Mish presents an extraordinary analysis of Bernanke’s Federal Reserve auction facilities and why they are really just reshuffling the chairs on the deck of the titanic. One of his best points is that the Fed is not “King Midas” - just because it is willing to hold crappy bonds, such as mortgage backed securities, does not make those securities worth any more.

The fact of the matter is that too much folly was undertaken during the credit bubble years. You can not make up for excess folly by encouraging further folly. Yet that is essentially the policy of the current Federal Reserve Board led by “Helicopter” Ben Bernanke. Living in his Ivory Tower Academic World (”ITAW”) for so long, he has been zapped of any noticeable common sense. Traditionally, those who inhabit the ITAW are filled with undue hubris and are given far too much credit by the lay individual. The reality is, the emperor has no clothes. If Bernanke continues down his foolish path, he will likely kill the US$ and therefore destroy the foundation of the American economy. So far, he hasn’t shown too much concern as the Dollar has crashed non-stop since he has been Fed Chairman. ITAW syndrome has been known to cause unintended consequencces. Hopefully a deceased US$ and totally obliterated U.S. economic system is not one of those.

At this time, it is important to realize that people who made poor decisions should be the ones to suffer the consequences and society as a whole should not be pulled into the Bernanke ITAW black hole.

Click here for more on the societal ills of a falling dollar.

Filed under: Politics, Social Mood, Economics, Current Events