There Was a Fed Chairman Who Swallowed a Fly

…that eventually led up to a printing press! Unfortunately, I haven’t had the time to respond to a number of things that have been in the news recently. However, Peter Schiff has done my job for me. Yesterday, he published an absolutely brilliant blog on the Fed’s most recent quantitative easing package better known as “QE2.”

Last week, there was an op-ed piece (written by Tim Egan) published in the New York Times depicting how President Obama saved capitalism. The New York Times does employ more than its share of intellectually challenged writers, but this article was pure tripe. It would be ill-mannered for me to suggest that the author really believes what he wrote.

In a nutshell, Peter Schiff’s column puts the falsehoods written in the NYT article into perspective, but I’ll sum up the main points:

Egan touted the growth in the stock market between 2008 and 2010. This extremely ignorant position ignores the declining value of the dollar, as the dollar and stock market have an INVERSE relationship. There is no growth when the market is measured in cheaper dollars. It’s obvious that Bernanke can easily fool leftists into thinking there is positive growth, which has been the exact intention of quantitative easing. I know people easily forget history, but the last two economic crashes came from this type of monetary policy and deception. Also, it’s noteworthy point out that when the exact same policies were the norm under the Bush Administration; the country was going to hell according to the left. Now all of a sudden, it saves capitalism!

In response to the bailout of the auto industry, there is no mention that Ford saw this crisis coming and managed to restructure itself WITHOUT the help of the government. In addition, it is wild speculation to suggest that more than 1 million jobs would have been lost. Perhaps GM and Chrysler should have merged. Some jobs would be lost, but how many jobs are lost or never created due to the propping up of irresponsible companies? If society longs for new opportunities, then it must let go of the past. GM could have dissolved or sold off GMAC, since the company has turned more into a creditor than an automaker. Egan also neglected to mention the opportunity cost of such a decision as well as the high labor costs that have had a negative impact on the competitiveness of these companies.

Perhaps the most ignorant statement in the column is when Egan suggests that record low interest rates are good for capitalism; and this should end all serious-minded discussions about Obama’s ideology being that of a socialist. This tells me that Egan doesn’t know the definition of capitalism or socialism. Egan doesn’t realize that free market capitalism has been DEAD for over a century. Economic policy steered by a central bank/planning committee is the type of market steering that is NOT present in free market capitalism. Government interference does not occur. Egan, like most leftists, does not understand the difference between “capitalism” and “crony capitalism,” or “statism” – the latter being a form of socialism. In this case, former President George W. Bush was just as much of a socialist as Obama.

Egan also mentioned record corporate profits in his column. While it’s true that the earnings outlook is very optimistic, the bigger picture reveals a bleak outlook. These profits are being derived from cheap money and the Fed’s influx of cash. None of it is real. There are some companies with record revenues, but eroding profit margins. I wouldn’t suggest that Egan doesn’t know the difference between revenue, profit and profit margin. Perhaps he ran out of time or felt an illustration of this point wasn’t necessary. Peter Schiff took the time, and I quote the following:

“In the 16 months since Bernanke assured us that QE1 would not jeopardize price stability, oats prices are up 40%, concentrated orange juice up 45%, gold and rice up 50%, corn up 55%, coffee up 60%, copper up 70%, sugar up 90%, and cotton and silver up 100%! (The sluggish Dow Jones Industrials are “only” up 30%.)”

I do think it is safe to say that Egan hasn’t followed the CRB index, which spells out inflation better than anything. Has anyone noticed that their grocery bills are rising? I anticipate that crude oil prices will be climbing into the mid $90 range very soon.

Cheap money doesn’t translate into growth. Cheap money doesn’t allow innovation. Growth and innovation are what creates jobs, and neither is currently present. The actions taken by the Federal Reserve will not allow companies to take risks, and it suggests that businesses know that the economy is much sicker than the lies being told. That’s why jobs have not come back, and they will not come back until the Fed reverses course.

The CRB index indicates inflation and a guarantee of eroding profit margins, which will eventually send the stock market into a downward spiral. Ben Bernanke and leftists devoid of business and economic intellect can pretend that companies are just “sitting on piles of cash.” Businesses are seeing their hiring costs rise and their purchasing power weakened. Egan missed the fact that healthcare costs have gone up at least 10 percent since Obamacare was passed since he still thinks it will lower costs. Businesses are having difficulty dealing with the increases in benefit costs and payroll taxes – specifically SUTA liability (State unemployment tax).

I don’t know what planet Egan and other leftists live on, but it’s certainly not Earth. The business world does not suffer from the amnesia that seems to have taken hold of leftists and establishment politicians who applaud the current economic policy and Ben Bernanke. I’m certain that the chief economists in the business world understand the fact that the Fed only knows how to blow two asset bubbles 1) a stock market bubble and 2) a housing market bubble. The economy has suffered from both of these bubbles popping in the same decade. The attempts are now being made to recreate the stock market bubble of the late 1990’s. Commodities speculation is running wild, and soon will come the crash. If Obama wants a second term, he had better hope the crash comes after 2012. Either way, the economy will be worse in 2012 than what it is now if the insanity is not put to a stop.

On a lighter note, I finished Peter Schiff’s parity on the classic nursery rhyme. Do consider that I’m poetically challenged! However, this simple tale will allow children and some commentators on the left to understand my point!

There was a Fed Chairman who swallowed a dime
I don't know why he swallowed a dime - perhaps he'll die!
There was a Fed Chairman swallowed a quarter,
Would have been better if it were mortar;
He swallowed the quarter to inflate the dime;
I don't know why he swallowed a dime - Perhaps he'll die!
There was a Fed Chairman who swallowed a dollar;
He didn’t holler after swallowing the dollar.
He swallowed the dollar to inflate the quarter,
He swallowed the quarter to inflate the dime;
I don't know why he swallowed the dime - Perhaps he'll die!
There was a Fed Chairman who swallowed a bond;
Too bad it wasn’t a magic wand!
He swallowed the bond to inflate the dollar,
He swallowed the dollar to inflate the quarter,
He swallowed the quarter to inflate the dime;
I don't know why he swallowed the dime - Perhaps he'll die!
There was a Fed Chairman that swallowed a stock;
as the health of the market goes tick tock!
He swallowed the stock to inflate the bond,
He swallowed the bond to inflate the dollar,
He swallowed the dollar to inflate the quarter,
He swallowed the quarter to inflate the dime;
I don't know why he swallowed the dime - Perhaps he'll die!
There was a Fed Chairman who swallowed a house,
Why not a mouse?
He swallowed the house to inflate the stock,
He swallowed the stock to inflate the bond,
He swallowed the bond to inflate the dollar,
He swallowed the dollar to inflate the quarter,
He swallowed the quarter to inflate the dime;
I don't know why he swallowed the dime - Perhaps he'll die!
There was a Fed Chairman who swallowed a printing press...
He’s dead, I guess!