Orwell targets Bernanke: An unteachable hole in the air
by Frederick Sheehan
Posted originally October 21, 2010
On Friday, October 15, 2010, Federal Reserve Chairman Ben S. Bernanke delivered a dishonest speech: “Monetary Policy Tools and Objectives in a Low-Inflation Environment.” What follows is not a critique of the talk, since that would be redundant. Please see one of my recent articles “Exploiting Bernanke” (September 21, 2010), which discussed the anticipated speech of October 15, 2010. Also see, “Central Bankers are Paid to Lie – Buy Corn” (October 5, 2010), which showed how Federal Reserve Chairman Arthur Burns fibbed his way through the 1970s. Investors who either believed him or were not adept at translating signals from the real world suffered.
Bernanke’s mendacious speech confirmed my general investment advice in “Central Bankers are Paid to Lie”: “Courses of protection include buying farms (including machinery companies, grain commodity funds, water rights, and desalinization companies), as well as precious metals, mining and drilling companies, and freeze-dried food.” As a guess, Bernanke’s current intention (this will change, and change often) is to add a trillion dollars to the economy. Such a wild, mad experiment has never been attempted before, outside of Argentina, Zimbabwe, and such.
The reason last Friday’s speech could be analyzed three weeks before it was delivered is Bernanke’s predictability. He will do nothing that veers from the course he found convenient for personal advancement three decades ago. He has neither said nor would dare process a thought that deviates from his doctoral thesis.
Even the title of his latest speech is a lie or stupid, as you wish – broadcasting as he did our “Low-Inflation Environment.” Inflation is practically everywhere that counts: food, insurance premiums, utility bills, tuitions. (“Where it counts” does not include the deflation of what really counts: wages, net wealth, house prices. This is why the “inflation vs. deflation” question is false.) Commodity prices keep rising, partially because there is greater demand than supply; partially because we are used to seeing oil and corn quoted in dollars. Producer and consumer prices generally lag commodity prices. The length of the lag differs. Anywhere from three months to one year captures most instances, under normal conditions. (When further depreciation of the dollar against commodities is anticipated, the lag will be compressed.) The dollar has fallen against a basket of currencies by 13% over the past 18 weeks. It is prudent to at least hedge for a contraction of this lag.
Bernanke’s speech was characteristic. He turned logic on its head and ignored the most debilitating consequences of his past actions. The Fed chairman used official government numbers to claim inflation was too low. Homage to government inflation calculations should have, alone, been enough for the media to ignore anything else he said. Of course, he was dutifully quoted and taken at his word.
It was not that long ago when an economist who claimed inflation was too low would have lost credibility. Bernanke stated “that FOMC participants generally judge the mandate-consistent inflation rate to be about 2 percent or a bit below.” The FOMC is the Federal Open Market Committee – the body that has absolute authority to act upon such inverted thinking as 2% inflation being good for the country.
A step back, to 1957: This was a time when academic economists were learning that theories manipulated to satisfy politicians could put themselves in positions of power. Most from this guild never dreamt anyone outside a college classroom noticed their existence. They miscalculated, as is the rule for these humbugs.
Politicians want money and credit to fulfill their constituents’ every wish. A Harvard economist told Congress that the U.S. needed a 2% rate of inflation to defeat communism. Washington loved him.
On August 13, 1957, William McChesney Martin, the Federal Reserve chairman at the time (and not an economist – he had been a Latin scholar at Yale, so understood that shortcuts destroy empires), lectured the Senate Banking Committee on the specific topic of the Federal Reserve “targeting” (Bernanke’s word – not Martin’s) a 2% rate of inflation: “Consumers are encouraged to postpone saving and instead purchase goods which they do not immediately need, and the incentive to strive for efficiency no longer governs business decisions…and speculative influences impair reliance upon business judgment.” Of utmost importance, groups struggle to insulate themselves from the loss of purchasing power, then “fundamental faith in the fairness of our institutions and our government deteriorates.”
The Bernanke Fed has stated its current policy is to chase consumers out of savings and into speculative ventures. (See The 2004 Fed Transcripts: A Methodical, Diabolical Destruction of America’s “Wealth”.) That is exactly the recipe for the Fed to accelerate its impoverishment of the American people. Alan Greenspan, of course, was the master at jumbling a few words to distract attention from this long-running plan to prevent the Fed’s extinction. Bernanke also resorts to nonsense. From his October 15, 2010, speech: a 2% rate of inflation is to “attain… price stability” and to “bring the unemployment rate down significantly.” He is doing exactly the opposite of what he pretends.
George Orwell wrote about “[t]his lunatic world in which opposites are turned into one another.” That was not lunacy for lunacy’s sake, nor is it today.
In 1940, Orwell wrote of World War II: “After 1936, of course, the thing was obvious to anyone except an idiot.” He was not erasing his own past, as was common with many others and is universal among “experts” today. (See the first paragraph of Ben Bernanke’s October 15, 2010, speech.) In 1938, upon returning to England from continental Europe, Orwell had written about the “familiar streets, the posters telling of cricket matches and Royal weddings, the men in bowler hats, the pigeons in Trafalgar Square, the red busses the blue policemen – all sleeping the deep, deep sleep of England, from which I sometimes fear that we shall never wake till we are jerked out of it by the roar of bombs.” The bombs flattened London in 1940.
The British institutions in the 1930s were in the same condition that the Federal Reserve, other government manipulators, the so-called economics profession, and the revered think tanks are in today. Orwell wrote of Neville Chamberlain, British Prime Minister from 1937 to 1940: “He was merely a stupid old man doing his best according to his very dim lights. It is difficult otherwise to explain the contradictions of his policy, his failure to grasp any of the courses that were open to him. Like the mass of the people, he did not want to pay the price either of peace or of war. ” At another point: “Tossed to and fro between their incomes and their principles, it was impossible that men like Chamberlain should do anything but make the worst of both worlds.”
This is an apt summation of the desiccated American hierarchy today. It is withering into dust.
Chamberlain had trusted Hitler, as had his predecessor, Stanley Baldwin. As prime minister, Baldwin had suppressed information about Hitler’s rearmament, sleeping, as was his wish, the deep, deep sleep of England. Orwell wrote: “One could not even dignify [Baldwin] with the name of stuffed shirt. He was simply a hole in the air.” Baldwin did everything he could to prevent any disruption to the exact relations that existed among the social and political institutions of the day.
Winston Churchill, not in office but a nuisance to the established order, knew the proportions of Nazi rearmament and gave speeches in Parliament with uncomfortable details. Baldwin’s cabinet voted to ban “independent views” from the BBC. Sir John Reith, dictator of the BBC, prevented Churchill from speaking. CNBC does much the same today, as does the print media.
Geoffrey Dawson, editor of The Times of London, suppressed Churchill’s views as well as those from Times reporters whose dispatches from Europe might upset Hitler. In 1935, Dawson wrote, “I do my utmost, night after night, to keep out of the paper anything that might hurt their [Nazi] susceptibilities.” He wrote this letter because he could not understand the Fuhrer’s ingratitude after, in the words of William Manchester, “five years of jumping through Hitler’s hoops.”
Dawson was not a Nazi but a dense, frightened old man who wanted the world to stand still. We can see the same combinations of dis-enlightenment that keep the American public in the dark today. An example is the coordination among government agencies (their data dissemination propaganda) and the Federal Reserve’s contorted views as expressed through the country’s news collection agencies. The Associated Press released the following on October 14, 2010, a day ahead of Bernanke’s speech:
(AP) “Wholesale inflation stayed tame last month outside of a sharp rise in food and energy prices. Moderate price inflation allows the Federal Reserve to keep the short-term interest rate it controls at a record low of nearly zero, where it has been since December 2008.”
With that, the AP assured its access to the Fed chairman.
In 1952, Bernard Iddings Bell wrote Crowd Culture, in which he discussed a wartime incident: “When Russia was Hitler’s ally in World War II, the American people were told by the papers, and believed, that the Russians were little short of fiends. Suddenly Russia changed sides…. [S]he became our ally. At a dinner in New York at that time, I sat next to a high-up officer of one of the great news-collecting agencies. ‘I suppose,’ I ventured, ‘now that the Muscovites are on our side, the American people will have to be indoctrinated so as to stop thinking of them as devils and begin to regard them as noble fellows.’ ‘Of course,’ he replied. ‘We know what our job is in respect to that. We in the working press will bring about a complete and almost unanimous volte face in the belief of the Common Man about the Russians. We shall do it in three weeks.’ He was right about it. The papers, fed by the news agencies, did just that.”
On March 29, 1943, Life magazine published a “Special Issue USSR.” On the front cover is a portrait of Uncle Joe Stalin, beaming downward, as if the dictator is looking upon his three-year-old nephew who just counted to ten for the first time. Over a hundred pages of the issue describe the Soviet Union’s wholesome leaders and their obliging peasantry.
Among the wholesome leaders is Vladimir Ilyich Ulyanov (Lenin), with a similar, avuncular portrait, as if he’s looking at the same nephew who just counted to 20. The article, “The Father of Modern Russia,” starts off “Perhaps the greatest man of modern times was Vladimir IIyich Ulyanov.” It goes uphill – or downhill – from there, depending on one’s view.
Flipping through the issue, the article “Collective Farms Feed the Nation” is worth a look. Pictures of the peasants are inspiring. They were a happy lot. The story starts off: “Although Russia was always overwhelmingly an agricultural country, most Russians used to go hungry.” Later in article: “Whatever the cost of farm collectivization, in terms of human life and individual liberty, the historic fact is it worked.” The cost of farm collectivization included several million Ukrainians who had been starved to death in the early-1930s.
“Collective Farms” could be written by an economist – then or now – without irony or conscience. Such a contortion of reality would do wonders for a rising academic or Federal Reserve staffer.
Orwell was harsh in his criticism of the intelligentsia, whose loyalties were as fickle as their abstractions. He did not confuse the term, intelligentsia, with intelligence. It was a collection of layabouts who, in a “desire for psychological escape” indulge in “chauvinistic sentiments that would be totally impossible if you recognized them for what they were.” Such a person is “capable of the most flagrant dishonesty, but also – since he is conscious of serving something bigger than himself – unshakably certain of being right.”
In their world: “Material facts are suppressed, dates altered, quotations removed from their context and doctored to alter their meaning.” Communism was an outpost for many of the intelligentsia in the 1930s. John Reed, author of Ten Days That Shook the World, (about the Russian Revolution), had willed the publication rights of his book to the British Communist Party. Reed died in 1920. The British Communist Party did exactly what Moscow wanted: it published an edition that excised Leon Trotsky’s role in the revolution and deleted an introduction by Lenin.
Orwell wrote: “Events which, it is felt, ought not to have happened are left unmentioned, and ultimately denied.” British Communists were badly shaken by the Russo-Nazi pact (Molotov-Ribbentrop) in 1939, an eventuality not difficult to forecast by a party whose subservience to Moscow should have animated its consciousness towards Russian self-interest.
Bernanke, the Fed, and the other weary institutions fall within Orwell’s description of Chamberlain and his circle: “What is to be expected of them is not treachery or physical cowardice, but stupidity, unconscious sabotage, an infallible instinct for doing the wrong thing. They are not wicked, or not altogether wicked; they are merely unteachable. Only when their money and power are gone will the younger among them begin to grasp what century they are living in.”
Of Bernanke today, he is a combination of both the establishment and the regimented intelligentsia that has acquired power. Orwell wrote of the intelligentsia: “Clearly there was only one escape for them – into stupidity. They could keep society in its existing shape only by being unable to grasp that any improvement was necessary” After a time, which looks like it will be after Bernanke and his comrades have done their worst, a leader, looking at the world as it is, may state:
“Difficulties began to build up in the economy in the 1970s, with the rates of economic growth declining visibly…. A lag ensued in the material base of science and education, health protection, culture and everyday services. Though efforts have been made of late, we have not succeeded in fully remedying the situation. There are serious lags…in the improvement of the people’s standard of living.”
Thus spoke Mikhail Gorbachev in his 1986 speech to the 27th Communist Party Congress when he effectively declared the institutions which had colluded to bankrupt the nation’s economy and spirit were dead.