Dear Mr. Bernanke

Dear Mr. Bernanke,

I realize you're not the most popular guy in the financial world. Heck, many financial writers have made entire careers out of lampooning you and your predecessor, Mr. Greenspan. So rather than mock you openly, I wanted to write and ask you point blank, "What ARE you thinking?" Honestly, you haven't been acting like a sane person. The stock market is only 16% off its all-time high and you're behaving as though the world is literally coming to an end. You've cut interest rates I don't know how many times since September. This hasn't helped Wall Street much - stocks continue to fall and spreads widen - but, far more importantly, it's hurting the rest of us, and by "us" I mean the 300 million people who live in this country.

The dollar, the currency we measure our wealth in, has broken below its historic bottom under your watch. For me and my readers, there has been a silver, I mean gold, lining to this. We all own the yellow stuff, which has doubled since you took office. However, for the vast majority of Americans, you're making life a heck of a lot harder.

You keep talking about solving the housing situation or the banking situation, but I've yet to hear you announce any plan to strengthen the dollar. Sure, you like to mention inflation here and there, though to be blunt, your numbers are fraudulent. Considering most of us eat and consume energy, it might be a good idea to include those expenses in your inflation reports. However, inflation aside, when are you going to come out and say something about strengthening the dollar? Your silence on this issue is striking since you've been doing everything you can, and some things you really shouldn't, to bail out Wall Street.

Last I checked, the U.S. was a capitalist country. I've been told we're supposed to be the best capitalists on earth. So where exactly did you get the idea that you should be giving taxpayer money to bail out the richest, most overpaid guys in the country? If they bought a bunch of garbage, generated a ton of bad loans, and generally made a mess of things, they should suffer. That is capitalism. Instead, you seem to be employing a system in which we socialize losses, while letting the profits remain in the private sector.

As much as I understand your desire to play matchmaker for Bear Stearns (BSC) and JP Morgan (JPM), I'm not really sure why my and my neighbors' money was needed to make the deal happen. I'm not even sure how it's a "deal" since you gave JP Morgan $30 billion to buy Bear Stearns. Correct me if I'm wrong, but in capitalism, buying something actually entails spending money. The last time I tried telling the gas station attendant that someone else would pay for my gas, I ended up with a fat lip.

However, since you've already gone "all in" with this socialization business, I have a suggestion for you: If you're going to make taxpayers responsible for Wall Street's screw-ups, then you should also give us a percentage of their salaries too. I would say give us a percentage of the profits, but there aren't any. I know, Goldman Sachs (GS), Morgan Stanley (MS) and the rest of them just topped earnings expectations. Unfortunately, I actually read the financial reports and saw that most of these "profits" were accounting make-believe in which the firms claimed they made money because their bonds fell in value. Sure, technically they could buy the bonds back for less than they initially sold them and register a profit… but they didn't. Those profits, like JP Morgan's purchase of Bear Stearns, didn't involve any real money.

So count me out when it comes to participating in profit-sharing with Wall Street right now. But I'd be more than happy to take a percentage of the $140 million Citigroup's Chuck Prince was paid while CEO, or the $161 million Stan O' Neal got for leaving Merrill Lynch (MEL). Heck, you could throw in the $115 million Countrywide Financial's (CFC) Angelo Mozilo plans on making when Bank of America (BAC) buys his company.

However, I have one small request. As weak as our currency has become, I'd prefer my percentage of their salaries be in dollars rather than Citigroup (C) or Merrill Lynch or Countrywide stock. I at least have some clue as to the value of the former.

Sincerely,

Graham Summers

Comments

[bruin532]

Give me mine in euros

[globalmacro]

Yeah you're smarter than Bernanke. It's also clear that you must be privy to ALL the information he had on the grave systemic financial risks that could have potentially brought down the entire global financial system. Because if you were, I have no doubt that I would want you to head the Federal Reserve and do absolutely nothing in the face of this crisis. Even guys like Buffett have trouble bringing Bernanke's actions in to question on this one. Not impressed with this commentary. You're just reiterating all the crap we've already heard and there is nothing new here. I'm sorry I wasted my time.

[gtbfl]

Duh - they didn't GIVE anything to anybody they Loaned JPM money and took suspect securities for collateral so the entire financial system didn't unravel - which doesn't mean the loan wont be repaid. You want a stronger dollar - tell your government you are tired of being the largest debtor nation in the world.

[User 143167]

In a crisis combined 1930 depression with 1970 stagflation, the Fed just has no way out.
Bernanke is not the guy to blame. He is trying to save this mess which was formed by a decade of irresponsible monetary policy and consumer behaviors.

[Michael B.Krause]

Depression? Get over it. Intel can't even give a bust quarter.

This is going to be a long a protracted unwind, a recession with some defaults, but this is not a depression.

[User 143167]

Michael, if the Fed did not cut rates and injected liquidity like this, a depression induced by massive bank runs is very likely. So the Fed chose to avoid the depression and took the risks of staflation.
Intel's quarter earning would be a non-factor if the global financial system collapsed.

[rmcsonics]

None of you are smart enough realize the point that drives this commentary...that as long as the government keeps interfering in everything (like our markets), nothing will ever correct itself, and all your fiat money continue its decline in value.

[Egg]

The main problem going forward I see is that Bernanke seems so obsessed to save the banks and market despite, as the article pointed out, this (historically speaking) mild sell-off...is that Bernanke will soon be out of ammunition with the rate cuts.

If in 6 months or a year the economy is still struggling, the market will be crushed, and there will be nothing Bernanke can do with interest rates anymore.

BTW...how is WallStreet going to react if the bond market eventually crashes one day? With the continued weaker dollar and the low interest rates (way below inflation)...it's very possible one day people (mainly foreigners) will just say "enough," and you will see long bond rates go from 4% to 6%+ almost overnight despite Bernanke having the funds rate this low.

[thel337]

I can't believe the comments here. A BSC failure wouldn't have collapsed the financial system it would just have allowed it to correct as is sorely needed. Did any of you read that LEH just used LBO loans as collateral to borrow from the FED? That is just plain crooked. All this maneuvering by the FED is just moving losses from wall street to me and you. The bad part is, like the guy that keeps getting another credit card to pay off the overlimit ones, it will all come crashing done eventually and YOU and I are going to pay for it.

[Chuck]

Can I write down my outstanding mortgage?
How about 50%?
How about 25% ?
How about 10%?

If I change my name to BSC, can I write off 99% over a 1 year period?

[fabian hug]

It is not Bernanke's fault. As far as I can judge, the seeds for this situation were planted way before his time. When the Supreme Vizir admits that economy is not his cup of tea, don't be surprised. It always starts with the leader. You can't lead with consultants only. The next one is not any better.

[James Cullen]

You do get a percentage of Wall Street execs' salaries; it's called taxes, and I'd wager Prince, et al. did a lot more to boost tax revenues than anyone else here.

[Mister C]

You want a strong dollar policy? uh?

Try banging your head on the wall.

[sivere]

We are not privy to all the information that Benanke has, true. BUT WE SHOULD BE. Congress should know what is going on, so they know WHY the Fed is doing what it is doing. And this information should not be kept from us. Especially when the Fed is bailing out entities not within its jurisdiction (i.e., Bear Stearns/JP Morgan). Congress (and ultimately you and I) have the responsibility to pay- this is clear. But, the dirty little secret is the we (through our congresional representatives) also have the authority- Article I, Section 8 of that "outdated" document (the Constitution).

It is time to TakeBackTheFed.com

[statePoet1775]

Is it just me or has someone else noticed that the word "confidence" begins with "con"?

This must be a coincidence since so much of our economy depends on "confidence"...

[RUSS THECUSS]

Ah! The fruits of the glorious fiat money scam game!

How they enrich the "POWERS THAT BE" & prey upon the pocket books of the innocent & ignorant sheeple of this once great nation. How they manipulate the statistics of the BLS (Bureau of Lying Statistics) to deceive the ignorant & provide ammunition for lying analysts, economists, government bureaucrats, bankers, & politicans to stiff Social Security recipients of COLA adjustments, make the sheeple believe there is no inflation & provide the manure to feed this great MUSHROOM FARM-- the USA! (Mushrooms must be raised in the dark & fed manure)

Has anyone out there in the hinterlands ever heard of the word "FASCISM" or "MONOPOLY CAPATILISM"???

Once the Federal Reserve (It is not "Federal--it is a private corporation & it has no reserves, except just another note (IOU) to replace the one in your hand if you ask them to redeem the worthless piece of fiat trash), finishes plundering all the resources of this monetary pyramid, they will then start the same old confidence game on the EURO! Europeans think the old USA is going down the monetary tubes to ruin, but THEY are next in line for their fleecing by the INTERNATIONAL BANKSTERS!

Is there no one on planet earth that see through these Armani suited scums "rape & plunder" techniques of striping the worlds population and subjecting us all to abject penury?

"FIAT" money has to be the machinations of no one but SATAN himself.

The CONSTITUTION DEMANDED that our money consist of nothing but GOLD & SILVER COINAGE!

Get yourself a copy of the book "THE CREATURE FROM JEKKYL ISLAND" then you will understand the meaning of the word "TREASON"! Then go out & buy your rope for the national day to hang all the banksters! Those parasites can't live without us but we sure can live without them!

It is time to DUMP THE FED & return to honest money! ....... & MAYBE ....... the ARTICLES OF THE CONFEDERATION!!!

RUSS THE CUSS

[RUSS THECUSS]

FROM THE PEN OF DARYL SCHOON:

5/27 Daryl Robert Schoon - THE SHELL GAME

THE SHELL GAME

Modern economics is not rocket science. In fact, it’s not science at all. It’s a game, a confidence game. Once paper passed for money, economics became an elaborate shell game designed to hide the fact paper had been substituted for silver and gold. Debt ratings are an attempt to quantify confidence in paper assets and are an essential part of the game. The shell game is called “Where’s The Money?” The answer is simple, it’s not there.

The question “where did the money go during the Great Depression?” has now been answered to my satisfaction. During the Great Depression, money essentially disappeared and, as a consequence, consumer and business demand collapsed as did prices, beginning a downward coreolis-like spiral that was to suck the global economy into an economic black hole.

My study of the Great Depression began in the 1990s and the subsequent collapse of the dot.com bubble provided a real-time corroboration of assumptions about the connection between loose credit, excessive speculation, and financial bubbles; and, now, in 2008, one of my most troubling questions about the depression has been answered—where did the money go during the Great Depression?

Plunge In US Commercial Property, an article by Daniel Pimlott posted on FT.com (Financial Times) May 21, 2008 provided a critical clue:

Commercial property prices in the US in February saw their sharpest decline since records began nearly 15 years ago as sources of finance for deals has dried up, according to data from Standard & Poor’s out yesterday.

The value of commercial buildings fell 1.03 percent between January and February, the largest monthly decline since at least 1993, when the industry was just emerging from a deep slump.

The fall in national property prices comes as banks have retrenched on lending due to credit crisis and the slowing economy, causing the volume of deals to slow sharply. The market for commercial mortgage-backed securities, which until last August was a major route to cheaper borrowing, has largely ground to a halt.

Sales of commercial properties were down 71 per cent in the first quarter compared with a year earlier, according to data from Real Capital Analytics.

The fact that sales of US commercial real estate fell an astounding 71 % from 1st quarter 2007 to 1st quarter 2008 is shocking and the implications are quite serious. The cause of the slowdown, however, provided the very clue I was seeking.

Commercial property prices in the US...saw their sharpest decline…as sources of finance for deals has dried up… as banks have retrenched on lending due to credit crisis…

DURING THE GREAT DEPRESSION
MONEY DID NOT DISAPPEAR
CREDIT DID

The answer to: Where did the money go in the Great Depression? is found in the metaphor of the shell game. It is now clear that money didn’t disappear during the Great Depression, credit disappeared.

The money was never there in the first place. Money had been replaced by credit in the shell game introduced by the Federal Reserve in 1913 when the Federal Reserve began issuing credit-based Federal Reserve notes in place of the savings-based money from the US Treasury.

For details on how the shell game is run, Professor Antal E. Fekete’s description of the check kiting scheme between the US Treasury and Federal Reserve provides crucial information for those perhaps wishing themselves to live off the earnings of others.

It is epitomized by an elaborate check-kiting conspiracy between the U.S: Treasury and the Federal Reserve. Treasury bonds, contrary to appearances, are no more redeemable than Federal Reserve notes. It’s all very neat: the notes are backed by the bonds, and the bonds are redeemable by the notes. Therefore each is valued in terms of itself, rather than by an independent outside asset. Each is an irredeemable liability of the U.S: government. The whole scheme boils down to a farce. It is check-kiting at the highest level. At maturity the bonds are replaced by another with a more distant maturity date, or they are ostensibly paid in the form of irredeemable currency. The issuer of either type of debt is usurping a privilege without accepting the countervailing duty. They issue obligations without taking any further responsibility for their fate or for the effect they have on the economy. Moreover, a double standard of justice is involved. Check-kiting is a crime under the Criminal Code. That is, provided that it is perpetrated by private individuals. Practiced at the highest level, check-kiting is the corner-stone of the monetary system.

GOTTERDÄMMERUNG The Twilight of Irredeemable Debt, Antal E. Fekete, April 28, 2008

www.professorfekete.co...

THE STUDY OF MODERN ECONOMICS IS SIMILAR
TO THE STUDY OF RELIGION IN A TIME OF IDOLATRY

In the shell game of modern economics, credit replaces money and when credit gives rise to speculative bubbles, the collapse of those bubbles leads to the defaulting of debt which causes credit to disappear and the economy to collapse.

The credit based shell game, however, is nearing its end. The historic credit contraction that began in August 2007 is still in progress. Despite the efforts of central bankers, credit is still disappearing and, just as in the Great Depression, the credit contraction is continuing to spread causing more and more debt to default.

Credit, the fertilizer of human debt, when no longer available effectively spells the end of the legalized shell game masquerading as modern economics; but the kreditmeisters, their global confidence game now damaged by an unexpected lack of confidence on the part of the marks, sic investors, however, will not give up their scam easily.

THE CONUNDRUM OF THE KREDITMEISTERS

Those running the shell game, the central bankers and their codependent brethren, investment bankers, are terrified of losing their day jobs, They have lived well for three hundred years (since the establishment of the Bank of England in 1694) leveraging the productivity of others and we can be assured they will do everything in their considerable power to keep their lifestyle intact..

At this time the central bankers are collectively engaged in financial triage as they attempt to replace the credit that is rapidly being withdrawn in the face of ever increasing amounts of defaulting debt.

Following the same play book they used in the aftermath of the dot.com collapse, the Fed has quickly cut rates from 5.25 % to 2 % but this time they will not ignite a housing bubble as they did the last time. This time, they will do worse. This time, they will burn down the house.

BURNING DOWN THE HOUSE
In the long run, there is no short run

In retrospect it will all be clear, the mistakes, the reasons, the excuses, the results. Now, however, in the beginning of the collapse, events appear more problematic, the outcome still unknown. Nonetheless, even in the fog of unexpected events, certain things can be known and safely predicted; and, one of them is that we are now on the road to hyperinflation.

Appointing “Helicopter Ben” Bernanke to head the Federal Reserve now is akin to sending Sammy the Bull, the mafia hit-man, to negotiate with the Palestinians and Israelis; and when the news comes back that Sammy the Bull shot and killed the Palestinians and Israelis at the negotiating table, we should not be surprised—just as we should not be surprised that Ben “the printing press” Bernanke is erring on the side of excess in the current economic crisis by providing even more credit, by shoving even more debt based paper into now a burning house.

WHEN A HOUSE OF PAPER MONEY BURNS

Hyperinflation is to inflation like pneumonia is to a cold. Though similar, the former is much more consequential; and whereas pneumonia can sometimes kill, hyperinflation is a veritable death sentence. Hyperinflation always ends in the total destruction of paper money. In hyperinflation, the value of paper money reverts to its mean—ZERO.

The past is indeed prologue when it comes to humanity, printing presses, and the recurrent desire of governments to turn paper into gold; which through the alchemy of central banking is possible—though only for a limited time.

While central bankers and governments do not intend to cause hyperinflation anymore than drunk drivers intend to crash, they are nonetheless responsible for the decisions that lead to hyperinflation and deflationary depressions.

The United States has experienced high rates of inflation in the past and appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century.

Professor Laurance Kotlikoff, Federal Reserve Bank Review St Louis July/Aug 2006

The US is the largest economy in the world and the US dollar is the world’s reserve currency. Its central bank, the Federal Reserve, is the most influential, and Ben “the printing press” Bernanke is its chairman. We should not be surprised at what is now going to happen to the US, the US dollar and the world economy.

As the Fed is busy bailing out international investment banks with America’s money, we should be more concerned with what is going to happen to us; because when the US dollar goes up in smoke, the US economy will go down in flames and the world economy will stumble badly, if not collapse completely.

Hyperinflation will destroy both the US dollar and the US economy and the world will not be unaffected. Professor Kotlikoff’s warning about a US hyperinflation was published in 2006; and, now in 2008, US printing presses under Fed chairman Ben Bernanke are running faster than they’ve ever been run before.

HYPERINFLATION IS LIKE STEPPING OFF A CLIFF.
YOU ONLY EXPERIENCE IT AFTER YOU’VE GONE TOO FAR

Friedrich Kessler, a law professor at Harvard and at Boalt Hall UC Berkeley described the onset of hyperinflation during the Weimar Republic in Germany.

It was horrible. Horrible! Like lightening it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money.

From Fiat Paper Money, The History And Evolution of Our Currency $28.50 by Ralph T. Foster, [e-mail] [phone] This book, a primer on the end game, is everything you wanted to know about fiat paper money and were too afraid to ask.

At Session III of Professor Fekete’s Gold Standard University Live in February, I discussed the possibility of a sequential or simultaneous hyperinflationary deflationary depression, the economic equivalent of having both a severe heart condition and a possibly fatal cancer at the same time. Such is not impossible; in fact, it is increasingly likely.

I highly recommend the thorough and studied analysis of hyperinflation and concurrent possibilities in John Williams’ Hyperinflation Special Report, Shadow Government Statistics, Series Issue No. 41, April 8, 2008, www.shadowstats.com/ar.... John Williams also references and recommends Ralph T. Foster’s Fiat Paper Money, The History And Evolution of Our Currency noted above.

The critical question should now be asked: What can we do?

THE PARACHUTE OF GOLD AND SILVER
JUMPING OUT OF UNCLE BEN’S SPUTTERING HELIPCOPTER

The following is from The Nightmare German Inflation, Scientific Market Analysis, 1970, which describes the extreme hyperinflationary conditions during the Weimar Republic in the 1920s:

The ones who fared best were the small minority who had the foresight to exchange marks into foreign money or gold very early, before new laws made this difficult and before the mark lost too much value.

The difference between 1920s Germany and today is that there are no longer any currencies convertible to precious metals. In the 1920s, when hyperinflation destroyed the German mark, other currencies were still tied to gold. Today, this is no longer the case. Today, only gold and silver will offer guaranteed monetary refuge during the coming crisis.

A hyperinflation is a monetary phenomena caused by the rapid printing of money not convertible to gold or silver. The inflation of the paper money supply happens gradually, but hyperinflation is itself a sudden-onset phenomena. Suddenly and unexpectedly, inflation becomes hyperinflation and unless you are already prepared, it is already too late.

Today, we are moving closer to the end game, the resolution of past monetary sins when the banker’s shell game is exposed for what it is—a monetary abomination, a parasite on the economic body that over time kills the host on which it feeds.

Be aware. Be careful. Be safe.

Have faith.

Note I: I now have a blog, Moving Through The Maelstom with Darryl Robert Schoon. My first blog discusses the underlying reasons for our increasing series of crises.

see www.posdev.net/pdn/ind...

Note II: I will be speaking at Professor Antal E. Fekete’s Session IV of Gold Standard University Live (GSUL) July 3-6, 2008 in Szombathely , Hungary. If you are interested in monetary matters and gold, the opportunity to hear Professor Fekete should not be missed. A perusal of Professor Fekete’s topics may convince you to attend (see www.professorfekete.co... ). Professor Fekete, in my opinion, is a giant in a time of small men.

Darryl Robert Schoon

survivethecrisis.com

drschoon.com

blog posdev.net/pdn/index.p...



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