Bernanke's era of anarchy to go on

Money creation out of "thin air" is a pure redistribution of wealth

By Noureddine Krichene 

A recent survey by Transparency International put Somalia top of their country ranking for corruption; very amusing indeed; that top spot is due, in part, to acts of piracy committed by Somali pirates. 

Piracy is confiscation of wealth by brute force. Money counterfeiting confiscates wealth, and so does swindling. Bernie Madoff was sentenced to 10 years in jail, simply because swindling is a crime; his victims lost their wealth that they had entrusted to him. Yet, when outgoing Federal Reserve chairman Ben Bernanke prints every US$85 billion every month out of thin air, this act is considered a virtue - even though it is forced confiscation of wealth. It is called an economic "stimulus" in that, according to its proponents, it boosts the economy and moves it towards full employment. 

Bernanke leaves office at the end of this month following destructive years during which he spread financial chaos, mass-unemployment, inflation, confiscation, and poverty in the US and beyond. 

The United States was enjoying great prosperity before Bernanke turned it into a country of desolation. His tenure as a policy maker and Fed chairman will be seen by history as an era of fallacies and anarchy. His unorthodox money policies and near-zero interest rates helped to bring about the worst financial nightmares in the post-World War II period, destroyed US banks, and set off currency devaluation in other industrialized countries. 

Ignoring the US Constitution and thinking of money as a baby's toy, Bernanke ruled with absolute power in money destruction. Comparing 2000, just before Bernanke joined the Fed board of governors in 2002, and 2013, we can say that Bernanke deservedly won the title "Helicopter Ben". Fed credit rose from US$0.5 trillion to $4 trillion, a multiple of eight. US government debt is now at $17 trillion, compared with $3.4 trillion before his move to the Fed. Crude oil is at $100/barrel compared with $18/barrel; gold rose from $250 an ounce to $1,300 an ounce. Food prices are at least four times higher. Stock price indices shattered all records in 2013. Yet US real per-capita incomes are far less than in 2000. That is Bernanke's legacy of disorder. 

Bernanke believes in a theory that stipulates that "money helicoptering" is the key to prosperity and full-employment. So fancy is this theory that it has been marvelled at by US politicians and academics alike. And it is so fallacious that many years of injecting vast amounts of money into the economy have utterly failed to achieve full employment, merely chaos. 

If his theory were true, full-employment would have been almost instantaneous. Contrary to sciences where relations are exact, economics theories may never be confirmed by facts. In exact sciences, there is an immutable relation between temperature and mercury expansion, for instance, which enables us to measure temperature with precision. In economics, there is no such exact relationship between zero interest and full-employment. If an exact relationship existed, Bernanke would have attained full-employment many years ago. 

He only encouraged intense asset speculation and brought about financial disorder, and impoverishment. He is not alone in this, for sure - many economic theories their proponents claimed to be exact, such as communism and Keynesianism, have failed miserably and caused disasters wherever applied. Now we can add or Bernanke-ism to that roll of dishonor. 

When Somali pirates get a ransom for a ship, no doubt this money will increase demand for goods and services by the pirates; it will squeeze the demand for goods and services of those who had to pay it. Piracy employment is uncertain and piracy itself amounts to a redistribution of wealth only - not the creation of wealth.

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