A few days ago, I was really sick and had to miss work so I did what anyone who works in finance does when they feel bad for missing work: I listened to monetary grand master pimp Ben Bernanke address congress.
Now, in many ways, Pimp Daddy B and his bullshit are the strongest indicator of what can happen in the stock market today. This is because, thanks to quantitative easing, the Federal Reserve pretty much is the market. This used to really scare me but now I'm numb to it. I imagine this is what it feels like to get used to life in prison. Eventually, you just accept the insanity and move on.
A trader actually forced Ben to admit that there was a time when American currency had no debt. But Pimp Daddy's lies were so blatant, so morally corrupt, and so FUBARed (that's right, I put an acronym in past tense—don't like it, read The New York Times) that I figured I would share them with you.
I will be addressing three major issues in this column today: the consumers' appetite for gold, the idea of a debt free currency, and something called Taylor's Rule. You probably understood what all of those words meant except "Taylor's Rule" so we'll get to that lie last. I like to ease through the boring.
All That Glitters
Like alcohol, the more people in bars the higher the prices go.Gold, as I may or may not have mentioned, doesn't ever really gain much value or lose much value over time. When you see the news and you hear that the price of gold has increased, what you are really hearing is that the value of your dollar has decreased. Market news has a long tradition of saying one thing and meaning another. That's how they keep dumbasses away from the easy money.
Anyway, when Bernanke addressed congress he actually stated that consumers have no interest in buying gold. Literally, as he was saying that sentence, the price of gold hit an all-time high. Three days before he made that sentence, the American mint announced that it would have to delay delivery of gold because demand was so high that the mint could not keep a supply to match. Clearly, people are buying gold. Ben should know that people who buy stuff are consumers. After all, he's in charge of the freaking central bank.
The balls on Pimp Daddy…
A Debt-Free Currency
Believe it or not, some of our elected representatives are not morons. One, apparently, is a former bond trader. And said former bond trader (name escapes me but he was old, white, and stuffy looking so it shouldn't be hard for you to figure out who he was) actually forced Ben to admit that there was a time when American currency had no debt. First, Bernanke lied and said otherwise but this former bond trader dude was not having it. The exchange went something like this:
Senator: But you can have a currency without having a debt. We've done it before.
Pimp Daddy: When? Umm… you mean… before the Civil War?
Senator: Yes, under Andrew Jackson there was a time when our country had no debt.
Pimp Daddy: Yes, but we didn't have a central bank then.
If that senator bond trader dude had followed that sentence up with logic, he would have said: "Case in point you bald bitch."
Anyway, what you should take away from all that mumbo jumbo is that to get rid of our debt, we have to get rid of our central bank.
Taylor's Rule Ain't Taylor's No More
Bernanke would rather walk alone.Okay, so there's this rule that few people who lack a masters in economics or at least a few years in the field of finance, are aware of. It's called Taylor's Rule and it's named for the economist who came up with it. The Rule basically defines the best way to handle currency in a high debt market. The basic core value of John Taylor's Rule is that if something is free, people will not be careful with how they use it. This is why rich teenagers always seem irresponsible. We all, I assume, basically get that part of it.
Here's the part that's a little tricky (courtesy of Zerohedge.com):
The Taylor Rule offers a simple formula that economists often use as a guide for the appropriate level of the federal funds rate. The formula provides changes in interest rates depending on the level of inflation and the output gap, which is the difference between actual gross domestic product and the economy's potential output. Depending on how you define the rule (for instance if you give the output gap a lot of weight in the formula or just a little, or if you use a projected inflation rate or actual inflation) you can come up with different interpretations of whether interest rates should be high, low or even negative in a theoretical world.
Now, when Pimp Daddy B was talking to Senator Bond Trader Dude (I really need to do more research), Senator Bond Trader dude told him that John Taylor basically thought we needed to end quantitative easing.
Bernanke responded by stating that Taylor himself had revised the rule:
"There's no particular reason to pick the one that he picked in 1993. In fact, he preferred a different one in 1999 which, if you use that one, gives you a much different answer," Bernanke said through his teeth.
When I heard Pimp Daddy say that I wanted to cry. Either Ben is stupid or corrupt. There is no choice C.
Anyway, here is what John Taylor wrote on his blog in response to Bernanke's gross misinterpretation of Taylor's Rule:
"I did not propose or prefer an alternative rule in that 1999 paper, and it is hard to see how one could interpret the paper that way."
That's stuffy white guy speak for, "Ben Bernanke is a lying douchebag."
So to recap, the chairman of the Federal Reserve said people have no interest in buying a mineral that has never been purchased more than it is currently being purchased. He also stated that our country has always had some level of debt. And he basically told the world that he knew Taylor's Rule better than Taylor himself.
Nobody who taught economics at an Ivy League school (as Pimp Daddy did) can be that dumb. And because there is no choice C, Ben Bernanke is a liar.
And, I (say it with me now) am really, really boring.