Friday, February 11, 2011

Ben Bernanke’s Logic for Keeping the Money Spigot on, or “This isn’t your Grandfather’s Great Depression!”

2/11/2011 Portland, Oregon – Pop in your mints…
If you have been reading about Federal Reserve Chairman Ben Bernanke's recent testimony before the House Budget Committee, you are probably beginning to think what we are thinking.  The man is insane.  Even Congress appears to be catching on to the fact that inflation is about to skyrocket.  How could the man in charge of the world's reserve currency miss something so obvious?  They wonder aloud.  They ridicule him, scold him for keeping interest rates low, and call for him to cease and desist his most recent counterfeiting scheme, QE2.
Ben is being bullied.  Congress needs to show that they are somehow "in touch" with suffering of the American people so they pick on him.  The irony is that the FED is simply the enabler to the American Congress's insane policies and related spending habits.  It is like a cocaine addict blaming his drug dealer for his addiction.
At one point yesterday Ben pushed back.  While Paul Ryan (R-Wisc) was deriding him, with the benefit of hindsight, for implementing QE2, a roughly $600 Billion dollar money printing scheme, Mr. Bernanke noted that Congress was on pace to run a record deficit of $1.5 Trillion this fiscal year.  What remained unsaid was that the FED is essentially funding the US Deficit by printing money.  This is the type of activity that has caused some very unhappy endings throughout history.  Yet, like Thelma and Louise, the FED and Congress are holding hands as they run the currency off a cliff!
But Congress and the FED are two very different characters with two very different goals.  Congress is simply trying to get elected.  The FED, on the other hand, is attempting to fulfill its impossible mandate to provide price stability and full employment to the American public.  Since it cannot do both, it is currently sacrificing the former in favor of the latter.

Thursday, February 10, 2011

Something Just isn't Right, Monetary Inflation - a Dangerous Byproduct of Economic Engineering

2/10/2011 Portland, Oregon – Pop in your mints…
Something just isn't right.  This phrase entered the thoughts of many this past Sunday as Christina Aguilera belted out the national anthem.  Aguilera chose to remove the ramparts completely from it and inserted the decidedly smoother lyric of the first verse.  A minor error in an otherwise stellar performance that many Americans seem unable to forgive.
If only Americans were so particular about their money!  Only recently have they begun to ask why are prices rising?  What is inflation, anyway?  Ben Bernanke, in his testimony yesterday before the House Budget Committee, stated again that he didn't see any inflation.  Of course, he is arguably paid not to see it so he too may be excused for simply playing his part.  

Apparently commodity markets have erred and thousands are rioting in the middle east for no apparent reason.  Inflation, according to Mr. Bernanke and his colleagues at the Federal Reserve, is perfectly under control.  He even promised that, if prices looked like they were getting out of control, He and his colleagues would quickly get them under control.  What a relief!
We have a News Flash for Mr. Bernanke:  PRICES ARE SPIRALING OUT OF CONTROL!

Wednesday, February 9, 2011

K2, Portlandia, and Nothing Natural about the Global OTC Derivatives Market

2/9/2011 Portland, Oregon – Pop in your mints…
We are taking a break for the technicalities of our current hypothesis and are popping in a ligher Mint today.  

Last night we enjoyed viewing clips of Portlandia, a short format comedy which is dedicated to exposing and affectionately poking fun at our beloved Portland.  As with all good comedy, at least in our humble opinion, small quirks are taken to extremes for comedic effect.  Take the following "Is it Local?" clip:

While you are not likely to see this scene actually take place in a restaurant, you can almost feel many of Portland's restaurateurs cringing as lighter versions of this conversation crop up at nearly every restaurant in Portland on a nightly basis.
Yes, comedic extremes can be hilarious.  Take the current world banking system.  At last count, the

Monday, February 7, 2011

Organic Vs Engineered Economies, Are Diminishing Marginal Returns Possible in an Organic Economy?

2/7/2011 Portland, Oregon – Pop in your mints…
We mentioned our hypothesis to our lovely wife last night.  She astutely noted that my use of the term "Organic" was a sign that the Portland lifestyle and terminology is starting to have a definite influence on my thinking.  Could this be the same lifestyle so eloquently parodied in the new series "Portlandia"?  We shudder at the thought, but perhaps it is true.  Still, our skin has not yet turned green so there is still time to reverse the process, if we so choose.
Notwithstanding our current influences, we must carry on with the hypothesis as originally stated:
"As a predominantly Engineered (Socialist) economy becomes less Engineered and more Organic (Capitalist), it experiences exponentially increasing rates of economic growth.  Conversely as a predominantly Organic economy becomes more Engineered, it experiences exponentially decreasing rates of economic growth."
We left off yesterday with mention of two of the most recent attempts to Engineer the US economy, the Dodd-Frank Financial and Health Care reforms recently passed.  We would like to emphasize here that we only single these out as they are recent and highly publicized examples.  The engineering of the US economy has been happening on an ever increasing scale, through government interventions in nearly every sphere of public and private life, since the Federal Reserve was handed control of the money supply that dark day in 1913.  We define this as an important turning point in the history of the US economy, when it reversed its tendency toward becoming a more Organic economy to becoming a more Engineered economy.
Perhaps it is not a coincidence that this change coincided with the onset of World War I.