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Hillary and Ben Bernanke on the Economy

May 17, 2014
400px-Msc2011_dett-clinton_0298Hillary Clinton’s speech yesterday revealed some of her thoughts about reviving the economy. She said she was trying to “encourage more companies to come off the sidelines and, frankly, for some to use some of that cash that is sitting there waiting to deploy.” This echoes the naïve idea embraced by the Obama administration that economies are fueled by ever more borrowing and spending. But this is not how jobs are created. Jobs are created when businesses deploy their cash savings wisely. It is always the quality of investment that counts, not the quantity. If high quality investment opportunities are lacking, often because of government interference with the economy, businesses actually help us all by refusing to waste their cash on projects that will blow up in short order and just create even more unemployment in the long run. When this false recovery, fueled by all the wasteful spending, blows up, as it will eventually, what will pull us out of the next crash? It will be those businesses and individuals who have refused to play at the casino, who have saved and put money away, who will be able to step in, invest, and start a genuine, not a phony, recovery process. Hillary’s viewpoint is as crony capitalist as President Obama’s. They both complain that government has done favors for business and business in turn must do favors for government. Favors start with campaign contributions, but extend to more hiring, especially before an election. Who cares about quality of investment, or long run results? “In the long run we are all dead,” as Lord Keynes, the godfather of crony capitalism, helpfully reminded us. Hillary further stated that “as secretary of state I saw the way extreme inequality corrupted other societies.” This is a clever reversal of the truth . It is corruption, in particular crony capitalist corruption, that creates the worst kind of inequality, in which the poor, the young, and the middle class fall further and further behind while rich government cronies thrive. There was more nonsense in Hillary’s speech. She boasted about how 23mm new jobs had been created during her husband’s administration and the government’s budget balanced, without mentioning the role of the dot-com bubble in making it all look good until the mini-crash of 2000. In truth, today’s rotten economy had its origin under the Clinton administration, but who will believe this when the 2016 election rolls around? This speech has been called “populist” by the press, and much of it purported to be. Hillary said that “some are calling [today’s economy] a throwback to the gilded age of the robber barons.” This is ironic coming from Mrs. Clinton, who is the master manipulator of the crony system, and of late has been busily giving speeches on Wall Street and elsewhere for as much as $450,000, and often for $200-250,000, usually with a private jet thrown in for transportation. Mrs. Clinton has been doing this since leaving the secretary of state job. Ben Bernanke waited for two months after leaving the chairmanship of the Fed, but is now cashing in the same way. He has spoken at an Abu Dhabi conference, on a private telechat to Japan, and at select Wall Street dinners hosted by the likes of JP Morgan Chase at posh restaurants such as Le Bernardin. His speech fee is also reported to be around $250,000 with private transportation extra. According to participants in the dinners, Bernanke suggests that the Fed a) wants reported inflation of at least 2% and b) will hold interest rates down for a long time. In effect, then, the present policy of virtually giving away money to favored institutions may go on and on into the indefinite future. Meanwhile another report today reveals that savers lost $750 billion in interest they could have earned since 2008 if the Fed had not repressed rates. This estimate is very much on the low side, and much of this money came right out of the pocket of the endlessly abused middle class. It is a shame to see Ben Bernanke enriching himself among the people he enriched as chairman of the Federal Reserve. Prior to this, as much as he contributed to the corruption rampant in this economy, he had not personally benefited from it.

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