The Austrian Way: Clever old Bernanke

Finally we taper. Last week Ben Bernanke saved the dollar… I mean stopped raping the dollar quite as hard as he had been. He’s going to trim QE by $10bn per month and slow down his dishing out of the funny money to £75bn a month.

It’s the biggest news in the markets this quarter and something we didn’t think he’d do for a while.

Clever old Ben.

Now if the financial system really implodes in years to come he can claim he had no choice to deploy the policy measures he did in 2008 and then tried to bring it all back. Tried to rein it in. Tried to get back to sound money, sound finance and sound markets.

Yeh, right.

The changing of the mantels

It’s funny. After Bubbles Greenspan we thought Ben Bernanke was the poor sod – picking up a crock of shit economy, swelling welfare state and crazy president.

Now the mantels are changing.

Janet Yellen now inherits something unimaginably worse. A US economy more drug addicted than eight years ago. A dollar that’s been the victim of the greatest monetary experiment in history. And, a president who whilst being all speeches and no soundness is also an economic knucklehead.

Poor Janet. What a hospital pass.

It’ll be fascinating to see how she manages it. And, it’ll be excellent to see a woman pulling the monetary levers in the US.

A new era in American high-finance starts in 2014.

But, when come the next financial fireworks?

Well, we’ve been waiting a while. How much longer?

After a 12 year gold and silver bull market, the dollar still floats. After 40+ years since Tricky Dick floated the world’s money, things still muddle on.

Some predict another market meltdown before 2020. Some predict a new reserve currency even sooner. The snow is indeed falling, but not even the super far-sighted, fractal visionaries can predict the avalanche.

Certain is not the same as imminent.

Equity markets are strong. Housing too. Unemployment is ticking down. Inflation is still not a problem… well, not really. And, gold and silver have had the living shit kicked out of them this last two years.

It feels so wrong, but so it is.

The ball is really in the court of the emerged Asian nations – now creditors to the world. If they decide the Western bloat is too much they can start a long-term bond bear market. Those who hold the great oceans of accumulated capital are those most able to unleash financial tsunamis.

The Chinese, Indians, Russians and others all have their interests to manage in the currency wars. Janet Yellen has an increasingly powerful BRIC-pack to manage, pander to and try to bluff.

As we wish you a very happy Christmas, we wonder if 2014 will be the year for financial fireworks?

  • silverminer
    • The Austrian Way

      Richard Russell is truly worthy of readership, but I must admit (as a long-term fan) that I think KWN has partially shot its credibility these last two years. What do you think?

      IMHO Too many old heads and successful men with track records have pumped the precious metals, often giving price targets and silly end game numbers for gold. One day maybe, but in the real world being that far off the mark for two years is painful. I know. My mining equities are 60% down. In professional fund management they say you can be wrong for one year, two years maybe, but three years and you’re out. KWN has intro’d me to Ben Davies, Eric Sprott, John Hathaway and loads of other guys I’ve now read, but I’m pretty bored of the style and delivery now.

      • silverminer

        I feel your pain Austrian…having mortgaged the children and sunk the lot in… My brother has the same opinion about KWN. However, I think these guys are spot on in all but timing. Be right and sit tight is my strategy. This looks like the 74/76 correction to me. Nothing like making a virtue out of necessity though…

        It would be possible to deleverage the system through a combination, of Bradbury Pound/Greenback Dollar, Glass Steagal, full reserve banking and a Modern Jubilee, but I don’t think it will happen that way as it wouldn’t serve the interests of the banking elites, i.e. we’d be set free from perpetual debt slavery and they’d lose their right to print the public currencies. It’s not going to happen.

        However, they still need to de-leverage the economies as they can’t create any more credit, hence make more profit, because there aren’t enough credit worthy borrowers. They need to create generalised, worldwide inflation which means they have to devalue all the currencies against something else (i.e. not against other paper currencies), that something being gold. This is where I think old man Russell is onto something. Again, the timing might be wrong but I think he’ll be proved right in what he says.

        Perhaps we are in the final shake out to free up as much gold as possible from the public? A deal has probably already been done to get enough gold into China ahead of the currency reset. That is occurring right now. Once that is done, and all the Banksters are net long, gold will be released to the upside and the inflation will begin. Paper gold contracts will be settled for cash and most (all except what has been released to the Chinese) of the official gold reserves will be found to be in the central bank vaults, having only been leased out, not sold and removed. All a massive fraud but they’ll explain their way out of it somehow and the police/judges won’t do anything.

        No predictions on the timing of any of this :D !

        Then we move to the SDR and World Government…Merry Christmas…

  • silverminer

    Perhaps we’ll get the modern Debt Jubilee that Steve Keen has been promoting? The private sector in the Western economies has to be de-leveraged somehow and deflation and bankruptcy appears to be off the agenda with policy makers.

    • The Austrian Way

      Hi silverminer,

      Thanks for stopping by and commenting.

      The fix is truly one of removing the debt, however we do it. Our economic arteries are clogged with the stuff. However, I wonder if those holding the reserves would really allow that… me thinks not. IMHO.

      I think the Asian creditor nations have to collectively, or independently, create superior forms of liquidity to hold their savings in. This means currencies. Ones which are not controlled by the US and cannot be debased according to whims in Washington. I think you’re pretty much with me on lots of this if you’re a KWN reader.

      In the long term I think that means a new reserve currency within 20 years, maybe even 10. What role gold, other real assets and crypto-currencies have in all this – I don’t know. I suspect a role of sorts but it’s impossible to predict.

      My prediction for 2014 is the the eurozone kicks off again and we might finally see a buyers strike in a bond market catch the ECB by surprise. How do you say ‘no bid’ in French?

      A very happy Christmas to you.

  • Mots

    does anyone know of any websites that campaign to close down the BBC ?
    I know.. only peripheral to this posting, but I really don’t want any more BBC bias particularly on economy topics / Europe