Pixie Dust

The baited* breath of Chairman Bernanke is due to be expelled  at 2:15 p.m. in his second-ever press conference as Fed boss. The presser follows a  12:15 p.m. interest-rate release from  the FOMC, (an acronym for the Federal Payday Loan Committee).

Ordinary folks like you and me await all this with bated breath. We have played along with the Fed's monetary gag for so long that, like it or not, we have a personal stake, survival, in the Charminization-rate of the American dollar.

I'm going to suggest a certain questioning attitude in listening to Ben. As he speaks, try to get a handle on just how he proposes to continue printing our way to something a majority of American voters will accept as "prosperity."

There's something to be said for the view that it's already too late, but Ben has to try. He has formidable enemies in the welfare classes as represented by vote whores in our legislatures and executive mansions. Further, he may have an enemy in his personal economic dogma. As smart as he is, the man's soul is larded with Keynes as propagandized by Samuelson.

And he is very smart. So are his fellow Federal Reserve Board governors. They're too bright to bless policy which they expect could lead to an American Weimar --  inflation coming at lightning speed and increasing exponentially.

(The German currency stabilized after the Armistice at something like 60 marks per American (gold- and silver-backed) dollar. That in itself represented massive inflation, but at least it held until June of 1921.  That summer brought further bad policy which devalued the mark to about 320  per dollar in September. By December, 1922,  it took 8,000 marks to buy one Greenback.

(Translate the number to the United States, 2011, and use our favorite benchmark, the price of bacon, now about $5 per pound.  That Weimarization level would boost it to $666 per pound. Your grandma starves. Your kids resemble the photos from Biafra, 1967-70.)

And that will not happen in the United States. The Washington, D.C. powers in which Ben is embedded understand that that level of misery would lead to a United States version of the putsches. Someone will remind them of the Reichstag elections of April 10, 1932.

The president, whomever he might be at the time, and all our subordinate electees could not endure in the face of that kind of upheaval short of trying to impose martial law upon a people less docile than the demoralized and defeated Germans.

So summon up what optimism you can and, for the time being, rule out the sort of hyper-paced borrowing and printing that would, in a relative eye blink, instigate the putsches.

Instead, watch for Ben's hints at something as bad, but en route on slower train, possibly buying enough time to tinker the economy back into something viable for another generation or two.

How much room does he weasel for a QE3 and a QE4? How much of our problem does he blame on, say,  Greece rather than Washington and the 50 state capitols? How does he explain the 50-1 leverage of his balance sheet? How forcefully will he hammer home to the political masters that they have long since bought the last vote we can afford?

---


*Correct. Baited with, among  many other adulterants,  a concoction of unicorn methane, pixie dust, smoke, mirrors, and ethanol subsidies