Home > Miscellaneous Musings > Gary North’s brilliant analysis of Bennie’s Jackson Hole speech

Gary North’s brilliant analysis of Bennie’s Jackson Hole speech

If you don’t know Gary North’s work, you’re missing out.  I’ve been an avid fan for over 5 years.

Check out his latest piece, published today in LRC.  A few snippets…

People who are unfamiliar with Bernanke’s strategy of downplaying everything, in good professorial fashion, may miss the significance of what he said.

‘On the whole, when the eruption of the Panic of 2008 threatened the very foundations of the global economy, the world rose to the challenge, with a remarkable degree of international cooperation, despite very difficult conditions and compressed time frames.’

Translation: (1) “The world rose to the challenge.” Hank Paulson nationalized the mortgage market unilaterally. He let Lehman Brothers go bust, so as to catch Congress’s attention. Then he got Congress to bail out AIG and the largest banks. I cooperated. The FED swapped liquid Treasury debt at face for heavily discounted promises to pay that were held by the largest banks for which there was no market.

Then the Financial Standards Accounting Board reversed itself on FAS 157. Banks would not be required to list their assets at market value. This kept them solvent.

Then other central banks and politicians imitated Paulson and me by bailing out their largest banks. We set the pattern. They followed suit.

(2) “Despite very difficult conditions and short time frames.” Translation: The American banking system had locked up right under our noses, and nobody knew what to do. The domino effect pointed to what Greenspan in 1998 called “cascading cross defaults” internationally: the inability of banks to settle their accounts at the end of the day, because of money owed to them. Paulson spent time puking in his office bathroom, but he pulled it off in time. It was nip and tuck for a time.

‘Notwithstanding some important steps forward, however, as we return once again to Jackson Hole I think we would all agree that, for much of the world, the task of economic recovery and repair remains far from complete.’ Translation: Everyone knows the economy is slowing. The two stimulus packages totalling $1.5 trillion barely reversed the recession, assuming it reversed at all. Meanwhile, the pantywaists on the National Bureau of Economic Research committee that decides when recessions end decided in April not to decide. That left me holding the bag. So the FED has declared that it ended in April 2009. Like it or lump it.

‘In many countries, including the United States and most other advanced industrial nations, growth during the past year has been too slow and joblessness remains too high.’ Translation: The entire world economy is busted. Greenspan sucked the other central banks into pumping up their economies with inflation and low interest rates, and when our bubble burst, so did everyone else’s.

‘Financial conditions are generally much improved, but bank credit remains tight; moreover, much of the work of implementing financial reform lies ahead of us.’

Translation: This is the best opportunity in 70 years to use government to take more power over the capital markets. A crisis is a terrible thing to waste. We got the country into this mess, and we’re going to take on huge new authority to make sure it never happens again. That’s the Keynesian way.

‘Managing fiscal deficits and debt is a daunting challenge for many countries, and imbalances in global trade and current accounts remain a persistent problem.’ Translation: “Challenge,” means “a problem with no known solution.” “Daunting challenge” means “the next time, this sucker may go down,” to quote President Bush. “Persistent problem” means the slow economy is not going to go away anytime soon after Bernanke retires.

‘This list of concerns makes clear that a return to strong and stable economic growth will require appropriate and effective responses from economic policymakers across a wide spectrum, as well as from leaders in the private sector.’ Translation: There is going to be central planning like we have not seen since the end of World War II. Corporate leaders are going to fall in line, or else they will face some really daunting problems.

‘Central bankers alone cannot solve the world’s economic problems.’ Translation: If we lose this sucker, I want some others up at the podium here to share the blame.

‘That said, monetary policy continues to play a prominent role in promoting the economic recovery and will be the focus of my remarks today.’ Translation: The FED is mainly in charge, so don’t mess with it. If our policies fail, we’ll lose this sucker.

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Categories: Miscellaneous Musings
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