YOUR MONEY

Has Bernanke finally got it right?

Over the last 3 weeks the U.S. Federal Reserve has made one announcement and one more recent ‘leak’ that suggests Ben Bernanke and company are finally getting their act together, seeing reality and creating ‘transparency’ for an organization who has lived by secrecy and George Orwell’s doublespeak; only contributing to public, stock market  and government uncertainty and confusion.

 

In early December Bernanke announced that the Federal Reserve will adjust its money (printing) policy to an inflation target of 2.5% and unemployment target of under 6.5%. The inflation target, while a bit above the old 2% target was a reasonable and minor adjustment. The big news --  the good and smart news -- was the addition of an  unemployment target  – publically stated for the first time ever in Federal reserve history and applauded by analysts and pundits everytwhere.

Now, anyone who wishes to see what the Fed will do next only needs to check two readily available statistics – the inflation rates and unemployment rates. Google can find the most recent data from any computer in the world in seconds!

Also helpful is the recent ‘rumour’ – if it proves true -- that the Fed will stop ‘printing money like crazy’ after doing so to the tune of over 2 trillion dollars in the last few years!  If true, it will put an end to the Fed’s shell game antics that have distorted the U.S. marketplace long after the original need for cash during the 2008-2009 sudden money crunch and near collapse of the entire, highly leveraged and dishonest (see my LIBOR article) U.S. and world banking system.

Adding trillions by the Fed has not forced healthy companies to invest their trillions of cash reserves nor led foreign investors and sovereign funds – with their multi-trillions -- to use their cash to build companies and create jobs.  Instead, they have been seeking ‘security’ in the face of world volatility – read European Union  about to collapse and the Arab world in chaos - – in 10 year U.S. Treasury bonds yielding as low as 0.10%!!!!

So, if trillions are already available in the public sector, no new Fed trillions are really needed.

What is needed is ‘certainty’ and ‘predictability’ in government monetary policy and the realization that Bernanke’s dollar printing presses are about to end.

 

Put simply, what the U.S. needs to kick start the U.S. economy is to give it a swift kick in the ass, to speak.

 “Sorry, America, I am not bailing you out any more and there will be no more free lunches or money from Uncle Ben (in reality, future generations of taxpayers). Become self-sufficient again!”

Or as Mr. Spock might have put it, “Live long and prosper -- on your own!!!”