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Tuesday, April 26, 2011

Ben Bernanke: Buck Buster update

“ It’s taken almost two centuries or bankers to pull the wool over Americans’ eyes, but today you and I are working for intrinsically worthless paper that can be created by bureaucrats — created without sweat, without creative ability, without work, without anything but a decision by the Federal Reserve. This is the disease at the base of today’s monetary system. And like a cancer, it will spread until the system ultimately falls apart. This is the tragedy of the great lie. Te great lie is that fiat paper represents a store of value, money of lasting wealth.” – Richard Russell, Dow Theory Letters
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Ben Bernanke burning U.S. dollars, it's only paper after all
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More views on Bernanke's destroy the dollar campaign. When U.S. Senators start warning Ben Bernanke about inflation it probably means the avalanche has already started.

The Daily Caller:
Kirk calls out Bernanke on inflation -- In a blunt letter to Federal Reserve Chairman Ben Bernanke, Sen. Mark Kirk (R-Ill.) warned against inflation.

The letter comes in advance of Bernanke’s much-anticipated first-ever press conference on Wednesday.

Sen. Kirk is concerned that the Fed’s controversial “quantitative easing”(QE2) program is driving inflation, writing “once higher inflation gains momentum, it will do great damage to the U.S. economy by stifling small businesses, challenging families and fixed-income seniors.” The Fed’s QE2 program was a $600 billion bond purchasing effort aimed at keeping inflation low...

You can read the full letter below (key graph in bold):
Re: Inflation is Here

Dear Chairman Bernanke:

I am concerned that inflation has already accelerated inside the U.S. economy while lagging government measurements will take too long to give sufficient warning. Once higher inflation gains momentum, it will do great damage to the U.S. economy by stifling small businesses, challenging families and fixed-income seniors.

During your March 1st testimony before our Senate Banking Committee, you noted that rising commodity prices and uncertainty over oil supplies could change inflation expectations with “…sustained rises in the prices of oil or other commodities would represent a threat both to economic growth and to overall price stability, particularly if they were to cause inflation expectations to become less well anchored. We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability.”

It appears that your words of warning have been realized. As of April 1st, many commodity prices are sharply up since last year, including copper (18%), light crude (25%), soybeans (48%) and corn (85%). In my meetings with small business owners across Illinois, they report rapidly increasing prices inside the U.S. economy. This strong upward price trend may take weeks, if not months, for government measures to record.

Recently, the Chairman and CEO of Berkshire Hathaway, Warren Buffett, stated “I would recommend against buying long-term fixed-dollar investments…if you ask me if the U.S. dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.” This is a stark warning from one of our country’s most experienced and successful investors.

The Bureau of Labor Statistics reports that twelve month inflation rates rose from 1.7% in January to 2.2% in February to 2.7% in March, a nearly 60% increase over the last 90 days. The latest seasonally-adjusted Bureau of Labor Statistics CPI-U reports an even higher rate of 4.7%. Additionally, MIT economists now project the world inflation rate rose to five percent. Clearly, European and Chinese central banks expect inflation and took measures to slow it. Both the CPI-U and the MIT worldwide rates are now substantially higher than the “1.25 to 1.75” U.S. inflation range projected by the Federal Reserve just six weeks ago at the March 1st hearing.

As the home of the world’s reserve currency, the United States should experience lower inflation than markets overseas. Recently, both the Wall Street Journal and Washington Post editorial boards warned that with a weakening dollar, this may no longer be true. Yesterday, the New York Times highlighted a Northwestern University study by Professors Arvind Krishnamurthy and Annette Vissing-Jorgenson who showed that under Quantitative Easing interest rates decreased, but only for companies with top credit ratings. They wrote “rates that are highly relevant for households and many corporations — mortgage rates and rates on lower-grade corporate bonds — were largely unaffected by the policy.” Recently, the President of the Philadelphia Federal Reserve, Charles I. Plosser, echoed the conclusions of that study. Regarding Quantitative Easing, he said “I didn’t think it was going to have much of an impact, and it complicated the exit strategy. And what we’ve seen has not changed my mind.”

The rising price of energy, negative S&P outlook for U.S. debt and broad-based increase in the price of other commodities/goods puts the U.S. in a rapidly changing environment for expected inflation. I would strongly urge you to increase the speed with which you measure prices. Should you also find the trends that I have now heard widely about, you should prepare the Board for an early end to Quantitative Easing, along with other monetary measures to protect Americans from rising inflation.

Thank you for in advance for your response.
Sincerely,
Mark Kirk
U. S Senate
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Seeking Alpha:
Is This What Hyperinflation Looks Like From the Inside? --
Gold is making new nominal highs almost daily. Silver, meanwhile is making 30-year highs. Prices at the pump are soaring, despite an oversupply of oil. The latter is only partly explained by ongoing Middle East turmoil and refinery retooling in preparation for the summer driving season. Anyone who eats has no doubt noticed that food prices are going up while the packages that food comes in are shrinking.

"Panic dollar selling is setting in," hedge fund manager Dennis Gartman says. "This may carry farther than any of us dream of or, worse, have nightmares of." In the race to the bottom, the dollar is ahead of the pack...
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The Billion Prices Project @ MIT --
These indexes are designed to provide real-time information on major inflation trends, not to forecast official inflation announcements. We are constantly adding new categories of goods, but we do not cover 100% of CPI goods and services. The price of services, in particular, are not easy to find online and therefore are not included in our statistics.
Country: USA
DAILY ONLINE PRICE INDEX

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Wall Street Journal:
Bernanke's Inflation Paradox -- The Fed said it wanted higher prices. Voila!
The Federal Reserve's Open Market Committee meets again today, and we suppose congratulations of a sort are in order. Last September, the committee declared that it wanted prices to rise more rapidly, and on that score it has succeeded. The question now is whether the Fed's success in promoting inflation is undermining the economic recovery it claims to be supporting.

This is the paradox of exceptionally easy monetary policy, and rarely has it been as obvious as it is today. The Fed has flooded the world with dollar liquidity that by its reckoning has lifted stock and other asset prices, eliminated the risk of deflation (if such a risk really existed), and prevented a double-dip recession. Wall Street and the White House are delighted.

On the other hand, this dollar flood has also contributed to a boom in commodity prices around the world, spurred inflation in countries with links to the dollar, and prompted investors to seek returns in non-dollar assets that are often risky and in many cases will prove to be a misallocation of capital
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Robert Auerbach / Huffington Post:
Bernanke's Press Conferences Will Not Remedy the Fed's Corrupt and Deceptive Public Records Policies --
What is needed is a complete record of the discussions at the Fed meetings of the Federal Open Market Committee, FOMC (12 members), and its Board of Governors (7 governors when all seats are filled). These unelected officials determine the size of the nation's money supply and the payment of billions of dollars of interest to private sector banks...
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Zero Hedge:
20 Questions For Ben Bernanke --
In March of 2009 you stated that for QE1 the Fed was printing money. However, you have stated that QE2 is not printing money. Can you define the difference?
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Jeff Berwick / SafeHaven:
The Federal Reserve Note is Dead, Long Live the Dollar --
US dollars were backed by gold and known as gold certificates from 1882-1933. Dollars backed by silver lasted longer, known as silver certificates, and were in circulation from 1878 to 1964.

However, both have been usurped by the Federal Reserve Note. A completely fiat, non-free market currency...

the Federal Reserve, impoverished countless millions and destroyed untold wealth, is coming to an end. The Federal Reserve Note will be lucky to survive past the 100th birthday of the Federal Reserve Act, on December 23, 2013. Thank god.
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NY Times:
Stimulus by Fed Is Disappointing, Economists Say --
“What has it done? It has eased credit conditions, it has pumped up the stock market, it has suppressed the dollar,” said Mickey Levy, Bank of America’s chief economist. “But does the Fed think that buying Treasuries and bloating its balance sheet is really going to create permanent job increases?”
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RayStevens.com:  Obama Budget Plan

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