The wheels of the perception management apparatus are turning at full speed, as evidenced by the audacious spin chief propaganda-meister Bernard “Tokyo Rose” Bernanke put on more bad economic news following another disastrous day in global markets.
He says the recession will end this year.
The utter ridiculousness of such a statement in the face of rising global unemployment, massive monetary inflation, and collapsing banks is testimony to the fact that the self-delusional government and financial industry psychology that incubated and unleashed the present financial catastrophe is alive and well. As long as these arrogant economic narcissists man the helm of our common financial ship, any hope for real solutions and genuine reversal is dim at best.
Why even George Soros and Nouriel Roubini, two other economic media darlings offered direct contradiction to Bernanke’s blather.
Soros said last week that the world financial system has essentially disintegrated, and added that thiere is yet now prospect of resolution to the crisis. He classified the turmoil as more acute that during the Great Depression, and compared the present economic conditions to those surrounding the destruction of the former Soviet Union.
"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."
Former U.S. Federal Reserve Chairman Paul Volcker agreed. He suggested productivity around the world was uniformly decaying, and that the rate of decay had surpassed that of the United States in many cases.
"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.
Nouriel Roubini, one of the few economists who foretold much of the current financial turmoil, on Friday said the United States is nowhere near the end of the banking and credit crisis.
"We are still in the third and fourth innings," Roubini told Reuters in an interview, using a baseball analogy to drive home his view that the current cycle is only nearing its midpoint.
"And it's getting worse," said Roubini, a professor at New York University's Stern School of Business and chairman of RGE Monitor, an independent economic research firm.
Is it the desperation pervading the United States government’s fiscal frontmen that induces Bernanke to make statements so naievely optimistic? Or is it the knowledge that such platitudes have such a calming effect on markets that he would forgo credibility in favour of one day’s respite from freefall?
Either way, the disconnection between reality and sentiment among the overseers of global financial policy is dangerous in that the actions induced by that kind of rosy outlook will compound the fallout down the road. If capital entities start investing based on assurances like that from on high, and then find themselves underwater when reality sets in, the carnage at the end of that transaction is amplified.
It would be more responsible for somebody in Ben Bernanke’s position to admit that the U.S. Dollar is on the verge of collapse, and the only thing keeping the illusion of solvency alive is the increasingly opaque treasury auctions, where anonymous “primary bidders” are increasingly defined as domestic as opposed to foreign. That way, investors would be able to migrate their now over-priced U.S. Dollars into under-priced precious metals so that the rogue wave of impending dollar demise doesn’t sink all the ships left in the harbor that haven’t been foreclosed upon.
But I suspect that’s part of the program Ben is propped up there to support. It’s the behind the scenes mega-investors who need us to believe in a future (not the derivative type) where equities make a quick comeback and life returns to the perpetual growth mindset whereby our routines are punctuated by nothing more severe than the occasional vacation or car accident. That way, they can off-load their U.S. assets in favor of precious metals while the rest of the herd are led to believe in The Great Stimulus whereby we wade trustingly back into equities for a second drubbing like cows at the abattoir.
And Barack Obama’s image as the Bird of Paradise is losing feathers faster than you can say DoubleSpeak. From one side of his magnificently articulate lips he asks for $3.6 trillion in spending while from the other he promises to halve the U.S. deficit by the end of his “first” term. I think that’s admirable, but again, based on what? All of the key indicators point to a rise in the deficit, and this first budget sets the record for highest deficit of all time.
Now it takes 12.1 percent of the entire U.S. GDP just to service this debt load. General Motors required 25% of its sales revenue to service its debt load before the crisis, and look at it now. In an intelligent environment, its crippled viability would be recognized and the corporation would be dismantled and redistributed to those who have demonstrated better managerial stewardship.
Where will the United States go when it can’t sell any more Treasurys to service its debt? China? Japan? That region of the world is contracting just as fast if not faster than the United States.
All of this happy talk needs to be juxtaposed against the same dialect that issued forth from the previous administration during the period from April 2007 when the first cracks in the dyke appeared at Bear Stearns. Following the first Dow dive thus instigated in August, Bernanke et al tried to assuage investors with platitudinous assurances designed to calm the suddenly savage beast. Those who succumbed to the sweet sounds of our Federal Pied Piper had their heads handed to them at least twice.
A smart investor would observe the continued demand for gold, the diminishing appetite by foreigners (particularly China) for U.S. Treasurys, the escalating domino effect of collapsing banks, and stagnant world inventories, and rightly conclude that for all the smiles and reassurances, you can’t fall half the way off a cliff, and a golden pillow is all that’s out there to break an individual’s fall.