"There is such a thing as a free lunch"

Obama and Bernanke's Truth in the great New Normal--

Take Everything You Know, And Burn It: A "New Normal" Recantation In Six Simple Lessons | Zero Hedge: " . . . . Lesson #3 Darwin & Schumpeter were wrong, creationists are right; there is such a thing as a free lunch - I once thought that economic growth emerged from the unplanned process of "creative destruction" identified by a charlatan Austrian-American economist named Schumpeter. This was a misunderstanding since wealth and economic growth are both created "ex nihilo" by a benevolent god called "the state," whose role is to stimulate demand by buying goods and services that nobody needs with money that does not exist. This process, of course, leads to an ever rising standard of living. Such truth was revealed by a great prophet named "Keynes" who some years ago endowed a new church and its clergy of "civil servants" who obey the orders of their economist cardinals. Such fellows are beyond criticism as they selflessly strive to improve the lives of lesser mortals. For their service and their abnegation, they are usually very well paid (as the clergy class always is when it supports the dominant political power). They deserve their stipend, or at least this is what they say, and, of course, unnecessary questioning of settled truths can be a bad career move. . . ." (read more at the link above)

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Federal Reserve Re-inflating the U.S. Housing Bubble

What the heck--the U.S. housing bubble led to the biggest recession since the Great Depression, and now the Federal Reserve under Ben Bernanke is trying to re-create the bubble all over again--except this time it is the Federal Reserve buying the mortgages, not Fannie Mae and Freddie Mac or Wall Street:

US cannot continue the endless sugar rush - Telegraph: " . . . If “insanity” is doing the same thing again and again and expecting a different result, then it’s difficult to describe Bernanke’s latest initiative as anything other than insane. By focusing on MBS (mortgage  backed securities) purchases, the Fed is trying to re-inflate America’s real estate bubble, in the hope that rising prices will encourage home-owners to spend more by re-mortgaging and getting even deeper into debt. America has done this before, repeatedly, and it always ends in tears. . . . For all the market euphoria, QE3 will do far more harm than good. By undermining the dollar and fueling future inflation, it will discourage household spending by further debasing wages and pensions. By putting upward pressure on the cost of living, QE3 will eat further into real disposable incomes, forcing American consumers to retrench even more. Oil prices are up almost 30pc since mid-June, even though the global economic outlook has worsened, as speculation has grown about American and European QE. That’s because money-printing encourages shrewd investors to seek out tangible assets – not just gold, but commodities too – and that trend is now spreading into the mainstream. The Fed already has $1,600bn of Treasuries on its balance sheet, compared to a $1,100bn budget deficit. With foreigners, not least foreign governments, now owning more than half of America’s debt stock, Washington is wide open to justifiable charges of debt monetisation. That’s why QE could eventually spark a trade war or, more immediately, a lot more explicit reluctance in Beijing and elsewhere to keep lending the US money. Bernanke wasn’t facing a banking collapse or the prospect of “imminent deflation”. Last Thursday wasn’t a “Lehman moment”. To please his political masters and their friends in high finance, the Fed chairman administered another big dose of QE anyway. So money-printing has evolved from a drastic remedial action to a lifestyle choice, which strikes me as an addiction. . . ."

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"That’s what people elected you to do"

Federal Reserve Chairman Ben Bernanke, Feb. 7, 2012

"Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point. To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time. Attaining this goal should be a top priority." (Bernanke testimony before Congress) http://www.federalreserve.gov/newsevents/testimony/bernanke20120202a.htm

Ben Bernanke may be the last honest public servant in Washington. Although only monetary policy is the domain of the Federal Reserve, the Chairman nonetheless has, more than once, warned Congress and the President that they need to take action as soon as possible to correct U.S. fiscal policy:

Bernanke Defends Fed’s Approach - NYTimes.com: "Republicans sought Mr. Bernanke’s affirmation that the jobs market remains very bad and that the economy remains in poor shape. Mr. Bernanke gave his assent. Democrats asked Mr. Bernanke to acknowledge that economic conditions are improving, and he did this, too. Mr. Bernanke also continued to emphasize the need for Congress to set a long-term plan for deficit reduction, saying that this should be done “as soon as possible.” “We clearly need some major changes in our fiscal planning, in our fiscal path going forward,” he said. Both parties were stymied in their efforts to extract his support for their approach to creating such a plan. Republicans want to balance the federal budget primarily through spending cuts, while Democrats say the government must increase tax collections too. Mr. Bernanke, pressed repeatedly, was blunt in response: “That’s what people elected you to do,” he said."

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