FakeBen's blog

SHORT U.S. BONDS [10-year and 30-year] (Timeframe for idea: immediate as well as longer-term trend):

While there appears to be consensus among Fed governors that inflation will moderate in the second half due to slower economic growth, the history of inflationary periods suggests that inflation ends only when interest rates rise.

Brother Can You Spare 10 Grand?
by Peter Schiff

The grainy footage of Great Depression soup lines and Hoovervilles now in heavy rotation on the major news outlets has been largely counterbalanced by a parade of economists who reassure us that such a protracted downturn is currently inconceivable.

ON RESOURCE NATIONALIZATION AND RESULTING INCREASES IN PRICES:

Philosophically, I wonder if it is worth exploring the idea that producing countries ALWAYS (as a permanent condition) have a natural bias towards nationalization. If you accept this as a permanent condition (a big if), then the question becomes: what causes situations where the political forces in the producing countries gain the upper hand (e.g. 1973-1974, 1979, today)? Conversely, what creates situations where political forces within and/or among the producing countries break rank (Saudi Arabia in the 80s)?

Are you getting worried about inflation? It seems amazing to me that there is so little talk about inflation and the long bonds are rallying. Meanwhile, you have oil at $108 WITHOUT ANY DISRUPTIONS OF SUPPLY. Can you imagine if we get a supply disruption? It seems clearer and clearer to me that oil is on its way to $200 if not $400.

Look at all the articles I've posted over the last couple of days on ag inflation and hoarding in 3rd world countries.

This is a transcript from yesterday's Congressional testimony. Note that Bernanke admits that if the Fed puts the interest rate at the "wrong place" then "that would have negative impacts."

Ron Paul: Does the Federal Reserve contribute to the business cycle?

Bernanke: It has. It has at times ....

Ron Paul: Does excessive credit and artificially low interest rates cause malinvestment?

Throughout the years, the Fed has put forth many arguments to rationalize the growth of debt: excess liquidity is a result of Asian savings; financial innovations have allowed for more debt and faster GDP growth; asset growth has outpaced debt growth. While it may be appropriate for such arguments to be made by the private sector as it seeks to encourage more debt assumption, the fact that these arguments were being put forth by the Fed indicates a flaw in the current system.

Ludwig von Mises is probably the most important yet least understood economist of the 20th century.

According to Wikipedia, "Ludwig Heinrich Edler von Mises (September 29, 1881 – October 10, 1973) was an famous Austrian Economist [who argued that] significant credit expansion causes business cycles."

The Fed's is an independent organization created by Congress to keep our money valuable and our financial system healthy. In 1977, Congress amended the Federal Reserve Act and gave the Fed its current "dual mandate" of promoting full employment and stable prices.

Over the last 30 years, the Fed has succeeded in promoting full employment and stable prices. However, it has done so by keeping interest rates at artificially low rates, which has encouraged massive debt growth relative to GDP.