The Choice Is Yours Folks

Yesterday you heard Representative Garrett be one of the few members of The House with a pair of balls between his legs.

He had the temerity to challenge Bernanke and ask him point-blank whether or not he would commit to not monetize the debt of failed institution(s).

Ben dissembled.  But what he said was in fact important - the answer he gave was, in essence, that absent a directive from Congress in the form of legislation that barred specific conduct, Ben was going to do whatever the hell he and the rest of The Fed wanted to.

Listen to the excerpt (about 2 minutes) right here:

In fact, it appears to me that Ben lied.  He said they haven't "purchased" any of this paper.  Oh really?  What was the Bear Stearns purchase of $29 billion worth of who-knows-what paper that was then put "off balance sheet" in a separate LLC Ben?  If you have the right to benefit from increases in value, then you own equity, as I've repeatedly pointed out - you bought an asset, you didn't loan anything.

Now let's talk about what Ben and The Fed have done:

• They have exchanged all but $25 billion of their short-term Treasuries - the most liquid securities that are easy to turn into cash by simply "running them off" as they mature - for paper of unknown quality and we are not permitted to know from whom they've taken it or what sort of actual credit quality it has.  That amount of money, by the way, is about half of all the retained earnings that The Fed has managed to accumulate over the last 80 years.
• They have pumped well over $200 billion in excess liquidity into the system since last summer, making dollars very plentiful.  This is in direct contradiction to the claim of a "Strong Dollar Policy"; the way you make something desirable, and therefore expensive (strong) is to make it scarce.  Ben has done the exact opposite, on purpose, and he is unrepentant in this regard.
• They have taken steps that are arguably unlawful in that they explicitly overstepped the limits of "discounting a note", which is where their authority supposedly begins and ends, with Bear Stearns in that they effectively purchased that $29 billion in assets and are now operating a separate LLC (with Blackrock as the manager.)  The only paper that The Fed is supposed to explicitly purchase is United States Treasury paper.  Go read The Federal Reserve Act.
• He has granted a "no bid" contract using the excuse of "crisis", and yet when asked in the hearing whether, now that the crisis was passed, he would send it out for bid and see if it was appropriately priced (and possibly replace Blackrock) he said "he'd think about it."
• They have willfully looked the other way while financial firms - essentially all of them - have either lied repeatedly about their capital needs, losses and intentions, or know so little about them that one must question whether they have the internal controls and knowledge to be in business in the first place. 

As a direct result of making dollars too plentiful (instead of scarce) we have seen The Dollar plummet in value and commodities produced by other nations skyrocket in price.  This is exactly what Ben had to know would happen, since he holds a PhD in economics.

As a direct result of meeting falsehoods and hidden losses with "more liquidity", Bernanke's Fed has provided more heroin to the addict who is screaming for it, repeatedly, all the way from last summer onward.

And just like a drug addict, instead of getting better the addict is placated for a short while as their body rots from within.

Now perhaps it is true that these are the right choices to make for America. 

Perhaps $4/gallon gasoline is the price we should pay in order to bail out the Wall Street bankers and fraudsters, which happen to include a significant number of ordinary Americans, not to mention thousands of mortgage brokers and hundreds of regional and commercial banks.

Perhaps having your heating costs this winter going up by 50% is a reasonable thing to have happen so that Ben can bail out Bear Stearns, along with the other banks who made bad bets by writing garbage mortgages for $500,000 homes to people who had no job, no income and no assets (so-called "NINJA" loans.)

We are supposed to live in a Constitutional Republic.  That is, these policy decisions are supposed to be made by elected representatives, who we vote upon every two or six years, and send to Washington DC - and who are, allegedly, answerable to us.

This power has been usurped, and yesterday you heard Ben Bernanke say in blunt English that barring an explicit law from Congress prohibiting him from doing this sort of thing to whatever degree he feels is appropriate, he's going to act as he, not you or your elected representatives, see fit.

Perhaps you're ok with this.

I'm not.

But until and unless we, the people, stand up and make known that we demand that our Congressional Representatives put their foot down and pass explicit legislation to stop this sort of crap, this is what you (and I) are stuck with.

The time to choose has come America.

Do you like $4 gas?  Do you like food prices doubling in the space of a few years?  Are you going to enjoy heating costs going up by more than 50% this coming winter?

Is it ok with you that Wall Street can create bogus schemes to pump asset bubbles, including housing, and when they burst you get the bill at the gas station and in your electric and heat bills, while the people who devised these schemes get a new vacation home in The Hamptons and a yacht?

Its your choice America.

You heard, on national television, Ben Bernanke tell Congress to, quite frankly, "go screw".

Why?

Because he's quite sure you won't flood Congress with angry phone calls and letters demanding that they stop him.

Is he right?

That's up to you.

If you find it outrageous that Ben Bernanke can, without consultation of Congress, monetize debt if he chooses, bail out anyone he wants (irrespective of whether it doubles the price of oil and gasoline), and in general that he can do whatever he'd like - without consent of Congress and without regard to the impact on your life, then you need make certain that Congress hears from you today, tomorrow, the next day and every day - until they put a stop to it. 

You need to get angry, and you need to act.

Because Congress can, if you make clear that is what you insist upon, put a stop to this crap.

Or, you can choose the easy path forward - $4 gas, $4/gallon milk, a 50% increase in your heating costs this winter, all the good jobs going overseas and serial asset bubbles to feed the bankers on Wall Street, while your wealth and earnings capacity is siphoned off and buys a Wall Street banker a new vacation home in The Hamptons.

Its your choice America.