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Bernanke's Reappointment Anointment


For four more years, all hail the Lord of Money.

Very high rates! Hmm. Is 1% (or whatever it was at the time, since adjusted to 0.1%) considered a "very high rate"? Have the banks been punished for their impudence, like spoiled schoolchildren just after engineering a nasty prank? No. They were rewarded for their behavior. How could Bernanke be so free with money for these scoundrels? Easy answer: Money is free!

You see, in Bagehot's day, gold was money. Gold was a finite resource for the central bank and couldn't be squandered. Bagehot didn't have the revered "printing press" that could bring forth wealth with the flip of a switch for all who genuflected to the master (not really new wealth, just an unearned share of wealth already created, sort of like adding water to milk -- after the fact, who would know?).

Why all of Bagehot's recommendations are taken with such high regard by Dr. Bernanke is a bit bizarre. Bagehot couldn't imagine the entire world being on paper, so everything he wrote about was to protect gold reserves and defend his country against the rest of the world destroying his currency. This is all a bit moot when currencies are all backed by nothing.

Bagehot, if he were alive, would be absolutely stunned at the gullibility of the populous and the corruption of this whole regime. I think he'd be a little embarrassed that he hadn't tried it in his time, but perhaps it being only 100 years after John Law tried the same in France (leading to a complete and total economic collapse) he was a bit wary of trying to fool the people in England with that "paper money is okay" bit of nonsense.

Anyway, like any good speech writer, Dr. Bernanke sums up where he started: "The outcome could have been decidedly worse. Unlike the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, [this time the response was] aggressive and complementary."

Bravo, Dr. Bernanke, bravo. Take a bow. Take four more years of being shuffled around in a black town car, have your groceries shopped for you, your clothing tailored for you, as you look down from your ivory tower at the minions below as they scuttle back to work, back to the economy that you saved for them with your brave and daring actions of the previous year.

My final thoughts are that Dr. Bernanke is wrong when he says that "the line between insolvency and illiquidity may be quite blurry." That this game of "kicking the can down the road" with rates at 0.1% won't solve the residential and commercial real estate debt problems; won't allow the West to buy more stuff from the emerging world at ever cheaper prices; won't lead to new, productive jobs; and yes, there will yet be another deflationary crisis coming -- and shortly. Today was no day for a victory speech.

But because the market is king, we must step aside and let Bernanke take his bows through the canyon of heroes.

Let's leave it with a couple of quotes. Hans Christian Anderson wrote, "But, the bubble burst when an innocent child loudly exclaimed, for the whole kingdom to hear, that the Emperor had nothing on at all. He had no clothes."

I can only wonder: Where's that innocent child today?

Of course, there's the opposite (more cynical) view. Neil Gaiman (Sandman) wrote "It has always been the prerogative of children and half-wits to point out that the emperor has no clothes. But the half-wit remains a half-wit, and the emperor remains an emperor."

All hail the emperor. For four more years, he will lord over our money
No positions in stocks mentioned.

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