As He Clips Our Coins, Bernanke Steals A Page From Nero's Playbook

Bending economic gravity

By Keith McCullough

“In 64 A.D., in a naïve attempt to deceive the populace, Nero decreased the silver content in the coins and made silver and gold coins slightly smaller” (The History of Money, pg 52)

As the quote above reveals, central planners have been clipping coins and devaluing the The People’s hard-earned currency for at least two thousand years.  The Roman Emperor Nero of course devalued the Roman currency for the first time in the Empire’s history. What was it that gave both the Roman and Ottoman Empires the audacity to plunder the purchasing power of their people?

After 200 years of operating as an independent bank, what made the British Empire so soft that it felt the need to socialize (nationalize) the Bank of England in 1946? What was the US “Free-Market” Empire and why have we empowered the Fed to change it?

If you disregard the vacuum of history in which Ben Bernanke thinks (the 1930s) and contextualize the moment his Fed currently occupies (within the construct of long-term history, which will ultimately judge Bernanke when he’s long gone), it’s getting scary again. But you probably already knew that. The sad thing is that some of his Fed heads do too.

On Monday, Dallas Fed Head Richard Fisher basically admitted two key things:

1.                 The current White House Administration has politicized the US Federal Reserve

2.               By not doing what they led the market to believe they would do (taper), the Fed is losing credibility

Check. check.

If you don’t understand the history of un-elected politicians devaluing currencies, you have some reading to do. Most people who aren’t paid not to “get” it understand this now. Self-education is the best long-term path to avoid becoming a lemming.

Look, I’m not that smart. Most people who have seen my SAT scores would agree. But I work hard and I recognize that Mr. Market is a very smart cookie. What I tend to get on a lag, is what Mr. Market is telling me to get. Unlike our Fed Chief, I don’t wake up every morning trying to bend economic gravity.

Ben Bernanke believes he can “smooth” gravity, economic cycles, etc. He’s basically telling the entire bond, currency, and stock markets that they are all wrong. So let’s stop, rewind the tapes and go to the score – what have markets done since Bernanke decided not to taper?

1.                 US Dollar went straight down

2.               US Interest Rates went straight down

3.               US Growth Stocks stopped going up; slow-growth Utilities stopped going down

Now isn’t that last part perfect? Great job Ben. Instead of US growth expectations accelerating, they are now slowing again.

This is the first 2013 US stock market “correction” that I will not be buying, all because Bernanke has decided that the opposite of what I want is what he wants. To review, what I want is A) what was happening and B) what every American should want. In other words:

1.                 #StrongDollar

2.               #RatesRising

3.               #GrowthAccelerating

To be fair, there are a lot of compromised people who are in the business of slow-growth (Gold, Bonds, MLPs, etc.) investing who have a pre-determined path as to what they want (more money to manage). But that’s not what The People want.

You don’t have to go back 2,000 years to get this non-partisan point either:

1.                 1983-89 US Growth > 4% GDP with #Strong Dollar (President Reagan’s avg = $115.25 USD) and Down Oil ($16.53/barrel avg)

2.               1993-99 US Growth > 4% GDP with #StrongDollar (President Clinton’s avg = $97.89 USD) and Down Oil ($19.69/barrel avg)

Who knows? Maybe Hillary is smart enough to get what Obama doesn’t? Maybe that’s the only way out of this mess:

1.                 Obama’s average USD (US Dollar Index) is the lowest in Presidential history at $79.52

2.               Obama’s average Oil price (Brent Oil) is the highest in Presidential history at $102.01/barrel

But sadly, that’s more than a few years away. At some point, someone in this country is going to wake up and realize that empowering Vladimir Putin and Middle Eastern kings via a Down Dollar, Up Oil policy is no different than doing the same via an un-elected Federal Reserve.

There is no doubt in my mind that the Fed is exerting its misplaced fear-mongering pull on the President. The lure is also to get you, The People, to fear the alternative (“If rates rise, housing will collapse!”) The reality is that it’s government policy itself that is luring us away from the free-market system that gave America its empire to begin with.