“In short, you are the definition of a moral hazard. You are repeating the same mistakes as Japan in the 1990′s on a much larger scale while sowing the seeds for the next bubble. The AIG bailout alone is reason enough to send you back to Princeton. I will do everything I can to stop your nomination and drag out this process as long as I can. We must put an end to your and the Fed’s failure and there is no better time than now. Your Fed has become the creature from Jekyll Island.”
A reality based harsh condemnation of the scapegoat of the global financial crisis, Ben Bernanke, the chairman of the US Federal Reserve (central bank). These are the words from US senator Bunning during the procedure for confirming Bernanke for a second four year term for the ‘world’s highest scapegoat’. While every word in the quotes is true about the actions taken by Bernanke, the circumstances make him just another bureaucratic scapegoat.
Times magazine person of the year 2009 happens to be Ben Bernanke for single handedly bailing out everyone (except Lehman brothers). He should have been the person of the year last year for being the visible face of the system that caused the greatest recession after the great depression. Albeit he is the face of the system, there are bigger concerns and players behind the scenes.
A populist US congress that wishes to provide a home for everyone and that too a super sized mansions also known as a Mcmansions called so, after the super sized burgers offered by the world’s largest junk food seller, McDonalds. Any and every obstacle to this is bulldozed through. Banks were forced to lend to people with ‘No Income No Job or Assets’, NINJAs in short. The banks that failed were bailed out at any cost and continued to be supported as the Federal Reserve Bank buys the toxic mortgage piled up by the banks. The fact that not even 50% of the face value of the mortgage would ever be realized makes it toxic and there are no laws to prevent it from being dumped on the general public in the form of inflation caused by devaluation of the dollar caused by newly printed dollars used to save the banks from holding such worthless paper. This is being done all over the world and strangely the protestors at Copenhagen are ignorant of it.
The domestic population in the US is ignorant at best and intransigent at the worst about the phenomenon of globalization. Everyday low prices at retail chains like Walmart are welcome but it also means everyday low wages and standard of living for the masses. The Americans have cherished the first part so far and are now witnessing the second face of the same coin ‘everyday low prices’. High paying good jobs in almost all sectors have been outsourced to low cost countries in Asia and eastern Europe. Outsourcing and energy from fossil fuels, albeit not suave and unpopular are the cheapest and the most viable ways of powering the present world and they shall continue and flourish. It is just globalization of wages that is happening right now until the Americans learn to live with the amount of wages earned by the Chinese.
China found opportunity in adversity and advanced its industrial revolutions. Chinese citizens also stepped up and worked hard in the modern gulags on their east coast. Many other emerging and developing countries also utilized the opportunity of this century. Gruel in gulags seems to be better than dying hungry on the streets for the billions in the developing world and also their rulers who are supporting this system even at a great cost.
Many a requiems have been written about the US dollar. The Soviet ruble collapsed about 18 years ago and world’s political order changed. Geopolitical realignment would happen when the US dollar collapses and those who do not wish that to happen would keep supporting the almighty dollar with all their might. Chinese rulers are not comfortable to see the gulags empty out people on the streets and having to deal with many Urumqis and Kashgars at once. Saudi rulers are not willing to lose power if and when the cash strapped US military establishment recalls all its forces from around the world. South Korea and Japan also risk tremendous damage if a military conflict involving North Korea erupts in north East Asia.
The Indian investor needs to be aware, awake and stop not until he/she makes some profit from the changing world order being brought about ‘team Bernanke’. Just as one person’s terrorist is another’s freedom fighter, Ben Bernanke could be the person who spelled opportunity for the prudent investor. Dinakarananda and the Artha Yantra team welcome you to explore ‘opportunity made fresh daily’ in these times.