Michael Pento: Bernanke’s “Unconventional Measures”

Michael Pento is a senior economist at Euro Pacific Capital and a proponent of the Austrian School of economics. He spoke recently to Eric King about the ‘Unconventional Measures’ announcement by Ben Bernanke, while the Federal Reserve Board Chairman was attending a meeting at Jackson Hole, in Wyoming:

After analysing the remarks, Pento believes that Bernanke will ‘do whatever it takes to get inflation roaring’, and move on from the purchase of longer-dated US Treasuries and mortgage-backed securities.

He thinks Bernanke will ‘spend’ newly-printed currency tickets on equity stocks and property, to expand the US monetary base way beyond its already high level of $2 trillion dollars.

[This monetary base figure used to be just $800 billion dollars a mere two years ago.  For the brave at heart, take a look a this incredible chart, from the Federal Reserve Bank of St. Louis, if you want to see what a real monetary spike looks like.]

What the central planners at the Fed are doing, says Pento, is dramatically elongating a sharp truncated recession into an extended depression, by refusing to allow a necessary bust to correct the mistakes made in the Dotcom and housing bubbles, blown up by Alan Greenspan.

Pento thinks Bernanke will continue to expand these earlier bubbles by blowing up the base money supply even further, to incomprehensible levels, with yet more currency created from out of thin air.  After explaining his thoughts, Pento warned that these expected actions will make physical gold an essential hedge for anyone holding US dollars who wants to avoid being wiped out by this currency inflation.

Pento then provided an excellent verbal description of the Austrian Business Cycle Theory to explain the consequences of this predicted inflation.

The radio interview is worth listening to just for this explanation.

[Pento’s description of Bernanke’s expected actions also reminded me of a great speech by Doug French at the Mises Institute, in April of this year, covering the remarkable policy link similarities between Chairman Ben Bernanke and Governor Gideon Gono, the head of the Reserve Bank of Zimbabwe. The video of this half-hour speech is below, the meat of which begins at about 6:30 on the clock.]