Apr 7, 2008

Is Bernanke Boosting Barack?

By Hal Lindsey

Is the U.S. Federal Reserve, as it claims, an agency of the U.S. government charged with maintaining the stability of the US economy? Or is it, as some critics charge, really a privately held consortium of banks whose principal interest is its own self-interest?

That argument could go back and forth ad infinitum, but in the final analysis, it's an exercise in irrelevancy.

Whether one believes the Fed is a colossal banking swindle or not, it is now an accomplished reality that is so ingrained in our nation that neither political party is willing to endure the pain of undoing its control of our money supply at this late date.

The Federal Reserve was created by a questionable act of Congress Dec. 23, 1913, when most congressmen had already gone home for Christmas. (The act's legitimacy, along with the personal-income tax bill passed at the same time, has been questioned for decades.) The Fed's stated purpose was to prevent the periodic banking panics that had erupted every few years since the late 1880s by expanding and contracting the available supply of money.

The Fed released too much money in the 1920s, then contracted it too fast following the 1929 Crash, in effect, causing the Great Depression it was created to prevent.

This was bad for Americans, but it was good for the banking system. Mom and Pop operations failed en masse – while the giant corporate banks (that "coincidentally" make up collectively the Fed) picked them up for pennies on the dollar.

The Federal Reserve, instead of being held responsible for the debacle, was rewarded with virtually unlimited power and charged with restoring economic order.

It is a matter of record that the Fed has since apologized for causing the Great Depression. But it has not ceased its practice of manipulating the economy at strategic moments in history for its own purposes – which not only include profit but the influencing of national elections.

George H. W. Bush still blames Fed Chairman Alan Greenspan for "talking down" the economy just before the 1992 election, sparking a mini-recession that handed the White House to Bill Clinton.

Greenspan's famous off-hand remark about the stock market's "irrational exuberance" in a Dec. 5, 1996, speech sparked the dot-com crash that caused George W. Bush to inherit a new mini-recession. The fallout from the 1990s debacle continues to reverberate across the market even to this day.

One could argue that this was a slip of the tongue or even that the comments were coincidental, but that would be just another attempt to hide the elephant in the room. Financial "experts" in the stock market and banking know that the entire market reacts to a mere turning of a phrase by the Fed chairman. (Now that's real power, isn't it?)

When Alan Greenspan said the market was pumped up by "irrational exuberance," investors suddenly lost their exuberance, turned rational, and the dot-com bubble burst.

Another recent example is how the Federal Reserve reacted to the economic damage caused by the 9/11 attacks. It used almost the same tactics it used during the Roaring Twenties after World War I. It flooded the market with cheap and available cash; then, when mortgages started to slide into default, it contracted the money supply. Strangely, certain investors made some enormous profits.

When Ben Bernanke succeeded Greenspan, he didn't just arrive from some other planet unaware of Fed history and practice. No one becomes chairman of the Federal Reserve without understanding the power of that position to sway the market and even national elections.

If there were ever a case of something that "everybody knows," it is that when the chairman of the Federal Reserve "talks down" the economy, it becomes a self-fulfilling prophecy.

So when Ben Bernanke went before Congress to warn a "recession was possible" – he knew it would be interpreted by investors to mean a "recession is imminent" – thus guaranteeing a recession.

The real question is, why now? Since Bernanke's job is to protect the U.S. economy, why did he "talk it down"? Both the market and the dollar plummeted, particularly when Bernanke said efforts to rescue the economy were an exercise in "fighting against the wind."

So, in the light of past Fed actions, Bernanke's timing should set warning bells off.

How about this possibility? The continuing bad news about American successes in Iraq has left the Democrats with nothing else to demagogue but the economy.

Political conventional wisdom says bad news for the economy is always worse news for the incumbent party.

As chairman of the Fed, Bernanke is aware that it takes close to six months before the bad news on Wall Street begins to impact on Main Street.

Six months from now would be October, just before the general election. Has the Money Trust, aka Federal Reserve, thrown its mantel on Barack Obama the way it did on Jimmy Carter and Bill Clinton?