Helicopter Ben’s Bad Idea…

Helicopter Ben is up to another of his tricks…

Former Fed Chair Ben Bernanke has parlayed his less than stellar success as Fed Chair into a multi-million dollar gig at bond powerhouse, Pacific Investment Management Company (PIMCO).

PIMCO is one of the largest asset managers in the world, and has more than $1.5 trillion under management.  The global powerhouse has under-performed for quite some time, and fearing a mass exodus of clients, they made Helicopter Ben an offer he couldn’t refuse.

And they’re getting their money’s worth, too.

Since joining the firm, Bernanke has teamed with Joachim Fels, the firm’s global economic adviser, to lobby the U.S. Federal Reserve to enter the stock market.

Notwithstanding the huge legal issues involved in putting public money in the markets, the duo believe more quantitative easing (counterfeit money printing) is needed to stimulate stubbornly anemic global economic growth.

They claim the “benefits” of QE are already known, whereas negative interest rate policy (NIRP) experiments provide little in the way of measurable benefits to global economies.  Sure, Ben!

Of course, the dumb duo are hoping most Americans missed Bernanke’s comments at an economic conference in South Korea last year in which he admitted that quantitative easing failed to produce any impact on economic activity in the United States.

Actually, that last statement isn’t completely true…

Bernanke’s impotent attempt to stimulate the economy by giving banks massive infusions of counterfeit cash sent the stock and real estate markets soaring.  And at the end of the day, if people feel more wealthy – that’s a good thing, right?

Well, until the house of cards comes crashing down as it must inevitably do.  Ask Alan Greenspan how his house of cards worked in 2007-2008.

The American economy has been constrained by the Four Horsemen of the Apocalypse: Greenspan, Bush 43, Bernanke, and Obama.  Not once in the last 15-years has the economy reached anything near its norm of 5% plus GDP growth.  In fact, the current Administration talks about 1.5% GDP growth as if it’s a badge of honor – instead of evidence of massive incompetence.

The truth of the matter is that should the Fed become the shareholder of last resort, the death spiral of Keynesian monetary policy will finally, and irrevocably, rear its ugly head.  It virtually guarantees a complete breakdown in the free market pricing mechanism.

Should that happen, Americans will get an up close and personal introduction to the realities of socialism – without the false hope of pixie dust and unicorns.  Socialism is ugly.  Just ask anyone from Venezuela – the land of no beer or toilet paper.

Lest you think that no first world country would attempt such a stupid tactic, a quick look at Japan should send shivers down your spine.

As the chart below illustrates, the Bank of Japan (Japan’s version of the Fed) is projected by the government to purchase nearly 60% of all Japanese government bonds by 2019.  Keep in mind, Japan’s bond market is nearly $10 trillion in size.

JGB Bonds

Even more worrisome, the Bank of Japan isn’t confining the purchases to the sovereign markets.  The bank has moved into corporate bonds and the Japanese equity markets as well.

The resulting lack of liquidity has sent the Japanese stock market volatility to 17-year highs.  Additionally, the Japanese markets are beset with flash crashes, which have the potential to wipe out the accounts of retirees and other savers.

Yet, somehow Ben Bernanke believes that what America needs is to bring Japan’s version of crony capitalism to our own capital markets.

I must say, I have to admire the guy.  Usually someone with no real answers to economic issues goes quietly into the sunset – or runs for president.  Not Helicopter Ben.  Nope, he’s the Thomas Tank Engine of economics.  He can’t climb that mountain, but he sure thinks he can.