Bernanke's Declaration of Independence

by Gary North
Oct. 09, 2010

Ben Bernanke gave a grim speech on October 4. It did not get media attention. That was because it was so grim.

It was on the looming fiscal crisis of the Federal government. There will be no easy way to avoid it, he said. Congress has to decide what spending to cut. This means that Congress must decide which special-interest groups to alienate. Then it must decide which taxes to raise. Whose ox will get gored?

Congress has been deferring this two-part decision since the Nixon Administration.

The essence of politics is buying votes with the taxpayers' money, but without losing more votes than you buy. That is to say, there must be deception. Each beneficiary must conclude: "I am going to get more out of this than I am likely to pay into the system." They all cannot be correct about this. So, the tax burden is concealed.

There are two other factors of concealment: increasing deficits and increasing monetary expansion.

Here is where Bernanke is firing a warning shot across Congress's bow. His speech is a warning to Congress that the Federal Reserve will not take the hit. It will not destroy the dollar in order for Congress to play its game of deception.

This was Bernanke's Declaration of independence. The media did not pick up on this. I don't think Congress did, either.

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