Fwd: The New Fed man is scary...

[Jim Devine <jdevine03@xxxxxxxxx>]

Contrarian  Chronicles
Ben Bernanke scares me --  already

Fed  chairman reveals his lack of real-world experience and an
arrogant confidence  the economy can be managed.

By Bill  Fleckenstein

We got a peek into our  new Fed chairman's brain Wednesday -- and it
wasn't pretty -- when Greg Ip, Fed  stenographer (née Wall Street
Journal reporter), penned a story titled "Long  Study of Great
Depression Has Shaped Bernanke's Views."

No understanding of booms or busts
Anyone with even  an ounce of common sense -- and a similar degree of
familiarity with the  Depression -- will quickly see that Bernanke has
no comprehension of the fact  that booms and busts are related. More
than related. To a degree -- honest  people can argue how much --
booms cause busts. They don't just precede them.  Booms derange prices
and therefore misdirect investment.

Bernanke  says that the Fed should never prick a bubble but only clean
up the mess  afterward. I disagree with him there, too, but this Fed
doesn't just stand  around watching bubbles inflate. It's inflating
them, both with its monetary  policy and with its tonsils. Bernanke's
tenure will prove this in spades as the  residue from the prior stock
mania and fallout from the leveraged-housing  bubble cave in on him.
It's also apparent that he has no understanding of why  Communism
failed, or that capitalism involves creative destruction.

Anyone reading Ip's article can quickly see that when things turn
dicey  here, the dollar will be shredded and gold will explode. (I'm
guessing the bond  market will be wrecked, as well.) I was going to
dissect the article this week,  but a friend beat me to the punch. I
decided not to produce my own rebuttal,  since my friend's take was so
succinct and spot-on. Though he asked me not to  identify him, here it
is:

Lead the economy by the  nose

"Ip writes: 'While some have criticized him for saying in 2002  the
Fed could print money to end deflation, the comments typify his
willingness  to question orthodoxy.' Oh, no, they don't. What his
comments actually typify is  Bernanke's own brand of orthodoxy, at the
root of which is an arrogant belief  that a central bank can lead a
market economy around by the nose.

Ben  Bernanke

"By manipulating the funds rate,  says the Maestro-designate, the Fed
can fine-tune the measured rate of  inflation, promote full employment
and assure financial stability. For Bernanke,  booms have nothing to
do with busts. The common-sense theorists of the so-called  Austrian
School (including Friedrich Hayek and Ludwig von Mises) might as well 
never have been born.

"So, on top of the arrogance of the central  economic planner, add the
arrogance of the cock-sure college professor. The gold  price isn't
going up for nothing."
--

Bill Fleckenstein is president of Fleckenstein Capital, which manages
a hedge fund based in Seattle. He also writes a daily "Market Rap"
column on his Fleckenstein Capital Web site. His investment positions
can change at any time. Under no circumstances does the information in
this column represent a recommendation to buy, sell or hold any
security. The views and opinions expressed in Bill Fleckenstein's
columns are his own and not necessarily those of CNBC or MSN Money. At
the time of publication, Bill Fleckenstein was short Research in
Motion and long Fannie Mae puts.
	  	
--
Jim Devine
"Segui il tuo corso, e lascia dir le genti." (Go your own way and let
people talk.) -- Karl, paraphrasing Dante.