Bernanke Turns to Jawboning: Opinion
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- I have
previously written that the U.S.'s 0% interest rates are the economic equivalent of hooking someone up to a defibrillator. Shock someone continuously with a defibrillator for three-plus years and it is safe to say that we will not end up with a patient in recovery, but merely a badly charred corpse.
The same goes for the U.S. economy. Three-plus years of continuous, maximum stimulus has produced nothing except a steady stream of
absurd statistics, attempting to delude the sheep into believing this badly charred corpse is recovering.
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Federal Reserve
Chairman Ben Bernanke has announced that 0% interest rates -- i.e. the economic defibrillator -- will remain cranked up to its maximum setting for at least three more years. He is either oblivious or simply indifferent to the economic carnage this is inflicting on the U.S. economy, and the global economy as a whole.
Sadly, that carnage has just barely begun to manifest itself. The U.S. housing market is yet another place where
throngs of "zombies" reside. In this case, it is millions of zombie-mortgages -- already underwater, with U.S. housing prices destined to keep falling for as far as one can see into the future. Here, the walking dead can only be resurrected through massive principal reductions. However, since that would push the "Wall Street zombies" much closer to their own annihilation, such relief is denied to the holders of the zombie-mortgages.
Savers are also being slaughtered. As the U.S. population ages and becomes more dependent on personal savings to fuel this consumer economy, the massive wealth-drain being inflicted on this ever-growing demographic through massively negative real interest rates ensures there is no future for this zombie economy -- other than burial, followed by (eventual) rebirth.
Stripped of their savings, the greying U.S. population has no recourse but to fall back on (supposed) entitlement programs: the U.S. social safety net. Pathetically, the American population remains almost entirely oblivious to the fact that this safety net is illusory.
The situation is even worse with respect to the health care system which purportedly safeguards the health of Americans. It was never fully funded. Now, as the $trillions in unfunded liabilities become $10's of trillions, and now
somewhere approaching $100 trillion, all that remains to be decided is when this benefits bubble pops (and then vanishes completely).
Reckless Fed money-printing ignites one commodity rally after another. Concurrently, the extreme shorting by Wall Street stomps these commodity markets again and again -- trying to hide the hyperinflation suicide rapidly approaching.
As I have explained in many
previous commentaries, such predatory shorting has catastrophic long-term consequences: the destruction of inventories -- across the entire global commodities complex. While debauched currencies provide ever-lower real income to commodity producers, suppression depresses these revenues much further. The inevitable result is that artificially low prices stimulate demand while simultaneously drastically curtailing supply.
The only possible long-term consequence is inventory default in one commodity market after another, followed immediately by dizzying price explosions -- and chaotic rioting, as nearly non-existent supplies and sky-high prices inflict global economic hardship which few can yet envisage in their worst nightmares.
Bernanke and company are reduced to "jawboning," the last refuge of failed monetary policy. Thus, we have a promise of three more years of 0% economic suicide. All the energy left in this decaying corpse goes into creating the illusion of life -- leaving no time, effort or energy being directed into a future economic rebirth.
And so we see the response of not only precious metals, but virtually the entire spectrum of commodities. Permanently gone is any more pretense of an exit strategy for the Federal Reserve.
Remarkably, even many of the
more astute commentators continue to soil their otherwise useful analyses by diluting them with "official statistics." Viewing Bernanke's latest announcement through the prism of inflation rate of under 5% -- while in the real world it rages in double-digits -- inevitably means that the reaction we have seen to his latest jawboning can only be described as "extremely muted."
Continue this monetary madness, and the U.S. economy chars -- as Bernanke "juices" this lifeless corpse again and again.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
