When money and power come together

Aug 4, 2015

- By Bill Bonner

Bill Bonner
Paris, France

Dear Diary,

"It's a total disaster. It's like hell here."

Thus did a trader describe the re-opening of the Greek stock market. Prices fell 23% yesterday, after trading was allowed for the first time in 5 weeks.

Down-and-out...despised...scorned - the situation in Greece is excellent. It may be a great time to buy Greek stocks.

Yes, prices are being discovered again...by free declaration of buyers and sellers. Stock holders are discovering that their equities aren't as valuable as they thought. Sellers are losing money. Buyers may be getting good value for money.

You can fool all of the people some of the time. Some of the people all of the time. And most of the people once in a while. You can obstruct price discovery and you can disguise and distort the real value of things. But Mr. Market will get even some day. He always does.

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Yesterday, Mr. Market gave us a "mixed bag" of signals. US stocks went down...but not seriously. Chinese stocks went up. Gold was off a couple bucks.

We mentioned, but did not explain, that Alan Greenspan betrayed Mr. Market; after he became head of the Fed in 1987 he went over to the zombies, or more precisely, to their allies, the cronies. It must not have been easy for him. In the late '80s and early '90s -- you could almost see him struggling with the contradictions. He had been loyal to free markets. But his job carried with it the biggest central planning authority of all time. He knew that currency unbacked by gold was a scam, but his position as chief of the Fed put him in charge of the largest paper money racket ever. He believed in letting Mr. Market set prices, but as gatekeeper of US credit, he corrupted more prices than any human being ever had before him.

But what was he to do? At her husband's inaugural address to Congress, in 1993, Ms. Clinton - now leading democratic candidate for president - chose to stand next to him. It was one of those magic moments in history, when power and money came together to celebrate.

(When we were in Vancouver, we went to an Anglican church. A banner hung down from the ceiling proudly proclaiming the trinity: King, Country, God. The parishioners like to imagine that all their leaders are united... It spares them the trouble of choosing just one.)

Of all the bigwigs in Washington, it was Alan Greenspan who had the biggest wig of all. He was practically a god to the members of Congress, to whom the economy was as big a mystery as heaven itself. To the American people, he was regarded as a combination of "Mr. Fixit" and the Wizard of Oz. They didn't understand a word of what he said - and why should they? He made no sense when he spoke as Fed chairman, intentionally. Greenspan explained it himself:

    What I've learned at the Federal Reserve is a new language which is called Fed-speak. You soon learn to mumble with great incoherence.
But the blither and blather worked. The politicians kneeled before him. The press took off their hats. And the masses, awestruck by the incomprehensible, thought he was a genius.

What was he supposed to do, turn his back on all that for the sake of the truth? 'What was the truth,' asked the jesting Greenspan. And he did not wait for an answer.

We wrote contemptuously about Mr. Greenspan from the end of the '90s until his retirement in 2007. He did his thinking in the bathtub, the press reported. Alan 'Bubbles' Greenspan, we renamed him. He had sold out...for glory, for money, and for power. But we had to admit: he got a good price! Had we been in his shoes, we probably would have been bought at half the price.

But what a pleasure it was to rediscover the old Alan Greenspan, before he turned his coat and forked his tongue. Back then, in 1966, he expressed himself clearly.

    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

    This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

But now, who speaks the truth? No one. Because all of the elite -- economists...businessmen ...academia...policymakers - are paid not to see the truth. And if they do catch a glimpse of it by mistake, they keep their mouths shut. Like Alan Greenspan, it is all very well to understand how things really work, but you wouldn't want to give up money, power and status for it.

The Huffington Post explains how the cronies bought the economics profession:

    "The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession

    One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll - and the rest have been in the past.

    A Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009. That's a lot of money for a relatively small number of economists.

But that is just the beginning. The feds have bought off the entire intellectual, financial, business and academic establishment. How? With easy money. As we explained in our speech in Vancouver, there is a scarcely a single public figure with substantial wealth or substantial reputation who doesn't owe it to the great credit expansion. In 1999, Fortune Magazine named Jack Welch 'Manager of the Century.' Was it because of Welch's genius...or the fact that GE had moved into financial services during a credit boom? Warren Buffett is regarded as the 'Greatest Investor Who Ever Lived.' But it was Buffett's great fortune to be investing during the greatest credit expansion there ever was. And how did Ben Bernanke and Janet Yellen get to be head of the Fed? They could not have done so without the wind of credit behind them, which seemed to make sense of their preposterous theories.

While the cheap credit embellished resumes and reputations it also made people dependent. Academia reaped tax-free donations, from people who had made their fortunes in debt-fueled finance, not to mention more than $1 trillion in tuition fees financed by the feds' student loan program. Corporations sold their products on cheap credit...made their profits from cheap credit...and then depended on cheap credit to float their bonds, buy back their own stock and pay their bonuses. Government ran deficit after deficit - all made possible by cheap credit. And now, practically every sentient being in the nation - and some Democrats too! - needs cheap credit to pay his mortgage, keep his job, boost up his stocks and hold down his finance costs.

Who is left to speak the truth?

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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1 Responses to "When money and power come together"

harsh vardhan

Aug 5, 2015

Only you,in plain simple words.

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