Monday, June 16, 2008


We assume that those who have reached positions of power, or positions of influence greater than ours, must know something we don’t. We also assume that those positions of power cannot or should not be challenged, since perception suggests that an individual who has realized high office, or has accumulated wealth, knows much more than we do. What universal truths could a farmer, or a truck mechanic possibly know that the oracle at the head of the U.S. Federal Reserve doesn’t?

The very fact that a person holds the powerful position of Fed Chairman automatically imbues that human being with more knowledge than the rest of us. We assume so, don’t we? Whether his name is Bernanke or Greenspan has little import. Through all media the position is treated with respect, even reverence, and the myth is patronized and further popularized. No need here to revisit the progeny of most assumptions, however, the Fed’s decisions of the past decade have resulted in an economic quagmire traumatizing most Americans that all economists are conflicted over.

With an oil price bubbling to extremes that is leading price surges in most commodities, there is urgent need to bring these spikes under control and back to economically sustainable levels. With the general economy slowing, raising the specter of deflation, the Fed is sounding the alarm of inflation. Does this really mean that the Fed is now cheerleading the chimerical utopia of inflation, since it would be preferable to deflation? Does saying it, make it so? Can we expect the printing presses to continue unabated spinning more dollars in answer to the overwhelming debt, which seem to be the Fed’s universal undisciplined answer to economic problems? Are we witnessing an international PR promotion for preemptive increases in the dollar’s value matched by an upward crank on the interest rates? Would this not be a jibe on the demand for China to allow its currency to float and appreciate against the dollar?

With home prices sinking, Americans’ biggest asset depositories are shrinking in value, countering the inflation calculations. Most Americans believe the economy is in a recession. Raising interest rates will hardly be helpful. What will it take for some truth and effective leadership to emerge from the Fed or Treasury? What will it take for a return to a strong and stable currency?

I have discussed in a past article the absolute necessity for the next President to get a firm and confident grip on inflation’s realities. Only then can sound economic strategies emanate from the Oval office. Making no assumptions on leadership expertise, including the Fed’s will also be an expectation of the new President. This is a call for leadership. In the meantime, save your pennies before they are pulled out of circulation from lack of value.


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