Bernanke's Harmful monetary policy

The American Thinker ^ | July 31, 2009 | John Chapman

[Scanian]

The stock market's recent run-up of over 11% has been the best sustained rally of Obama's young Presidency. What to do now, if you are an investor? Unfortunately, the market seems very fully priced now based on historical Price/Earnings benchmarks, especially after its recent run-up - which in fact may well have been primarily due to investors cheering the marginal decline in prospects for ObamaCare.

Indeed, the St. Louis Fed's graph below on growth of the monetary base is all you need to see, in order to understand why you want to buy gold. In congressional testimony last week, Fed Chairman Ben Bernanke talked cleverly about taking reserves out of the system rapidly as things stabilize, but to do that would guarantee another credit crunch, interest rate spike, and bust; there is in fact no political will for this. As F.A. Hayek once said, now that they have unleashed the monetary expansion which drives inflation, they have a tiger by the tail. The gray bars indicate the definition of recession - i.e., at least 6 consecutive months of negative growth.

The best investment plays are now overseas: all dollar-denominated assets are going to be punished as this stimulus spending kicks in. Obama's ignorance of this eventuality is why the huge spending plans will not only go awry, but could trigger a dollar and bond market collapse. Obama's economists arrogantly think that cannot happen due to the dollar's reserve currency status.

[wafflehouse]

What is sad are the number of "brilliant" economists warning against deflation

we are in deflation right now

[Moonman62]

The yield curve is rather steep, but where was everybody when the yield curve was inverted?

[expat_panama]

"Indeed, the St. Louis Fed's graph below on growth of the monetary base is all you need to see, in order to understand why you want to buy gold."

[2001convSVT]

"Indeed, the St. Louis Fed's graph below on growth of the monetary base is all you need to see, in order to understand why you want to buy gold. In congressional testimony last week, Fed Chairman Ben Bernanke talked cleverly about taking reserves out of the system rapidly as things stabilize, but to do that would guarantee another credit crunch, interest rate spike, and bust; there is in fact no political will for this. As F.A. Hayek once said, now that they have unleashed the monetary expansion which drives inflation, they have a tiger by the tail."

This is the heart of the article to me. We are going to have record high INFLATION!

[expat_panama]

"brilliant" economists warning against deflation

we are in deflation right now

Indeed, the St. Louis Fed's graph above on deflation is all you need to see, in order to understand why you want to sell gold.

[expat_panama]

We are going to have record high INFLATION!

"Going to have" is not the same as "have".   Sounds like kids saying that they're "going to" clean up their room.
 

[Mase]

I saw nothing from the author about the $15 trillion in asset values we've lost during the downturn and the relationship of that loss to the growth of the monetary base. I suppose calling attention to that fact might prevent him from being able to scream about imminent and rampant inflation.

[expat_panama]

"...that fact might prevent him from being able to scream..."

Maybe, but only if the fact came with duct tape.

[wafflehouse]

Indeed, the St. Louis Fed's graph above on deflation is all you need to see, in order to understand why you want to sell gold.

i wouldnt sell gold right now. gold is a very important part of a well balanced portfolio, especially when you have ben "reinflate or bust" bernanke in charge of the printing presses