4/8/2020 Update – An analysis of Ben Bernanke’s April 7th interview and how we need to prepare for where the world is heading

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-I provide a line by line analysis of today’s Ben Bernanke online discussion, sponsored by the Brookings Institute.
-Mr. Bernanke was careful to steer the moderator away from comparing the economic effects of coronavirus crisis to the Great Depression, and instead, equating it to a national emergency.
-I observe that the Fed is beginning to assume many authorities that were traditionally reserved for the U.S. Treasury and Federal government, especially with regard to corporate lending. This, I assume is necessary when a future national emergency will render the United States government unable to respond.
-Mr. Bernanke discusses all of the programs already in use and those that are proposed. There are many and I enumerate them all.
-Mr. Bernanke mentioned that the Fed will become active corporate lenders. All the new initiatives are tailored to maintain the banking system and corporations, and will be intended to keep the economic sectors on life support when there is no longer any effective government. There is nothing planned to help the state/local governments and the individual.
-Mr. Bernanke states that there really is no limit to how large the Federal Reserve’s balance sheet can grow. As we did so in the past, he compared the potential size to the relative size of the BOJ’s existing balance sheet (100% of GDP), and stated that the Fed could grow it to that size relative to the U.S. economy with no problem. I agree.
-He mentioned that disinflation or outright deflation will be the main problem over the intermediate term and pointed to commodity prices as an example. I agree.
-When asked if the balance sheet size would cause price issues, Mr. Bernanke equivocated, because he knows that QE is deflationary by definition, but cannot say so.
-To the untrained eye, Mr. Bernanke’s interview wasn’t very revealing, but I see it differently. He speaks of a future world of personal austerity and centralized corporate power, where credit will be very difficult to obtain, as it will be dispensed and administered from a centralized source.
-My overall take on the discussion and my analysis of what lies ahead for us and humanity.
-This coronavirus crisis has been manufactured as a dry run for future national emergencies. These actions, while ostensibly temporary, will be enduring in effect. Mr. Bernanke mentioned the term “hysteresis.”

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