope of his mandate, was in the best interest of the people and succeeded in avoiding any major breakdown of the system.

Under Bernanke Rule things have dramatically changed.

Bernanke Rule:

Bernanke has used economic breakdown as a weapon of global, systemic terrorism [Confer Ben 'Systemic Risk' Bernanke.].

Terrorism is the systematic use of terror especially as a means of coercion. At present, there is no internationally agreed definition of terrorism. Common definitions of terrorism refer only to those acts which are intended to create fear (terror), are perpetrated for an ideological goal (as opposed to a lone attack), and deliberately target or disregard the safety of non-combatants.

Bernanke has overtaken both the American executive and the legislative bodies; by making them vote and sign the TARP he made them the unwillingly accomplices of his crimes.

He has grown the amount of money he has emitted to highs never heard about before.

Using extraordinary powers that were granted to the Fed after the Great Depression and never used since, he has included in the balance sheet of the Federal Reserve System an arbitrary amount of arbitrarily chosen assets purchased at an arbitrarily set price.

He has refused to let the people audit the Fed (Confer Congressman Ron Paul) by saying it will lead to an eventual breakdown of the sanctity of the value of the US Dollar should they transgress his independent power.

He has tightened his grip on his lords making them feel his iron fist. [Confer Ben 'Systemic Risk' Bernanke.].

He is succeeding in getting the central bank a power that far surpasses its traditional mandate by getting the function of Systemic Risk Regulator. Systemic Risk, I proved, [Confer Ben 'Systemic Risk' Bernanke.] he himself created.

How and why he got extraordinary power from both the Bush and Obama administration is not something we are going to fully understand, except in retrospect.

The reach of Bernanke's power is not limited to the United States of America. By granting swap options to foreign central banks, options they had to exercise in order to help them circumvent the collapse of their domestic banks, he has been able to increase their "systemic" dependency on the Federal Reserve System and influence their monetary policy. For example the ECB, which had, against its will, to implement the barbaric Bernanke Quantitative Easing policy.

Under Bernanke rule the Federal Reserve System has been transformed in an organization that openly transcends international boundaries, executive powers, legislative powers and judiciary powers:

I will argue here that, to the contrary, there is much that the Bank of Japan, in cooperation with other government agencies, could do to help promote economic recovery in Japan.

Most of my arguments will not be new to the policy board and staff of the BOJ, which of course has discussed these questions extensively.

However, their responses, when not confused or inconsistent, have generally relied on various technical or legal objections—- objections which, I will argue, could be overcome if the will to do so existed.

Prof. Ben Shalom Bernanke
Japanese Monetary Policy: A Case of Self-Induced Paralysis?
For Presentation at the ASSA Meetings, Boston MA,
January 9th, 2000.

It has become a criminal organization with uprecedented powers.

All that are the least of the dangers we are facing.

The Real Danger we Are Facing Now:

The extraordinary power the central bank is getting puts democracy in danger, and to my opinion that danger is much higher than what people can even envision. These dangers, history tells us, can even reach grave menaces to the world security. [Confer Black Thursday & Hitler Rise to Power.].

Ron Paul, by asking to audit the Fed, is making an important point [Confer Ron Paul vs. Bernanke.]. However, by limiting the scope of his demands to the issue of vested interests, he misses even more important issues that relate to freedom, democracy and even security.

If there is a conspiracy, and I am not saying there is one, I am sure that the bankers are not part of it. They are only, by maximising their profit, the unwilling tools of people who have a much higher aim than simply accumulating money. These people, if they exist, are aiming at an absolute power, which, I claim, is now within their reach. If we do nothing now, before The Crash, I claim that the global economic system they could impose on us, and to which we would agree because of our anxiety about our economic future, would have the capacity to do just that. It is even possible that Bernanke is just a piece in that gigantic chess game and that after The Crash he will have outlived his usefulness.

If that happens, and I am not saying it will, no one would ever be able to recover their lost freedom be it either by a democratic process or through violent means.

If there is a conspiracy, and I am not saying there is, it can be traced to, at least the Bretton Woods agreement [July 1944 - December 1945] where world economists decided, willingly or against their will, on the gold standard at a time when, after the Great Depression, they all knew that this barbaric relic was a factor in accelerating economic depressions.

There is no escape from a 'managed' currency, whether we wish it or not.

In truth, the gold standard is already a barbaric relic.

John Maynard Keynes, 1st Baron Keynes of Tilton
June 5th, 1883 – 21st April 1946

Here again, Ron Paul, by asking for a return to the gold standard instead of my managed credit free currency is, with good intentions, making a proposition that could have unintended disastrous consequences.

As you already know I am insane and sometime paranoiac [Confer Preface.]. I have imagined that they could implement a credit free economy similar to mine with a simple difference: instead of indexing the accounts on a random number (The serial number of a €5 banknote) [Confer The Crash and Thereafter, Our Credit Free Currency.] as I suggest, which preserves to the highest possible extent your privacy and your individual freedom, they would simply index it on your DNA. Your DNA would be your account "number". That would allow them to filter who would participate on any genetic pattern they would chose. It would give a grip on any element of your private life like an improved Google that would be indexed not on your Google Account but on your DNA. But again, I am insane.

It would mimic the events described in the Book of Daniel and the Book of Revelations with the Mark of the Beast being your DNA. But well, again, I am crazy and you shouldn't, as pragmatic individuals, rely on these fantasies. That would give rise to the dreaded New World Order.

Given a sufficiently inverted yield curve [Confer Model of The Yield Curve.], Bernanke could at any moment start The Crash by jacking up short-term interest rates in order to, apparently, curb the inflation that arises from the inverted yield curve [Confer The Commodity Conundrum Solved! The Hidden Parameter in Interest Rates. and The Stagflation Paradox.]. He would, at will, invert the yield curve to such a degree that it could immediately trigger The Crash [Confer Bubbles & Bursts.]. He has done it already, possibly willingly, [Confer Ben 'Systemic Risk' Bernanke.].

The next scheduled announcement of the FOMC is August 12ve, 2009 at 14:15 EST. For now the yield curve, according to my model, is not sufficiently inverted. But the following one will be September 22nd, 2009 at 14:15 EST.

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation,

governments can confiscate, secretly and unobserved,

an important part of the wealth of their citizens.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes, 1st Baron Keynes of Tilton
June 5th, 1883 – 21st April 1946
The Economic Consequences of the Peace.
pp. 235-248.


The central banks existence can not be justified: nor on a mathematical ground, neither on constitutional grounds, and more importantly not on a moral ground.

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.

Indeed the world is ruled by little else.

I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest.

But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.

John Maynard Keynes, 1st Baron Keynes of Tilton
June 5th, 1883 – 21st April 1946
The General Theory of Employment, Interest, and Money.
Chapter 24: Concluding Notes on the Social Philosophy
Toward Which the General Theory Might Lead, Paragraph II.
December 13tn, 1935

On all of these grounds it is important and urgent to abolish the central banks.

But the essential issue here is one of insurance, with a relatively modest premium, against a potentially catastrophic, very low probability event.

With that, Peter, would you outline your proposals to us?

Chairman Alan Greenspan
Meeting of the Federal Open Market Committee.
August 24th, 1999

First, and with all due respect, Sir Chairman, my name is not Peter. My name is Shalom, Shalom Patrick Hamou.

Disclosure: long Stocks, long Treasuries, long Minerals.