Why Bernanke has Failed, and Will Continue to Fail
BY CHARLES HUGH SMITH
Ben Bernanke’s zero-interest rate policy (ZIRP) and command-economy efforts to maintain mispricing of risk, debt and assets are destroying capital and capitalism. No wonder his policies have failed so miserably.
To understand why Federal Reserve Chairman Ben Bernanke’s efforts to restart economic “growth” have failed so completely and miserably, we need to compare the present with the end of the Great Depression. There is a wealth of irony in the Chairman’s supposed expertise on the Great Depression, as his policies have backfired on “fixing” the Great Recession.
Rather than “fix” the economic malaise by re-inflating the credit-boom bubble, he has only increased the systemic vulnerability to a much greater crash.
This is akin to an “expert” on World War I recommending a bigger, stronger more costly Maginot Line as the “solution” to military vulnerability.
In the Great Depression, excessive speculation built on systemic fraud and embezzlement led to the implosion of a vast credit bubble.
The “solution” touted then and now by saviors of the Status Quo was to “save” the financial sector and debtors by substituting Federal spending (with the money being borrowed via the full faith and credit of the U.S.A.) for collapsing private borrowing and spending.