Ben Bernanke must be a pretty confident guy these days. Why else would he throw a mini-fit just before his confirmation hearing on December 3, and risk offending his interviewers? So confident is Bernanke of landing another term that he recently penned an article in the Washington Post where he throws a hissy fit and trashes all the plans in the Senate and the House that would require an audit of the Fed. Bernanke has taken a page from Hank Paulson's scare tactics book and painted a dire picture of economic collapse if the Fed's dealings are exposed.
Now we actually AGREE with Bernanke's economic collapse theory but not for the reasons he is citing. Once the Fed's books are open, scary skeletons are sure to pop out of its closet, and it will certainly push us back over the cliff as the world realizes:
1) The true extent to which Bernanke has raided the taxpayer kitty and put the taxpayer's hard earned cash at risk, by making secret loans to banks and other entities: A brief trailer of this scenario has already been provided by Bernanke's cousin across the pond - Bank of England's governor Mervyn King. It was recently revealed that last year the Bank of England hid a $102 bn loan it had made to RBS and HBOS from the British Government and the public. As Edmund Conway of The Telegraph writes:
1) The true extent to which Bernanke has raided the taxpayer kitty and put the taxpayer's hard earned cash at risk, by making secret loans to banks and other entities: A brief trailer of this scenario has already been provided by Bernanke's cousin across the pond - Bank of England's governor Mervyn King. It was recently revealed that last year the Bank of England hid a $102 bn loan it had made to RBS and HBOS from the British Government and the public. As Edmund Conway of The Telegraph writes:
For it transpires that last autumn, to the almost complete ignorance of most of the City (and, I admit, most of the journalists who, like myself, keep a pretty close eye on the UK economy), the Bank of England lent a staggering amount of cash [$102 billion] to Royal Bank of Scotland and HBOS. I was dumbfounded when I found out. For a period of time in late ‘08 and early ‘09, British taxpayers’ cash was at a significant risk (although the money lent out by the Bank was not backed up by its own debt so this was rather more like quantitative easing than Government debt).
The first thing to remember that in the wake of the Northern Rock fiasco the Government enacted a number of laws which allowed the Bank to withhold certain information about the constituent parts of its balance sheet if it judged that this would help it improve financial stability. This meant that it could legally be rather more discrete about where in the balance sheet these sums would show up.
How many such secret loans has the Fed made? An audit would surely reveal several.
2) The true extent of Bernanke's money printing operations, and the degree to which these have trashed the dollar.
2) The true extent of Bernanke's money printing operations, and the degree to which these have trashed the dollar.
3) The Fed's secret currency swap deals with other nations that allow it to claim "successful U.S. Treasury auctions", when all the while it has been lending dollars to foreign central banks to buy U.S. Treasuries.
4) The true extent to which banks have been able to raid the taxpayer's kitty and indulge in heavy speculation in financial markets
5) The extent to which the Fed has worked to suppress gold prices.
So much as a "peep" about any of these secret Fed dealings and the U.S. economy is toast. No wonder Bernanke is running around town scared.
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