Bernanke finally sees problems in the economy. . . . Duh.

I saw this on the news:
JACKSON, Wyo. -Federal Reserve Chairman Ben Bernanke  said Friday the financial crisis that has pounded the country — coupled with higher inflation — is taking a toll on the economy and poses a major challenge to Fed policymakers as they try to restore stability.
“Although we have seen improved functioning in some markets, the financial storm that reached gale force” around this time last year “has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment,” Bernanke said in a speech to a high-profile economics conference here.
Hmm. Perhaps he thought the economy couldn’t get any worse. You can’t blame him though; he has spent most of the past year trying to figure out how many ivory towers he has. Such a daunting task would be easier if they didn’t all look alike.
He likened the financial crisis to a gale which has been blowing for a year now. One wonders where such a wind comes from.
I can’t figure out why everyone wants to blame the financial markets for huffing and puffing on the economy and blowing the house values down. They were just doing their jobs, trying to make a buck like the rest of us. That’s a tough job when interest rates are lower than the inflation rate.
Here is the problem. Stage left we have a bunch of investment bankers whose Chinese clients won’t settle for two percent returns, and stage right is the world view of the administration, which needs those clients to keep recycling greenbacks back to where they were printed.The best kept secret during the last 7 years, maybe even 27 years, is that the economy has been in the throes of its own Katrina all along. While members of the elite ruling class were getting paid tens of millions of dollars to quit their jobs, the rest of us hadn’t had a real raise in many a year. Our employers were going broke getting rid of their CEO’s and couldn’t pay us enough to buy prescription drugs, so we had to get cash from somewhere else.
Once upon a time you robbed banks because that was where the money was. No longer. The money is in China and Sandi Arabia, and you don’t want to get caught breaking into a bank there. You have to be more creative. The problem is: the money lenders want a return closer to, say, 15 percent and all we can pay is two or three. This is where the financial markets make the big bucks and why Ben and co. were trying to decide which irony tower had the best view. They only got irate and complained about a shortage of hurricane shutters when the gale winds started to blow.
Since time immemorial alchemists have been trying to turn base metals into gold. Leave it to American free enterprise to make it a reality. Almost, anyway. The investment bankers invented a product called mortgage backed securities. It turned two percent inputs from borrowers into 15 percent outputs to lenders. The real beauty of this product is that no one knows how it works. One man’s leverage might be another’s Ponzi scheme, but if Elliott Spitzer wants to know how this system works he’ll have to dig out his waterboard. One wonders whether he’d let the rest of us in on what he finds out.
At any rate, everything looks good as long as we can pay the interest. We would have a better idea what we were doing if we were dealing with a really disreputable business, like a payday lender. When your interest rate is 20 percent per week, it doesn’t take long for a pleasant breeze to become a gale. How were we to know that Freddie and Fanny were really updated Bonnie and Clyde?
What I’m trying to say here is what most of us have known for a long time. The economy has been in bad shape. We who ultimately pay the bills finally couldn’t and started to default. Mortgage backed securities, miraculous inventions though they be, can’t turn zero into anything else. Fifteen percent return dried up. The Chinese, the Saudis, or whoever had money to lend, wised up to the smoke and mirrors hiding the reality of our economy. They stopped extending credit to those who wouldn’t pay it back. Presto, a credit crunch.
Like the soldiers being sacrificed so this administrator an save some face on the foreign front, the financial markets are taking the rap for the domestic economic mess.
None of this makes sense.

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