Rebel Traders - Stock Market and Economic Analysis

In just one more week Ben Bernanke’s term will expire. The confirmation of Ben to another term will reach fever pitch this week as the voting process gets underway. This morning one more Senator (John McCain) has indicated he will vote against Ben Bernanke’s re-confirmation.

Over the past few days the talk has turned to what would happen if Ben should lose his bid for a second term as the Federal Reserve chairman. Unfortunately, much of this talk is about what would happen in the short term, not long term impact. Some in Washington have stated that failing to appoint Bernanke to a second term would send the wrong message to Wall Street and the markets would react very negatively, and they could not allow that to happen.

Washington, and the Senate specifically, appear to only be concerned with what happens tomorrow, and not what happens months and years from now. I agree, if Ben Bernanke fails to win a second term the stock market most likely will react negatively in the short term. But, this would not be a reaction by the market thinking the economy could get much worse if Ben walks. No, the stock market reaction would be in response to the very real possibility that the transfusion tubes that are now connected between the tax payers and the financial firms would be severed.

As has been written by me, and many others, the rally in the markets witnessed over the past many months has, in part, been nothing more than easy money for Wall Street provided by the tax payers to the tune of nearly $1 Trillion dollars, and a safety net of trillions more again on the backs of the tax payers. Wall Street loves Ben Bernanke, he has enabled them to obtain money, much of it very cheaply through the numerous lending programs and bailouts. But none of this would have ever been necessary had the Federal Reserve been on the ball in the first place. Had the Federal Reserve been doing its job it would have maintained a stable financial system, albeit not as robust as some may have liked. Instead the Federal Reserve ignored the warning signs, contributed greatly to making the problems worse, and after the financial collapse responded in a manner which only puts the financial system at even greater peril instead of dealing with the root issues. But dealing with the root issues would not be popular in Washington because it would mean allowing the financial system to ‘reset’.

I don’t care about the near term impact on Wall Street, I care about what is going to happen 6 months from now, or 2 years from now, and even longer. Sure the markets won’t like it if Ben leaves, But that will only be because Wall Streets free lunch card will be in jeopardy of being torn up and wall street will be forced to earn money by actually earning it, not handed to them.

Ben Bernanke, through his massive and unprecedented quantitative easing has laid the groundwork for the an even larger financial disaster as the programs are merely an extension of what got us in this mess in the first place.

Ben Bernanke has failed to recognize, act upon, or even acknowledge that the Federal Reserve was instrumental in destroying the financial system which led to the stock market crash of 2008 and 2009. When housing prices were skyrocketing he claimed it was fine, even when others were screaming that it would lead to a financial meltdown.

A man who proclaims to be a student of the Great Depression, Ben Bernanke has only enacted policies that, if left intact, places the United States on a road to financial ruin. The United States can not keep borrowing to address the here and now without it having grave consequences down the road.

To claim that Bernanke rescued the financial system from collapse is akin to a firefighter who sets fires and then responds to help put them out. In the real world a person who does something like that goes to jail. But in the Government they are put up for another term. And was Ben really putting out the fires? No, he may have responded to the fire, but his actions only subdued the fire temporarily. And as we say in the fire service, the chances of a re-kindle are very high.

The long term health of our financial system is at stake. One should not be focused on what would happen the day after. Ben should not be re-confirmed no matter what the short term implications are. There would be some who say ‘oh no, the market nose dived because they failed to reappoint Bernanke, are they nuts?” The only nuts would be those who think that continuing the same failed policy of Ben Bernanke is the right thing to do. For me, I’m thinking about the financial health of the United States in the years ahead, and that is reason enough for me to urge the Senate to vote against re-confirming Ben Bernanke.

NO on Ben Bernanke for a second term