SOS Ben Bernanke has everyone fooled?

Why Ben Bernanke has almost everyone fooled?

1. Many share the believe that Ben Bernanke drop money from helicopter.
2. As a result, most people sees under his leadership is excessive inflation.
3. So, majority virtually prepared for severe inflation.
4. To prepare for inflation, investor will pour money into commodities, stocks, precious metal or properties on the pretext, money will lose its value due to excessive printing.
5. That is exactly Bernanke got everyone to believe, the US government and Fed is trying to inflate out of their debt.

This is what majority believe, at least it sound logical, isn't it?

How can the majority be wrong this time?

On the CONTRARY, the majority is wrong, and here is why.

1. US Government and the Fed derives their powers from two sources, one is TAXATION and the other, its ability to BORROW or create new CREDIT or DEBT.
2. The Fed would commit suicide if it were to hyper-inflate, because federal government bonds are reserve of the FED (which is privately owned) and federal government bonds are the reserve of the FED.

Thanks to the magical wand, Ben Bernanke had everyone thought that Fed has the power to alter the course of US economy by printing or stimulating or quantitative easing. And hence, the confidence are BACK for the mislead reason.

Von Mises said "There is NO MEANS of avoiding the final collapse of a boom brought about by credit expansion." "No Means" which means nobody can do anything about it, including the Fed.

Dollar denominate debt is about USD65 trillion in 2010 (excluding social care and medicare). Worldwide wealth is USD160T, gold is about USD7T (half held by central bank). Worldwide derivatives is about 600T.

MyView

1. 1980 - how can gold go down with all this inflation?
2. 2000 - how can stock go down in a New Economy?
3. 2004 - how can US dollar goes up when we have this huge trade deficit?
4. 2005 - how can oil go down when world production has peaked all time?
5. 2009 - how can we have deflation? Bernanke won't allow it

There is no point debating over the inflation or deflation outcome of the whole episode, but it does change your wealth position. Should we read it correctly, then we can benefit from it. On the contrary, should we read it wrongly, our hard earn money will be wipe out, not because we did not work hard, because we really do not know. And it is complicated, and not easy to solve the puzzle.

Have some thought about it. Inflation is created by credit creation. When credit reach its peak, i.e. credit contraction will come, and it is just started. Whichever way we look at it, either inflation or deflation, they share the same conclusion, the majority is doomed. But, if we got it correctly, we can protect ourselves.