Fed chief Ben Bernanke testified a year ago (April of 2008) before Congress and said that America was not yet in recession and might still avoid it. He called our economic crisis at the time a "contraction." Interesting choice of words. At the time, I was so shocked and outraged at those comments that I wrote a commentary ripping Bernanke to shreds. I felt he was either a fool or a liar. Well the more things change, the more they stay the same. Earlier today Ben Bernanke told Congress that the recession will end this year. THIS YEAR. Really? You could have fooled me.
So the man who didn't even know we were in a recession last April, now thinks he can read the future? How can we depend on his ability to predict the future, when he's proven he can't even predict the past. While the Chairman of the Federal Reserve had no clue we were mired in a deep recession last April, this small business owner-turned-Libertarian Vice Presidential candidate was already loudly and publicly calling it a depression. In my commentary last April, I concluded that we had been in a deep recession for as long as a year…and I stated that it was clearly turning into a depression.
How did I accurately predict and diagnose economic conditions that the Fed Chairman couldn’t? Simple- small businessmen are "the canaries in the coal mine." We live on Main Street. We feel seismic tremors when book-smart economists from Harvard in their Ivory Towers are still giving lectures about how earthquakes can't possibly happen. My prediction of course turned out to be deadly accurate. Bernanke's prediction that we might avoid a recession joins the scrap heap of history. Our Fed chief joins a long list of economic geniuses whose heads were so far up their butts, they couldn't find water in the middle of an ocean.
Back in April of 2008, I predicted a long and deep depression- not of 1929 standards, but certainly the worst since 1929. At that same moment in time, our Fed chief was describing the worst economic crisis of our lifetimes as "a contraction." That would be equivalent to telling a pregnant woman that her labor pains are “just contractions.” As a four-time father with my lovely wife Debra, I know that husbands face either bodily injury or divorce for comments that ignorant and insensitive. Perhaps economists and Fed Chiefs should face the same fate.
In today's Congressional testimony, Bernanke called our deepening economic crisis a "severe contraction." Recognize the pattern? Last April a deep recession was in Bernanke's words just a "contraction." Now the worst crisis of our lifetimes (and quite possibly a depression) is merely a "severe contraction" which will end this year. This man has a way with words. He’s almost as good as President Obama with words. Obama is the man who boldly promised during the election that he would create millions of jobs. I commented publicly at the time that since he had never run a business in his life, any job that Obama created as President would be his first.
But once elected Obama changed his tune. First, he predicted his economic stimulus plan would create millions of jobs…then he changed the prediction to a less bold "create 3 million jobs"…then he changed it to "create or save 3 million jobs.” Interesting phrase to use- “save jobs.” How exactly do you keep track of how many jobs you’ve saved? Well of course the answer is that you cannot keep track. You can make up any number you’d like. So if 5 million or 10 million jobs are lost under Obama, he’ll simply claim that he saved 5 or 10 million more and declare victory. Watch the words carefully and you'll see the pattern of lies from a politician or Fed chief.
But I digress- back to our esteemed Fed chief…Mr. Bernanke didn't even know what a small businessman knew back in April of 2008. So why would anyone trust Bernanke now? He predicts this recession will end this year? Really? With hundreds of thousands of Americans losing their jobs per month, he thinks we're ready for a miraculous recovery? With consumer spending at a historic standstill and consumer confidence at all-time lows? With the massive losses of Eastern Europe about to wipe out virtually every European bank, he thinks the worst is over? The problems of European banks at this point make the crisis in the U.S. look like…well a "contraction" by comparison. But here's the problem- if European banks go under, Europe goes into a depression like 1929. And there goes our trading partners, thereby plunging America into round 2 of this crisis. Dark clouds are forming on the horizon. Not months away, not weeks, but days. And our Fed Chief sees sunshine ahead. The only question is…is Bernenke a fool or a liar?
The worst of this crisis has not even begun yet. Bernanke claims to be a student of history. So let this small businessman and Vegas Oddsmaker-turned 2012 Presidential hopeful educate our esteemed Fed chief on the subject of history. Historically a deep recession (or in my opinion a DEPRESSION) like this one does not end in a year. Historically the worst is yet to come. Historically the problem is the lagging absence of tax revenues. Our government will buckle over the next 2 to 5 years because of a dramatic drop in tax revenues. Never in the history of economic crisis' this serious, have tax revenues ever recovered for years. Now that's a big problem under any circumstances. But when you have a President like Obama who likes to spend (and spend BIG), this creates a crisis of epic proportions.
"The rich"- as Obama likes to call successful American entrepreneurs and business owners- are decimated. Their incomes have been cut dramatically and therefore government tax revenues will drop dramatically for years to come. It's pretty simple- there are far fewer rich people and those that are still technically "rich" have far lower incomes. Yes, there are still rich Americans, but the group is a shadow of its former self from the halcyon days of the 90’s and early 2000’s. In short, much of the group that Obama depends on to pay for all his massive out-of-control spending, no longer exists. The same group that pays for all the bills of government, no longer exists. The same group that pays for bloated government employees compensation and pensions, no longer exists. The same group that Obama depends on to pay for Universal government-run health care, no longer exists. Obama's plans have gone up in smoke (excuse the reference to Obama's college days). The world has changed overnight, and Obama and Bernanke don't even realize it.
But wait, it gets worse. When Obama hits this group ("the rich") with a massive tax increase in 2011, tax revenues will drop even further. All at a time when federal, state and local governments have decided to take the dangerous, reckless, deadly path of spending more, hiring more, paying more to government employees, hiring more teachers, wasting more money on trains from Los Angeles to Vegas (another Amtrak?), and countless other billion dollar boondoggles and earmarks disguised as "economic stimulus."
Just as spending, deficit and national debt goes up dramatically over the next 24 months, tax revenues will go down just as dramatically. How will government fund all this spending? Well of course Ben Bernanke's Fed will print more money- by the trillions. The result? A massive wave of inflation
that will wreck the U.S. economy just as Obama and Bernanke hope to be coming out of the crisis- causing a further drastic drop in tax revenues, and a second wave of depression/unemployment- just as it happened in the 1930's under FDR.
Obama's plan to spend more; expand government; hire more government employees; hand out more entitlements; and strengthen labor unions; is a tragic repeat of FDR's plan. It will lead to the same result- economic disaster. It is important to note that it took World War II to end the last decade-long depression.
It doesn't take a Harvard economist to see what is coming. Countries will face massive unrest, rioting and revolution the world over. Governments will fall. Companies thought invincible, will fail- just as GM, Ford and Chrysler were once thought invincible. The face of politics as we know it will be changed forever in the aftermath of this economic tsunami. And in the midst of economic Armageddon, our Fed chief whistles past the graveyard.
All that said, in the long run I remain an optimist. I love America. I have faith in Americans. Today we are headed down the wrong path. The recovery from this disaster will be long, slow and brutal. But eventually we will emerge from the darkness. But only after a majority of Americans recognize the tragic mistakes of this administration. Only after our local, state and federal governments enter rehab to treat their spending addiction. Only after government dramatically cuts spending and taxes- thereby empowering the ingenuity and creativity of the American entrepreneur, small business owners, and the private sector. Only after we recognize that government isn’t the solution- it’s the problem. Freedom and liberty can never- in the long run- be extinguished. Not in this great country. How soon we recover depends on how soon we recognize that the path to recovery is only found economic and personal freedom.
Wayne Allyn Root was the 2008 Libertarian Vice Presidential candidate. His new book will be released by John Wiley & Sons this Spring entitled, “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts.” The book is available for pre-sale at Amazon.com. Wayne also happens to be Barack Obama's college classmate (Columbia University Class of '83). For more of Wayne's views, commentaries, or to watch his many media interviews, please visit his web site at: www.ROOTforAmerica.com