For three years we have had to listen to B.S. Bernanke (yes, his initials really are “B.S.”) drone on and on about the mythical “U.S. economic recovery.” I recently pointed out with an abundance of long-term charts and elementary reasoning that it wasn’t even theoretically possible for the crippled U.S. economy to be growing.
However, don’t take my word for it. Instead, let’s look at the actions of B.S. Bernanke. Until Japan’s failed experiment with taking interest rates to zero – and leaving them there – no nation in modern history had ever engaged in such recklessly insane monetary policy.
There is a very good reason why this had never happened before in economic history. Zero percent interest rates (as I have noted previously) are nothing less than the economic equivalent of a defibrillator. It is a last-ditch, desperation measure designed to attempt to shock some life back into a dying body.
Ultra-low interest rates (interest rates much lower than inflation) were never intended as a permanent prescription for any economy. They rape “savers”. And with rapidly greying populations, we are becoming societies of savers. Leaving interest rates at near-zero is simply serial rape.
What happens when you rape savers again and again and again? They stop saving. They begin spending their paper as fast as they get it – the inevitable consequence of near-zero interest rates.
The math is simple. When you have “negative interest rates” (savings rates much lower than inflation), every day that people hang onto their money it loses value. So people spend that money today, rather than waiting until tomorrow to spend it – when it will be worth less (worthless?). And when all the consumers start spending all their money as fast as they get it (and then borrow more at those near-zero interest rates), asset bubbles start cropping up all over the economy – starting with the real estate market.
This is what must happen with any/every economy with near-zero interest rates…with one exception. When does the human body no longer respond to a defibrillator? When it is already dead. When does an economy not “respond” to near-zero interest rates (i.e. explode into asset-bubbles)? When an economy is already dead.
All that Japan has accomplished with nearly two decades of near-zero interest rates is to prove beyond a shadow of a doubt (in hindsight) that its economy has been dead for all these years. Similarly, all that B.S. Bernanke has proven with his 3+ years of near-zero interest rates is that the U.S. economy is already dead.
We don’t need two decades of near-zero interest rates to prove the U.S. is an economic corpse. Defibrillating an economy with near-zero interest rates for 3+ years (and getting no response) is proof of death just like defibrillating a body incessantly for three years would prove it’s a corpse.
For the deluded apologists who claim there hasn’t been enough time for the U.S. to pump-up all of its asset bubbles yet again, there is an inevitable precursor for interest-rate induced asset bubbles: ultra-high inflation. If the U.S. economy was not already deceased then 3+ years of 0% interest rates would have already led to out-of-control inflation.
Yet we have B.S. Bernanke insisting that U.S. inflation is extremely low – despite the $trillions of new paper he has been relentlessly injecting into it for nearly 4 years. Even John Williams ofShadowstats.com who engages in honest calculations of U.S. inflation insists that U.S. inflation is still only “high” (just over 10%), but nowhere near the “hyperinflationary depression” he originally predicted for the U.S. going as far back as 2003.
Then there is the U.S. Treasuries market. What do the “highest prices in history” for U.S. bonds indicate from an economic fundamentals standpoint? That the U.S. economy is in the midst of itsworst depression. There is absolutely no possible way to rationalize the highest prices in history for U.S. bonds and a “growing economy” – especially with the U.S. dumping the greatest supply of Treasuries in history onto the market. Maximum supply and a growing economy directly imply low Treasuries prices, not the highest prices in history.
However, it would be unfair to single out B.S. Bernanke for all of this criticism. There is also plenty to criticize about Canada’s central bank stooge: Mark Carney – yet another Goldman Sachs alumnus. Yesterday the Bank of Canada again left Canada’s interest rate frozen at its own near-zero level.
What was this liar saying today? He was gushing about the “strengthening” global economy, and thus the Bank of Canada elevated its projections for global economic growth for 2012. Where was the interest rate increase, Mark?
Any Canadians with functioning memories knows that Mark Carney has been lecturing Canadians incessantly for the past two years about their “over-spending”. As noted above, Mark Carney’s interest rates are 100% responsible for that behavior – as (like most people) Canadians demonstrate an aversion to rape.
Meanwhile, real estate bubbles across most large Canadian cities swell ever larger, and teeter ever more ominously. Mark Carney’s near-zero interest rates are 100% responsible for that as well.
In short, if Mark Carney believed one word of his own B.S. about a strengthening global economy then he would have raised interest rates yesterday, and indicated that many more increases were on the way. That would halt the “over-spending” of Canadians, rather than causing it. It would halt the growth of real estate bubbles across Canada, rather than causing them.
Just as with B.S. Bernanke, we see Carney’s actions always and absolutely contradicting his own words. When people say one thing but do another we call them hypocrites. When peopleintentionally say one thing but do the opposite then they are simply liars.
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Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada www.bullionbullscanada.com. He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among the most complex (and misunderstood) in the world.
Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.