Ben Bernanke - The Father of Extreme US Socialism

Mish

Looking for a reason for the upsurge in radical socialism, don't blame Trump, blame the Fed.

Writer David McWilliams penned an excellent article in the Financial Times: Quantitative Easing was the Father of Millennial Socialism.

McWilliams notes that Fed chairman Ben Bernanke's "cash for trash" QE scheme drove up asset prices and bailed out the baby boomers. The cost of course, was pricing millennials out of the housing market.

Unorthodox policy penalizes the asset poor.

What assets do millennials have? Hardly any. Instead they are saddled with mountains of student debt which, thanks to president George W. Bush, could no longer be discharged in bankruptcy.

The Bankruptcy Reform Act of 2005 would have better been called the Debt Slave Act of 2005.

Then, when the Great Financial Crisis hit, the Fed came along bailed out the banks, bailed out the bondholders, bailed out Fannie Mae, and bailed out the asset holders in general, leaving millennials mired in debt unable to afford a house.

Simmering Stew of Anger

The irony in this simmering stew of anger is people blame Trump, not the Fed.

But socialism, even AOC's radical socialism is not about Trump, at least directly.

Peak Trump

I had a lengthy phone conversation with David Stockman after I finished reading his new book, "Peak Trump".

The first thing I said to him was "This really isn't about Trump, is it?"

He laughed, then responded along the lines of, "You are correct. Trump is a symptom of the problem. He wanted to drain the swamp but failed to do so. He never really had a good chance of doing that, but he failed to make the most of the chance he had. We are where we are because of decades of Congressional and monetary mismanagement."

I gave his book two thumbs up in "Peak Trump" by David Stockman: Book Review

Trump Won the Election Because

  1. Obama promised change and failed to deliver. Wars continued so did drone policy. Obamacare was a disaster. In his first term, Obama bailed out the banks.
  2. The millennials wanted Bernie Sanders and the Democrat leadership rigged the primary for Hillary. Many disillusioned millennials then sat the election out.
  3. Trump's message appealed to union workers in the rust belt states who believe China was stealing our jobs.
  4. Many believe Hillary is a bigger warmonger than Trump.
  5. People genuinely cannot stand Hillary, for many good reasons.

It took all of those things for Trump to win, and then just barely.

Rise of the Radicals

Now, instead of drifting towards the middle, the radical Left, epitomized by AOC and her Green New Deal, have an open battle to win the heart and soul of the Democratic Party.

​For example, AOC's Green New Deal Pricetag of $51 to $93 Trillion vs. Cost of Doing Nothing.

But why should she care?

Also note that the socialist don't like tax breaks for Amazon. The result was Hooray! No Jobs for New York.

But why should socialists care when the Stunningly Absurd "New Green Deal" guarantees living wages no natter what you do or what your skills are?

And let's not forget Progressive Lies Like "Free College" and "Medicare For All".

Pompous Twit

Today ZeroHedge noted Greenpeace Co-Founder Rips "Pompous Little Twit" Ocasio-Cortez As "Garden-Variety Hypocrite" On Climate.

Yes, AOC is an economically illiterate pompous twit, obvious even to a the Greenpeace co-founder.

I have a socialist friend who knows full well how nonsensical his plan is.

But he is so irritated by bailouts, Trump, tax cuts on the rich that he doesn't give a damn. He is rooting for AOC to "balance things out".

So, here we are.

Yet the irony is that independents will not vote for extreme nut cases with $80 trillion plans, nor will they vote for the likes of Elizabeth Warren or Kamala Harris with their preposterous Slave Reparation Proposals.

You don't right wrongs by being stupid, no matter how irritated you migt be at the current politics.

Mike "Mish" Shedlock

Comments (32)
No. 1-17
Tengen
Tengen

Agreed. When your banking overlords don't care about price tags because they can print whatever they need, this ideology bleeds into politics. AOC's budget looks completely ridiculous, but does it really matter when every other candidate's budget is only a little less absurd?

If anything, someone like AOC may be the tonic we need by hastening the crash of the kleptocracy. We've feverishly applied lipstick to this pig for long enough!

lol
lol

Blame DC,blame the 2/3 of the population that gets a "check" from big gov every month,a handout from big gov,subsidy from big gov't,loan/contract from big gov't,entitlement from big gov,paycheck from big gov and on and on,the fed is the enablers...…..but the 220 million amerikans that live off big gov't is the ONLY reason for the rise of communism errrrrrr socialism!

pgp
pgp

Actually looking at the problem more deeply you have to blame 100+ years of US capitalism for the state of the world today which perhaps started with the founding of the FED but which was ultimately supported not just by banks but big companies and a fascist government policy of foisting exploitative economics (aka US democracy) on the world, often at the point of a gun.

Extreme capitalism obviously hasn't worked out, extreme socialism is just the inevitable hysteresis effect of a society crushed by elitist self-interest and unregulated greed culminating in a suffocating and dying planet.

Lets just hope history doesn't repeat with a communist revolution or it will be 100 years of government oppression with the same cretinous establishment in charge.

Greggg
Greggg

Trump will be reelected in 2020. Reason: Most people realize Jefferson's fears have come true, “I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Occasional Cortex now represents more than half the news coming from the democrats.

wootendw
wootendw

"You don't right wrongs by being stupid, no matter how irritated you migt be at the current politics."

That is true in regards to AOC's plan but there other plans that should be equally worrisome because they sound sensible to most voters, at least in the short run. Even when bad policies do cause harm, the voters don't always know the reason - "the invisible foot of government" as Dick Armey once put it.

For example, raising taxes on the 'rich', meaning those with higher incomes. As long as they think someone else will pay, voters won't care.

Regulating businesses is another vote-catcher, particularly among those who were disgusted by the bailouts. Numerous people blame the crisis on the 'repeal' of Glass-Steagall, not realizing that Glass-Steagal included the creation of the FDIC which was not repealed (but should have been).

Raising minimum wage until it really does cause unemployment in middle-class communities is always a vote getter.

There's plenty to worry about from the left.

killben
killben

"Looking for a reason for the upsurge in radical socialism, don't blame Trump, blame the Fed."

Yup! Let us name them - Greenspan-Bernanke-Yellen.

"You don't right wrongs by being stupid"

But when people in power keep doing the wrong thing over a long time (in this case 30 years) ultimately that will be the result. Essentially the capitalism that is being practiced today can get you ONLY ANTI-CAPITALISM. So I for one am not surprised though I am pretty confident that it will lead to grief. My worry is you may end up with something much worse like Hitler. But unless the people in power change themselves this is more likely to be the end result. You cannot be Unfair over long periods of time and expect that all will end well. History is likely to show 2008/9 (Bailout, ZIRP and QE) as the turning point for the world with a mad man at the helm of the Fed with his deranged policies.

The hilarious part is they are running the ship with the same deranged policies. Markets fall 20% (from being extremely overvalued) and the Fed comes rushing in making the cooing noises. In short, nothing has changed or will change till society boils over.

truthseeker
truthseeker

Bernanke is most responsible but he had help from repeal of Glass-Steagall, new leveraged products from the banks okayed by Greenspan, later referred to as financial weapons of mass destruction by Warren Buffett. Bernanke initially got the Fed to lower rates adding QE1,2 and 3 to try to reinflate the housing market, but when he realized that wasn’t working, he then said he was trying to push up the equity markets so that the wealth effect would bring the economy out of recession. QE-1, 600 billion dollars pushed into the credit markets I remember reading later on that this figure was the amount of money earned by middle class savers each year with normal interest rates from treasury bills, bonds and banking CD’s.

DFWRealEstate
DFWRealEstate

We should dispense with the terms "radical" or "extreme". Even the term "socialism" is being used inappropriately in many instances. All of the exclamations of "radical socialism" are preposterous on their face. We've had socialism in the United States for decades...socialism for the rich. This is precisely what the bailouts were all about, privatized gains and socialized losses, looting of the U.S. Treasury in plain sight. The Fed/govt just used different terms like TARP, QE, The Discount Window, the "wealth effect" etc. The "radical" policies being discussed are really just a search for fairness and shared prosperity or at least shared opportunity of prosperity. The game has been rigged for far too long, and the power brokers overplayed their hand. It's the essence of greed in an unhinged/unregulated capitalist system. And no, the "free market" won't fix it. Left to its own devices, the "market" will always tilt towards wealth, power. Only people and sound government will fix this mess. Will those people seeking reform overreach as well, probably so. But this shouldn't be surprising considering all of the fraud and socialism for the rich this country has endured during the last several decades.

27CAV8R
27CAV8R

Agree except for one thing. Dismissing AOC as a "pompous twit" might get some chuckles and knowing nods now, but watch out when she develops some DC savvy. She absolutely crushed her opponent and his Democrat machine when she won her election. She has the disgruntled on her side...and there are plenty of them. Yep, she came across as an arrogant snot when she bragged that she was "the boss." However, she was right on target...she's wagging the Democrat dog now.

Blurtman
Blurtman

Perhaps worse, congress confirmed Al Capone as head of the Justice Department. (Hank Paulson as head of Treasury) Goldman Sachs' record penalty was for financial fraud that occurred under Hank's watch. Third world country.

JonSellers
JonSellers

The pendulum swings. Prior to FDR the USA was a fairly free market country, with the vast majority living in poverty. FDR implemented socialism and the country had a good run through the '60's. It took awhile but the free marketeers won their way back to power with Carter and Reagan. That has lasted for 30 years and the lower classes and young are feeling the bite again. So the pendulum is swinging back. Winner take all politics cannot lead to balance.

ReadyKilowatt
ReadyKilowatt

No one ever seems to mention the Chicago school of economic thought. They provided the justification for zero interest rate policy, the "third mandate" of the fed worrying about asset prices, and the deification of Alan Greenspan. I'm not an economist, but from what I've read Chicago school is just another term for mercantilism. Replace state-sponsored piracy with high frequency trading and it's basically the same thing. But instead of funding Drake's high tech sailing vessels today's Queen Elizabeth (the Congressmen who exempt themselves from the rules set up for us) backs firms who have rack space next to the stock exchange's router and high speed microwave links back to the office.

Realist
Realist

At what point did the US become a nation of whiners? Reading this blog is like listening to a group of 90-year-old men, wearing their pants up to their armpits, complaining about the government full-time. I come here for “Economic Analysis”, but more and more all I’m seeing is people pointing fingers at “who is to blame”, and spouting “conspiracy theories”. I guess some people have nothing better to do. Sorry if that offends some. I just felt that it needed to be said.

thimk
thimk

will someone inform AOC that Bruce Springsteen is the "BOSS"? On a more serious note - each iteration of boom bust fed induced cycles causes more wealth to accrue to the 10%.

RonJ
RonJ

"The millennials wanted Bernie Sanders and the Democrat leadership rigged the primary for Hillary."

The mainstream media is meddling in our elections. Not a Sanders fan, but CNN and MSNBC just ran hit jobs on Sanders. CNN did not identify questioners presented as being common folk, for the political operatives that they were. An MSNBC commenter lied about what Sanders said in a speech, while no one else in the MSNBC group called her out on it.

Jackula
Jackula

If we have another event like the 2008-09 financial crisis before the 2020 elections the Dems could run Donald Duck for Pres and win

BrokeBoomer
BrokeBoomer

I am a Boomer and I don't think Uncle Ben did me any favors. During the GFC the value of my savings were cut in half, at least. At a time when retirement was e getting near but still needed to work, job opportunities dried up. No jobs, had to dip into my much diminished savings. Yes ten years later asset values have gone up but it's too late for me. Millenials are not the only ones that got royally screwed.


Global Economics

FEATURED
COMMUNITY