Helicopter Ben Bernanke (Courtesy of Google Images)
Last Tuesday, while being interviewed by Charlie Rose, President Obama referred to Ben Bernanke, the Federal Reserve’s chairman, saying:
“He’s already stayed a lot longer than he wanted or he was supposed to.”
Later in the day, former Federal Reserve governor Laurence Meyer suggested that, with that remark, President Obama,
“. . . essentially fired Ben Bernanke on the spot and gave him a fairly tepid testimonial afterward.”
Mr. Bernanke has not, in fact, been fired. It’s possible that President Obama was merely guilty of an unfortunate choice of words that was taken out of context, misunderstood and exaggerated by others.
On the other hand, it’s also possible that Obama is an adept politician who is always acutely aware of whatever he’s saying and therefore fully intended to convey the message that it’s time for Bernanke to go.
If so, it would seem that Obama is unwilling to actually “fire” Bernanke, but would be much relieved if Bernanke “did the honorable thing” and “voluntarily” resigned.
This, in turn, implies that Obama may have already been privately encouraging Bernanke to leave, but that Bernanke had so far refused to resign.
Why might Bernanke refuse to resign? Perhaps he doesn’t want to accept his inevitable role in history as the “goat” who collapsed the US economy.
If Bernanke persistently refused to follow the private “hints” that he resign, perhaps Obama felt compelled to “go public” on the Charlie Rose interview to say that it’s time for Mr. Bernanke to “hit the bricks”.
Whatever Obama’s reasons, his faint praise for Bernanke makes clear that Bernanke is no longer welcome. Without Obama’s confidence, Bernanke’s days are almost certainly numbered.
• Let’s suppose that “Helicopter Ben” Bernanke will resign within the next 90 days (perhaps sooner) from his post as chairman of the Federal Reserve System.
If it’s true that “Helicopter Ben” is about to depart from the Federal Reserve–we can ask why? Is a personality conflict? Could it be that Obama simply can stand to have Bernanke around for another day? Does Obama despise that over-educated honkey? Would Obama rather work even with Hilary than with Ben?
That’s possible but unlikely. The economy is not revived. It’s fragile. Ben Bernanke’s resignation might be viewed by the public as something akin to rats leaving the sinking ship. Result? The public might lose more confidence in the economy. That potential loss of confidence might cause stock markets to fall by several hundred points. It might even be sufficient to tip the economy into a full-fledged depression. That would be bad for the reelection of incumbents and should therefore be avoided.
We can therefore conclude that if Mr. Bernanke is being invited to resign, the reasons must be something much more substantial than a personality conflict.
What might that mean? It would almost certainly mean that Mr. Bernanke’s policies over the past five years were recognized as having failed to cause an economic “recovery”.
What are Bernanke’s policies?
Well, what’s his nickname?
A: ”Helicopter” Ben.
How’d he get that nickname?
A: By declaring that in the event of a serious recession or depression, he’d revive the economy by dumping dollars into the economy from “helicopters”.
In other words, Bernanke’s solution to an economic depression would be to flood the country with a massive injection of fiat dollars. ”Helicopter Ben” would inflate his way out of a depression.
And that’s pretty much what Bernanke has done since A.D. 2008–flood the country with fiat dollars under the guise of “Quantitative Easing” in three waves of QE1, QE2 and now QE3 ($85 billion per month injected into the economy).
I give “Helicopter Ben” a certain amount of credit. If his inflationary policies have failed to revive the economy, they have nevertheless prevented the U.S. from collapsing into a full-fledged depression.
Even so, if Bernanke is about to be terminated as Fed chairman, Bernanke’s pro-inflation policies are probably also about to be terminated.
We can wonder whether those pro-inflation policies will be terminated because:
1) they simply haven’t worked; or,
2) the government has reached some sort of limit on its ability to “spin” fiat currency out of “thin air” and is simply incapable of continuing to inject $85 billion per month into the economy.
But it’s at least likely that if Bernanke resigns, QE3 will also be reduced or terminated within the following six months. There’ll be no subsequent QE4.
If so, the stock markets should decline significantly. The economy might slide into an overt and undeniable depression. There’s no telling how much social and political unrest may follow. Cash will be scarce. Savings may disappear in bank failures and pension fund collapses.
As in the Great Depression of the 1930s, “cash” will be “king”. Those who have any “cash” (savings or a paying job) will be able to buy property for extremely low prices–perhaps ten cents on the dollar. Maybe less. Those who don’t have cash (savings or a paying job), may be pushed towards starvation or criminality.
What kind of “cash” will most likely be “king” in another, possibly “Greater Depression”?
Probably not paper dollars. Probably gold and silver coin saved outside of the commercial banking system.
Those who have a handful of gold coins buried in the back yard and save from any bank runs or government confiscation of safety deposit boxes may find themselves able to purchase spectacular homes, farms or other properties at fire sale prices.
All of this conjecture could follow if Mr. Bernanke resigned from the Fed and his pro-inflation policies were abandoned.
Of course, all of this gloomy conjecture is probably inevitable and will therefore follow sooner or later, regardless of whether Bernanke resigns now or five years from now.
The question is not “What will happen to the economy?” so much as “When will it happen?”
And that’s what’s odd about President Obama’s remark about “Helicopter Ben” having “already stayed a lot longer than he wanted or he was supposed to”: why risk damaging the economy with Bernanke’s resignation?
If Bernanke resigns, we may get along just fine. Maybe they’ll find a new Fed chairman who’s even more inclined to stimulate the economy with even bigger waves of Quantitative Easing. Could be.
But why take the risk of canning Bernanke? Why take a chance that Bernanke’s resignation could trigger a 2,000-point drop in the Dow Jones Industrial Average?
Have we finally come to the “end of our tether”? If Obama is really forcing Bernanke to resign, could it be that Obama has finally said, “To hell with it–let’s pull the plug and see what happens”?
I can’t answer that question. But I can see that if “Helicopter Ben” is about to be shot down, we can reasonably expect the economy to respond negatively. Whether that response will be brief or long-term remains to be seen.
Faced with these possibilities, you might do well to prepare to deal with a significant economic turbulence starting within, say, the next 90 days.
I can’t guarantee that prediction. I can only say that it seems plausible to me. If you agree with my premises and logic, you might also agree with my conclusions.
If you do, buckle up.