Ben Bernanke may not be the biggest fan of the movie 127 hours, but right now he may be the star. What Little Ben ("LB") does not want you to know is how stuck he is in his pile of rocks. Americans probably won't understand until years into the future how stuck he really was. A few people are close to understanding, Ron Paul Maybe or David Rosenberg, but neither has got it pinned. (I don’t know either and they probably get it better than I do!)
So let me just spell it out for Tim’s reading public! For all intense purposes we are still in a recession – whoops I let the cat out of the bag. Little Ben just does not want you the consumer to spend like it so he is doing everything in his power to make it look like we aren't. He is stuck, he is jammed in their so tight and chewing away at his arm he just can't get free, but at the same time the smoke and mirrors are doing wonders for our mood.
So what is he doing that got him so stuck you ask?
If LB had set back and not done anything for QE2 we would still be in a recession and lost a great deal more banks and businesses. There would be a tremendous shortage of credit. We most likely would be in what you may understand as a depression (but when it is over things would be cleaned out – Americans love to solve problems – that would have solved our problems).
To keep that depression at bay he is printing money and money and money. On top of that your President is spending money and money and money like it is going out of style.
Both of these are risks you and I can't even fathom and have horrendous repercussions. Their actions could potentially bankrupt the country you live in, but if they are able to fool enough people to think we are not in a recession and they can jump start this countries engine there is chance that a rapidly growing economy will absorb the old mess we were in and the new mess they have made. If if, if and if – Lots of ifs that have to work. If their bet does not work our impending recession becomes a 1930's depression.
Little Ben in his press conference lays out that our economy is doing fine. Are we – We are approaching the highest gasoline prices ever, we have the worst housing glut EVER, we have the highest unemployment I have ever seen, we have increasing food prices which are causing worldwide riots and the economy is just sputtering along. Can you imagine if a CEO said everything was fine in a press conference with these problems?
LB's plan although it feels ok right now is not working near as well as he'd hoped. These are the problems with his plan. He fully understands the risks he took and the risks our country faces right now, but if our country can grow faster than the risk he is taking then he can start pulling back and our rapidly growing economy will just keep moving (imagine a Winnebago rolling down hill). But the problem is we don’t have a growing economy, we have a very weak sputtering economy and the risks he took are now individually fully fledged problems on their own.
He does not really have a choice though. He can't pull back and stop because if he did the cost of our debt would rise and we can't afford that. To afford our enormous debt your government would have to tax us. So instead they keep interest rates at an all time low which kills the dollar and raises things like gasoline and food prices which in turn lowers our amount of spendable income. Hmmm…. that sounds like a hidden tax.
So now he is stuck, wedged in tight. I tell you this they don't know what to do. They are behind closed doors praying the public will keep spending money they don't have. Hoping that something gets our economy moving.
Our problem now is twice as large as it was two years ago. LB could have just lost and arm a few years ago and chewed himself to safety, but now he is dropping dynamite into the hole hoping when it blows it does not take us with him.
There is no way out. You will most likely see a QE3 after QE2 is done. Hoping and praying to keep our problems at bay. Now on top of the sluggish economy, the problems with food and fuel, the housing glut, the lack of jobs and the falling dollar, he has the problem of American's getting fed up. Fed up with his problems he is causing. We don't like the high gasoline prices, we don't like high food prices, we really don't like the weak dollar, we don't like the bubbles he is creating and most certainly WE DON'T LIKE BEING THE COUNTRY IN TROUBLE. Americans like being on top. Americans want to take our medicine. Americans want to fix the problem and move on. Let’s stop trying to fake out ourselves and the world.
When American's stop spending the music shuts off and we are short chairs for 20% of our population. The Tea party working very hard to get control of the music and they want it off. There is a 10% chance Little Ben will be called a hero and 90% chance he will be known as the man that caused the largest worldwide recession ever.
