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Yesterday, Ben Bernanke departed from the silent, opaque tradition of the Federal Reserve and held a press conference. The event attracted considerable attention, for its novelty as much as for its substance. But those hoping that Bernanke would do his best imitation of Willy Wonka and reveal hidden facets of humor, complexity and charisma were, to say the least, disappointed.
What was striking wasn't what was said: it was the theater of saying it. The build-up demonstrated what most have long suspected: the Federal Reserve has become the fourth branch of government, with few of the resources of the other three but with as much influence on the warp and woof of society. The Chairman of the Federal Reserve – in his signaling, his cryptic utterances and Delphic statements - now has arguably more sway on American life than the Chief Justice of the Supreme Court.
It's not that anyone truly expected Bernanke to say anything of substance. After all, the risk-reward for him skews almost entirely to the risk side of the equation. Say something unwise and unexpected and the markets – susceptible as they are to uncertainty and more sensitive to change that the princess and her pea – could be roiled. Say something wise and unexpected, and there is no news and no reaction. So Bernanke did what central bankers do: say very little at great length and with great variety.
Or to be precise, he reiterated what the Federal Reserve Open Market Committee has been saying for months: the economy is recovering but is still hobbled by high unemployment; inflation is increasing because of food and fuel but in general remains in check; and low-interest rates and continued use of creative tools such as Fed purchases of U.S. treasuries remain necessary to keep the economy moving forward. Bernanke also disagreed that the Fed and the Treasury are pursuing a purposeful policy of keeping the dollar weak in order to bolster American exports (which is what the Chinese have been accusing the United States of doing), and he warned of long-term deterioration of the U.S. financial position if the government doesn't do something to get deficits and spending under control.
Perhaps the most compelling message was on employment. Two questioners probed what the Fed can do to reduce unemployment. Bernanke's most telling sound bite? “We don't have any tools for targeting long-term unemployment specifically. We can try to make the labor market work better broadly speaking.” Several Fed governors have been on record urging Congress to remove the Fed's odd dual mandate (unlike many other central banks) to strive not just for price stability (a.k.a keeping inflation and deflation at bay) but also to work for full employment. The problem is that while the Fed has immense influence over financial systems and markets, unless it starts hiring lots of people, there is little is can do beyond creating the purported conditions for employment.
As for the markets, the reaction to Ben was mostly benign. Stocks – which have been on a roll of late – reacted positively the news that there was no imminent risk that the Fed would stop injecting money into the economy. Excess money – liquidity – is the mother's milk of equities, and a generally weaker dollar is a recipe for continued high prices of oil, food and metals that trade in dollars internationally. Traders have been doing well trading global stocks and commodities, and Bernanke remarks were taken as a signal that this trade is still on. With bond yields zero (or less taking inflation into account) and Bernanke assuring markets that liquidity would remain ample, stocks should continue their upward trends – until, of course, they don't.
The trick for the Fed now is to keep everyone calm but not complacent, and to signal that one day soon but not too soon policies will change and the Fed will be less involved in supporting the markets. When you teach a kid to ride a bike, you have to let go of the bike without saying anything and hope that the child keeps riding before they freak out and realize you've let go. That's what Bernanke has to do with the markets, and it's not an enviable task.
With his blank delivery and academic patois, Bernanke fits the mold of oracular banker perfected by his revered and reviled predecessor Alan Greenspan. The markets have come to hinge on the words, signals and actions of the Fed, and as go those markets so go the collective material fortunes of us all. But the desire to imbue the Fed with that power – and the willingness of those like Bernanke to accept it – has risks. Central bankers are not neutral pullers of levers: they are human, and they make mistakes ranging from hubris to miscalculation. They may save us one month and crush us the next. Today, the markets cheered. But the downside is that tomorrow, they may jeer, or worse, fear. And this fourth estate, unelected and powerful, is unprepared for those storms.
Touted as the press conference that would make the Fed more open and transparent it was not an unexpected disappointment; Bernanke's wooden demeanour and anal delivery was completely in character. However, the above piece is also painfully constrained, EVERYBODY KNOWS the Fed owns the State, so why beat around the bush, Zach?
Regardless of all the relevant and irrelevant commentary, Bernanke succeeded in devaluing the dollar against all the major currencies -- that was the objective!
The sooner other nations follow suit and directly manage their currency rates the sooner they will restore their lost sovereignty.
Bernanke is simply following China's lead in taking control -- though somewhat indirectly -- of the currency rate.
Australia for one would do very well to devalue its dollar now before its inflated rate severely impacts Australian business. Notwithstanding that that remedy is a very big ask for a servile Washington puppets such as Gillard and Swan.
We are simply indicating that some Aussies are fully capable of running this nation's economy in the peoples' best interests.
While Wall St traders continue to control the value of the Oz dollar Australia will remain a financial (slave) colony -- FACT!
'Fleeing the dollar Flood Fraud,' Max Keiser, gets a bit carried away here, ignore it!
Members of the International Monetary Fund emerged from their huddle in Washington last weekend resolved to keep every option open to slow the flood of dollars pouring into their countries, including capital controls. That's a dangerous game, given the need for investment to drive economic development. But it's also increasingly typical of the world's reaction to America's mismanagement of the dollar and its eroding financial leadership.
The dollar is the world's reserve currency, and as such the Federal Reserve is the closest thing we have to a global central bank. Yet for at least a decade, and especially since late 2008, the Fed has operated as if its only concern is the U.S. domestic economy.
The Fed's relentlessly easy monetary policy combined with Congress's reckless spending have driven investors out of the United States and into Asia, South America and elsewhere in search of higher returns and more sustainable growth. The IMF estimates that between the third quarter of 2009 and second quarter of 2010, Turkey saw a 6.9% inflow in capital as a percentage of GDP, South Africa 6.6%, Thailand 5%, and so on.
This incoming wall of money puts the central bankers in these countries in a bind. If they do nothing, the result can be asset bubbles and inflation. Brazil (6.3%) and China (5.4% officially but no doubt higher in fact) are both enduring bursts of inflation, as are many other countries. These nations can raise interest rates or let their own currencies appreciate, at the risk of slower economic growth. Rather than endure that adjustment, many countries are resorting to capital controls and other administrative measures to try to stop the inflow.
Over the past year, Brazil has introduced taxes on stock and bond investment and raised bank reserve requirements; Indonesia has introduced holding periods for government bonds; South Korea has limited banks' ability to engage in foreign-currency financing, among other things; Peru and Turkey have taken action, too. Yet their currencies have in many cases continued to rise and the money keeps coming in.
So it was little surprise earlier this month when IMF chief Dominique Strauss-Kahn joined the parade and endorsed capital controls as a necessary "tool" to be used on a "temporary basis," ending the fund's long-time commitment to free flows of capital. The last time the fund did this was amid the Mexico monetary crisis of the mid-1990s.
The IMF wanted its members last weekend to endorse guidelines on when they would use such measures. Brazil's finance minister spoke for many when he refused, calling capital controls necessary "self defense" measures against "spillover effects" from other countries' policies. He meant the U.S.
As if to underscore the point, U.S. Treasury Secretary Timothy Geithner responded by pointing the finger right back at developing countries, essentially updating Treasury Secretary John Connally's famous line to a delegation of Europeans in the 1970s that the dollar is "our currency but your problem."
The larger story is that the world is starting to protect, and perhaps ultimately free, itself from America's weak dollar standard. The European Central Bank recently raised interest rates and may do so again to prevent an inflation breakout. China is allowing more trade to be conducted in yuan, a first step toward making it a global currency. At a meeting of developing countries—the so-called BRICs—in China recently, leaders called for "a broad-based international reserve currency system providing stability and certainty." They weren't referring to the dollar.
Even in the U.S., Americans are buying commodities (oil per barrel: $111) and gold ($1,500 an ounce) as a dollar hedge, and the state of Utah recently took steps to make it easier for citizens to buy and sell gold as a de facto alternative currency. Whether or not these prove to be wise investments, they are certainly signals of mistrust in Washington's economic stewardship.
At an economic town hall this week, President Obama blamed "speculators" for rising oil prices. He should have mentioned the Fed and his own Treasury, which have encouraged the world to invest in hedges against the falling dollar. Chairman Ben Bernanke and Mr. Geithner have deliberately pursued a policy of unprecedented monetary and spending stimulus to reflate the economy and boost asset prices. The bill is coming due in a weak dollar, food and energy inflation, and the decline of U.S. economic credibility.
WASHINGTON (Dow Jones) -- World Bank President Robert Zoellick Thursday said he hopes the institution will have a role rebuilding Libya as it emerges from current unrest.
Zoellick at a panel discussion noted the bank's early role in the reconstruction of France, Japan and other nations after World War II.
"Reconstruction now means (Ivory Coast), it means southern Sudan, it means Liberia, it means Sri Lanka, I hope it will mean Libya," Zoellick said.
On Ivory Coast, Zoellick said he hoped that within "a couple weeks" the bank would move forward with "some hundred millions of dollars of emergency support."( By Jeffrey Sparshott, Of DOW JONES NEWSWIRES –full article here - http://tinyurl.com/3hj8yyp .)
We listen to U.S. spokespeople try to explain why we’re suddenly now entangled in another Middle East war. Many of us find ourselves questioning the official justifications. We are aware that the true causes of our engagement are rarely discussed in the media or by our government.
While many of the rationalizations describe resources, especially oil, as the reasons why we should be in that country, there are also an increasing number of dissenting voices. For the most part, these revolve around Libya’s financial relationship with the World Bank, International Monetary Fund (IMF), the Bank for International Settlements (BIS), and multinational corporations.
According to the IMF, Libya’s Central Bank is 100% state owned. The IMF estimates that the bank has nearly 144 tons of gold in its vaults. It is significant that in the months running up to the UN resolution that allowed the US and its allies to send troops into Libya, Muammar al-Qaddafi was openly advocating the creation of a new currency that would rival the dollar and the euro. In fact, he called upon African and Muslim nations to join an alliance that would make this new currency, the gold dinar, their primary form of money and foreign exchange. They would sell oil and other resources to the US and the rest of the world only for gold dinars.
The US, the other G-8 countries, the World Bank, IMF, BIS, and multinational corporations do not look kindly on leaders who threaten their dominance over world currency markets or who appear to be moving away from the international banking system that favors the corporatocracy. Saddam Hussein had advocated policies similar to those expressed by Qaddafi shortly before the US sent troops into Iraq.
In my talks, I often find it necessary to remind audiences of a point that seems obvious to me but is misunderstood by so many: that the World Bank is not really a world bank at all; it is, rather a U. S. bank. Ditto, its closest sibling, the IMF. In fact, if one looks at the World Bank and IMF executive boards and the votes each member of the board has, one sees that the United States controls about 16 percent of the votes in the World Bank - (Compared with Japan at about 7%, the second largest member, China at 4.5%, Germany with 4.00%, and the United Kingdom and France with about 3.8% each), nearly 17% of the IMF votes (Compared with Japan and Germany at about 6% and UK and France at nearly 5%), and the US holds veto power over all major decisions. Furthermore, the United States President appoints the World Bank President.
So, we might ask ourselves: What happens when a “rogue” country threatens to bring the banking system that benefits the corporatocracy to its knees? What happens to an “empire” when it can no longer effectively be overtly imperialistic?
One definition of “Empire” (per my book The Secret History of the American Empire) states that an empire is a nation that dominates other nations by imposing its own currency on the lands under its control. The empire maintains a large standing military that is ready to protect the currency and the entire economic system that depends on it through extreme violence, if necessary. The ancient Romans did this. So did the Spanish and the British during their days of empire-building. Now, the US or, more to the point, the corporatocracy, is doing it and is determined to punish any individual who tries to stop them. Qaddafi is but the latest example.
Understanding the war against Quaddafi as a war in defense of empire is another step in the direction of helping us ask ourselves whether we want to continue along this path of empire-building. Or do we instead want to honor the democratic principles we are taught to believe are the foundations of our country?
History teaches that empires do not endure; they collapse or are overthrown. Wars ensue and another empire fills the vacuum. The past sends a compelling message. We must change. We cannot afford to watch history repeat itself.
Let us not allow this empire to collapse and be replaced by another. Instead, let us all vow to create a new consciousness. Let the grass-roots movements in the Middle East – fostered by the young who must live with the future and are fueled through social networks – inspire us to demand that our country, our financial institutions and the corporations that depend on us to buy their goods and services commit themselves to fashioning a world that is sustainable, just, peaceful, and prosperous for all.
We stand at the threshold. It is time for you and me to step across that threshold, to move out of the dark void of brutal exploitation and greed into the light of compassion and cooperation.