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Monday, June 29, 2009

Bernanke, Geithner, and Summers are going to fix the problems they never saw?

[N]ow, there’s a new Committee to Save the World. Summers is back. And he’s joined by Bernanke and Geithner. What a great committee! Innocents and insiders… who neither saw any evil, heard none, nor spoke none. The three were deaf, dumb, and blind to the biggest bubble in all time.

But now they are taking the lead in fixing the problems they never saw. How?

With stimulus! A $100 billion here. A $100 billion there. They’ve put at risk an amount of money nearly three times as great as America’s expenses in World War II.

They bail out a bank in North Carolina. They take over an auto company in Detroit.

Hey, what about the casinos? Aren’t you going to bail them out too?

What makes these three fellows think that this will make Americans richer? More prosperous? Or more secure? Has this sort of meddling ever actually made people better off? They should follow Ray Dalio’s advice and read about similar crises in history. Can you make those crises go away by spending trillions? If so, there’s no evidence of it in the histories we read. Not in the Great Depression. Not in the Latin debt crisis. Not in the Japanese experience.

And what about this time? The evidence we see tells us that the underlying economy is getting worse, not better. In addition to the figures cited above, there are the inflation rates. Inflation in America and Britain is coming down…to around 2%. In Europe it has already fallen into negative territory…with rates heading to minus 1%.

Meanwhile, oil is over $70 this morning – 7 times higher than it was when Larry Summers, et al, saved the world the first time. Gold is nearly 4 times higher.

In other words, the feds’ easy money is not reaching the consumer and not stimulating the consumer economy. Consumption is down…and with it, business earnings are down too.

“Dow 1 million,” says our old friend Jim Rogers. The feds’ phony money can stimulate speculation, he points out. But it can’t stimulate real growth.

This second ‘Committee to Save the World’ is destined to end like the first one – in disgrace and disaster. It will try to cure one disaster by creating a worse one.
-- from "Curing One Financial Disaster With a Worse One" by Bill Bonner

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