Bernanke Raises Prices… Well… Some Prices

The WealthCycles Staff

Fed Chairmen have a long history of secrecy, carefully crafted statements, and a complete lack of transparency—thus it was understandable that Federal Reserve Chairman Ben Bernanke’s “press conference” at the National Press Club was reason for some excitement. Following his speech, Bernanke was to answer journalists’ questions.

As it turned out, what could have been a great chance for members of the press to ask Bernanke some tough questions about the Fed’s shady dealings ended up looking more like canned questions lofted to Bernanke. But one question stood out, in which the National Press Club Chairman asked Chairman Bernanke whether or not the Federal Reserve’s asset purchase program had anything to do with the growing political unrest in Egypt and around the world or spiking food prices, which have hit all time records according to the United Nations Food and Agriculture Organization (see 28:13 in the video below).

Bernanke pushed back, claiming that food prices had nothing to do with QE2 or anything that the Fed had done to prop up the U.S. economy. According to the Chairman, rising food prices in emerging markets had more to with rising prosperity and a desire to consume better foods.

He claimed that rising food prices were emerging markets’ problem:

“I think it’s entirely unfair to attribute excess demand pressures in emerging markets to U.S. monetary policy, because emerging markets have all the tools they need to address excess demand in those countries.”

So basically, deal with it.

Maybe Helicopter Ben doesn’t realize that the Egyptian pound is in a managed float with the dollar, meaning that when the dollar falls, the Egyptian pound falls. Maybe he doesn’t realize that the main reason for Egypt’s managed float is that Egypt’s biggest export market is the United States—and its biggest export product is oil, which is priced in U.S. dollars. If Egypt allowed its currency to appreciate,  it would effectively reduce its oil revenue, make all its other exports more expensive to foreigners, and make tourism more expensive for visitors.

But the Fed claims no responsibility for those prices.      

On the other hand, Bernanke took complete credit for rising asset prices, like the stock market, and reducing their price volatility, which is a widely used proxy for risk.

So, somehow, he can create currency that raises some prices but not others. Oh, and don't worry about it, he can control which prices go up.

But the broad United States stock market, as measured by the S&P 500, is up 17.5% since Chairman Bernanke announced QE2, while commodities, as measured by Thomson Reuters/Jeffries CRB Index are up 18.8%. Yes, stock prices have gone up, but measured by their purchasing power vis-à-vis commodities, they have lost value.

It’s insane to think that the Federal Reserve and Ben Bernanke can control which prices rise and which don’t. It’s insulting to free market intelligence that he would claim such power.   

Though we call our market free and feel proud for it, still it is managed by financial organizations and government. The policy makers should only control the quality of competition but not the competition.

Regarding the price rise of consumable food items, I must say that there is not only rise in food items only, many consumable items have rise in price & that's the reason of increase of food price.

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Ben Bernanke is not crying, End the Fed. Start by raising awareness by marking your dollars with END THE FED over the pyramid. That bill will circulate 18 months on an average.

Ben Bernanke is not crying, End the Fed. Start by raising awareness by marking your dollars with END THE FED over the pyramid. That bill will circulate 18 months on an average.

We do need to get the word out, although I wouldn't recommend defacing a dollar bill. In my opinion that is not an effective method.

It has been my experience, that only when you understand an individuals mindset, then make a logical and compelling case, can you change someone's mind. Or, at the very least, you get them to thinking critically about the subject.

nicholas - WealthCycles Administrator

hi, since this website is about waves and cycles, I'd like to get a little foresight on which asset class will be most likely undervalued, so that I can make a plans for a smooth transition into that asset class without having to trade in my silver for dollars if possible once hyperinflation kicks in!

Will real estate work? since everyone will be out of a job and there'd be very little cashflow!

Wow! If only more people understood what was going on.
Thank you for the information.
- Brian J

Your welcome Brian. I am glad you enjoy the site.

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