... On July 1, 2005, Bernanke stated with great confidence that the U.S. was not experiencing a housing bubble, saying: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”
L: Wow could he possibly have been more wrong about anything more important?
Doug: In November of the same year, he talked about derivatives, saying, “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” He also said, “The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”
And a couple months after that, back on housing again, he said, “Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
L: So much for the wisdom of the expert…
Doug: Well, he’s not stupid, not in the sense of being unintelligent (he’s obviously very intelligent) but I would say he’s stupid in a better, more sophisticated sense of the word. One that I think is more useful, that being: an unwitting tendency towards self-destruction. And I’m afraid his stupidity is not just going to drag down the U.S. financial system, but the U.S. itself with it.
What he said about the housing and derivatives bubbles shows that he either has no idea what’s going on, or he’s a pathological liar. Reality was totally absent from those two statements.
And in February of 2008, he said, “I expect there will be some failures of smaller banks.” Bear Stearns collapsed just a couple weeks later…
L: You’re kidding!
Doug: I wish I were. I’d like to believe the second most powerful man in the world weren’t either a knave, or a fool, or both. Remember, this is the same guy who told the world that Fannie and Freddie were “adequately capitalized” and “in no danger of failing.”
Earlier this year he said, “Currently, we don’t think [the unemployment rate] will get to 10 percent." Wrong again and if you actually count people who are out of work, rather than the government’s phony subset of that number, we already have over 17% unemployment.
This guy is truly pathetic but nobody points any of this stuff out. That he can be so dead wrong about so many vital things and not get called on it is simply amazing to me it makes me feel like I’m living in some sort of demented parallel universe.
L: This has to be the worst case of “the emperor’s new clothes” on record.
Doug: Quite possibly. After all, who can gainsay the word of the second most powerful man on the planet? And a Ph.D. expert on the Great Depression to boot. Which makes perverse sense, as only an expert can screw things up as royally as he has.
I’m afraid the U.S. dollar is going to be totally destroyed. The consequences of that are going to make everything that’s going on now pale by comparison. I mean, as bad as the consequences of propping up all these dinosaurs like General Motors and AIG and General Electric and Goldman Sachs, among many others, might be next through direct theft from the U.S. taxpayer are, that’s nothing compared to what will happen when things get really bad, which they haven’t yet.
It’s really going to be bad when they destroy the dollar that’s when it’s really going to hit the fan. Runaway inflation is bad enough in a place like Zimbabwe, where most of the people are still living on a subsistence level. And it was bad enough in Germany in the 1920s, when most Germans were still living on farms or making things with their own hands. But in an advanced industrial society, as heavily urbanized as the U.S. is, runaway inflation is going to be unbelievably disastrous. As dim as the average American is, he’s bound to get perturbed when his quality of life nose-dives, and who knows what the social consequences of that will be.
L: Social revolution… Massive social change.
Doug: Yes. Runaway inflation in the U.S. would be the ultimate disaster. Think about all those people who have dollars set aside, which is to say the prudent middle class; they’ll be totally wiped out. Even huge corporations that have massive cash reserves, like Microsoft and McDonald’s, if they don’t hedge that cash with the utmost skill, could find those hoards wiped out and themselves bankrupted as well. Remember that people all over the world are holding U.S. dollars. There’s far more U.S. currency outside the U.S. than there is inside the U.S., and all those foreigners are going to resent it personally and hold it against Americans when their U.S. dollars are wiped out. On top of that, most central banks around the world hold U.S. dollars as their main asset, and that will be wiped out as well. It’s going to be a complete, worldwide disaster.
It’s going to be much worse than what happened in Germany or Zimbabwe. This is a couple orders of magnitude greater seriousness and it seems to me that this is almost certain to happen with a monumentally stupid person like Bernanke steering the ship of state into a reef. ...
Read it here. When it all does finally fall apart this country is going to get feral. Got guns and ammo?
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