Big Ben
David Petch
Jan 7, 2008
This article was published
for the benefit of subscribers on December 19th, 2007.
 Big Ben is the largest standing four
faced chiming clock in the world and is known for its remarkable
accuracy due in part to Edmond Beckett Denison who invented the
double three-legged gravity escapement added to the original
mechanism. The mechanism was created in advance of completing
the masonry and final tower assembly, which is where Edmond found
spare time for his improvement.
The hour hand of Big Ben is
9 feet long and the minutes hand is 14 feet long. The focus of
this article is to metaphorically dissect the features of Big
Ben and apply them to Ben Bernanke. Metaphorical similarities
and dissimilarities may not be apparent on the surface but should
be crystal clear by the conclusion of the article. A clock having
a long hand and a short hand is equivalent to a magician having
one arm extended during a trick for distraction of the other
hand (hour hand) in the background setting up the trick. The
FED so to speak has repeatedly used this slight of hand on numerous
occasions as of later, particularly regarding inflation. A few
weeks ago, Ron Paul was questioning Bernanke about why try to
solve inflation with printing more money and with the use of
several non-informational statements a final point was made that
as long as Americans were buying things made in the US there
was no inflation. Considering that the US imports 70% of energy
for domestic purposes and most manufactured goods (a large percentage
of which is processed foods made from China), this is a real
problem because the greenback is quickly losing its status as
the reserve currency.
The expression "putting
a penny on" with the definition of "slowing down"
arose from the method of fine tuning the accuracy of Big Ben's
pendulum. Adding or removing one penny to the pendulum can add
or subtract, respectively, 2/5th of one second per day. As the
figurehead of the FED, Ben's purpose is to disseminate information
on measures the FED agreed to behind closed doors. The pendulum
of the economy in fiat terms can be viewed as the addition or
removal of interest rates to try and keep things within reasonable
growth. i.e. some pennies may have to be added or removed to
slow down the economy. At present, the FED (as other countries
around the globe) is removing a penny (lowering interest rates)
instead of "putting a penny on" (raising interest rates)
in an attempt to minimize further weakness due to the sub-prime
mortgage failures and derivative implosions. In the not too distant
future once inflation really begins to pick up steam due to real
negative interest rates, countries will begin "putting a
penny on" in order to try and keep the economic pendulum
in balance. Central Banks better hope the pendulum remains within
the confines of the structure containing it and not fly through
a wall to be exposed to those who stare upon them.
During WWII, Big Ben suffered
damage to two faces of the clock and was subsequently repaired.
In 1976, the internal mechanism of the clock failed due to metal
fatigue. Only once in its lifetime since 1854 did it suffer mechanical
failure. Below is a description of the four faces of Ben Bernanke.
It is important that two particular faces do not suffer damage
inflicted by causal effects or external agents, because when
a person loses face, it sometimes is more difficult to regain
it if not impossible... these two faces being the public and
global central bankers.
Four Faces of Bernanke - "Ignore
the man behind the curtain" has a totally different dimension
added.
i) Global Central Bankers
ii) American Public
iii) US FED
iv) Ben staring at himself in the mirror
Global Central Bankers
Of all of the faces
of Bernanke facing different groups, this by far is the most
important. Different countries from around the globe have been
purchasing US Treasuries thereby allowing the US deficit to continue
growing. "Keeping the Faith" of the central bankers
in countries is important to allow the deficit to continue. Loss
of faith from other Central Bankers can be viewed to a congregation
losing faith in their minister. A minister can pack up his or
her bags and simply move to a far away town and start things
anew. Unfortunately, there is only one Earth and all of the same
clan of bankers have been hearing the same sermon for the past
number of years. Once booted out, there is no other place to
set up shop. The only way out for the FED to allow continuous
monthly deficits in the US is to monetize debt. This action is
viewed negatively by other countries and serves to debase the
US dollar. As mentioned previously, currency debasement ultimately
leads to higher interest rates and inflation.
American Public
The US FED is one of
the only private institutions on the planet that controls monetary
policy of a country by printing money for them and charging interest
rates. This is a privilege that should be reserved for governments
only and not have a group of corrupt rich people collecting interest
payments off the back of the people. "Keeping the Faith"
with the American public is also important because a change in
government policy reflected by a vote from the populous could
see the US Federal Reserve System dismantled. There certainly
would be valiant attempts by the rich bankers to block this (not
to be discussed but I will leave it to the imagination), but
a strong public outcry and a return to sound money can eliminate
this. For now, the FED has been able to keep the wool over the
eyes of the public, but once many have been sheered and see clearly,
there could be a change in the guard.
US FED
Bernanke is Chairman
of the FED and is the mouthpiece for disseminating their collective
thoughts and information to the public. There really is no losing
face amongst individuals of the FED because they are all serving
the same master. For Bernanke to "lose face" with the
FED, he would have to speak under his own prevailing thoughts
rather than to an agreed bunch of statements before the cameras
arrive.
Staring in the Mirror
There is an old saying
that "You can Fool Everyone but You Cannot Fool Yourself".
Bernanke's Ph.D. thesis was based upon the study of the Great
Depression of the 1930's. His conclusions were that deflation
ensued due to the lack of suitable cash infusions at particularly
critical points during the crisis. Cash infusions that were too
late would not be able to undo sustained damage, so the basic
conclusion was that frequent timed injections of cash could have
prevented the severity of witnessed deflation. Bernanke's conclusions
are now being put to the test in the biggest game of poker ever.
The stakes are high and as derivatives continue to unwind, watch
for equivalent chunks of money set to be digitally distributed
to wherever needed. The likely outcome for this sort of game
is going to result in sustained inflation due to the persistence
of cash floating around I am not certain if hyperinflation is
going to develop, but one distinct possibility is a sort of financial
purgatory. This financial purgatory could be defined as the current
level of liquidity is being kept constant by replacing any forms
of credit that "deflate" the total amount of available
cash (cash equivalents and credit) which is in effect "monetization".
The end game is that either hyperinflation will run its course
or that at some point the US dollar will be judged and booted
out of purgatory into financial hell, both of which translate
into severe deflation. So in the end, when Bernanke wakes up
one morning and stares at himself in the mirror, will he lose
face with himself for realizing that his thesis was merely a
document for how to stave off deflation for some time rather
than make it become extinct.
Note: Just so I am not taken out of context for the
final statement, I am in the inflationary camp and assume it
will continue until some point in 2012... then deflation, not
in any other order. I have already written two articles about
why deflationists have been wrong the past 20 something years
and why they will continue to be wrong until this inflationary
cycle completes...for those interested, simply Google "Diatribes
of a Deflationist" I and II. Monetary inflation can occur
via printed money or introduction of credit extended through
various means. Credit is being destroyed, but Central Banks are
monetizing the debt...sure it might not hit the public, but it
is preventing any significant declines in the available money
supplies around the globe.
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David Petch
email:
ITMmyFAV@aol.com
website: www.treasurechests.info
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