Ben Bernanke Made Incorrect Diagnosis of the U.S. Economy

Ben Bernanke, the chairman of the United States Federal Reserve made a huge mistake in diagnosing the current economic crisis.  As an old vanguard of the Great Depression school of thought, Mr. Bernanke sees an economic crisis as a result of deflation.  Such view could impact significantly on the efforts to recover the economy from crisis.  In fact, seeing the current inflationary recession as a contraction of the economy due to deflation could further fuel more economic turmoil.

In nominal terms, the U.S. economy is showing signs of deflation. More businesses and companies have been closing in the past months.  Banks and investment houses have been forced to beg for additional liquidity to stay afloat.  Unemployment is soaring and each month, the number of jobless Americans has been growing.  Money traders on the other hand are adamant in investing more money in the market.  Meanwhile, international demands and orders for American goods have been declining.  As the economy contracts and the retail sector tumbles, domestic spending also shrunk.  All these are elements of deflation which are custom made for the economic orientation of Mr. Ben Bernanke.

Mr. Ben Bernanke therefore diagnosed the economic crisis based on his economic orientation and incorrectly applied several solutions to counteract the seemingly short term deflation.  So to curb, inflation or the increase in commodity prices, Mr. Bernanke through the U.S. Federal Reserve imposed a zero percent interest rate.  The logic is to allow consumers to take advantage of the credit market to jumpstart the financial sector.  To counteract the contraction of the business sector, the Fed started a shopping spree of toxic assets and bailing out insolvent banks, investment houses, and collapsing companies.  And to cover decreasing domestic demands and pump up the retail and manufacturing sector, The Fed through the leadership of Mr. Bernanke started printing more dollars to infuse the economy with more cash.

However, such monetary and fiscal measures are utter suicide because the root cause of economic contraction is not deflation but inflation.  The economy of the U.S. is overflowing with money.  Such excessive supply of currency which does not correspond to the actual value of reserved gold could further trigger and accelerate inflation.  As the Fed prints more money out of thin air, its real value in nominal terms has been greatly diminished.  No wonder that the U.S. dollar has been trounced at the international money market.  This means that even if America is brimming with dollars, the added cash flow will only serve to fuel the fire of inflation.  In fact, instead of curbing the contraction, the Fed is leading the economy into a state of hyperinflation.

You should better be prepared for the onset of hyperinflation.  All indicators point out to this possibility as the U.S. Federal Reserve continues pump more money into the already cash-saturated economy.  And because the real value of the U.S. dollar is being eroded daily, there will come a time that its purchasing power could become worthless.  This is hyperinflation and will signal the demise of American dominance in world economics.

Learn more how Mr. Ben Bernanke fumbled the economic crisis.   Visit our website to get a clear picture of why inflation is the primary problem and not deflation .

HTML Version:

Text Version:

Article Url: