Ben's Odyssey -- Chapter IV

Od-ys-sey (noun): a long wandering or voyage usually marked by many changes of fortune; an intellectual or spiritual wandering or quest.

Here is what we know, so far.  Ben talked about deflation for years – defined it; lectured on how and why to avoid it; and then outlined how to deal with it if and when it arrives.

Next we know that Ben has been engaged in implementing every deflation fighting step he said was available to him.  We reported his progress to you and he’s done darn near all of ‘em.  Even though we have no deflation – we have rising prices.

Now we also know that the objectives that Ben and the men he funds, Mr. Obama and congress, say they seek strong economic growth and jobs creation.  But they are not occurring.  All these fellows keep wringing their hands waiting for good economic news.  We also know some other things.  There is a big disconnect between what Ben said would trigger his deflation odyssey and the facts on the ground.  Overall price declines; demand dropping price declines are nowhere to be found.  Quite the opposite as a matter of fact.  Prices are and have been rising – some at a very rapid escalation pace.

Let’s take a closer look:

1.    We are not in a period of deflation; we are not threatened with a period of deflation as defined by Ben and his odyssey team.  Using the facts, even though they can be and sometimes are distorted by government, we have proven factually that America is experiencing rapidly escalating prices in some very focused sections of its economy – higher education and medical care costs, and government spending is simply off the charts while revenues stagnate.  We also know some cities and states are improving services and becoming very efficient while others seek handouts and federal assistance, and

2.    Overall prices – as computed by the government,  have risen steadily over the past 20 years and are continuing to do so at this very moment, regardless of what Ben and the odyssey gang say, and

3.    Federal government spending on its own – has risen so rapidly that it almost leaves the chart when compared with household income growth.  If citizens don’t earn money to pay more taxes while government spending rises at a much higher rate, we don’t need an MIT economics degrees to know we are not Keynesian bound – we are banana republic bound – look at the numbers in this chart from the Heritage Foundation:

This chart should be enough to send Ben back to the drug store in South Carolina and his leader back to a “community organizing” storefront on Chicago’s south side.  This situation needs to be stopped – not promoted through irresponsible fiscal and monetary policies.

At TheFundamentals we see something else going on.    Not deflation; not even fear of deflation as spelled out by Ben ten years ago.  Something very, very different that has driven Ben on his odyssey.

What is the one overwhelming fact about government in the last twelve years? (see above)  Government spending has skyrocketed.  And, as the spending has escalated quickly and dramatically; revenues have not.  Revenues are not rising but spending is and so, there, is debt.  These are facts we all know.  There is only one reason why a government consistently spends money it does not have – to hold onto power.  And there is only one reason why a government does not tax and take other measures to raise revenues to meet its spending and that is because it will lose power if it does so.  And so government needs two things to keep power when it finds it has out promised its ability to pay its way – the ability to issue debt and the ability to find buyers for the debt.  Ben has chosen an odyssey, a journey for which he has no authorization.  He has decided that it is his job and it is his time to maintain the US government created bubbles in government spending; health care spending and education spending and he has chosen to do so under the camouflage of “fighting deflation.”

We need to step back and ask a basic question – do a majority of the America people demand these bubbles be sustained or do they demand responsible government at all levels but particularly at the level where the monetary policies – interest rate setting; currency transactions and debt management be managed to meet long term, fundamental goals?

Ben Bernanke is not managing monetary policy with long term good fundamentals in mind – he is acting to keep irresponsible people in power.  That makes him irresponsible and it means he too, along with the president and the congress, must be replaced.   It is time to end Ben’s odyssey.