LaRouche: "Don't They know That Bernanke Is Crazy?"

In discussions with two prominent economists who are closely monitoring the background noise leading to the April 27 FOMC meeting, it is clear there is increasing pressure on Federal Reserve Chairman Bernanke to end the policy of so-called Quantitative Easing. It is not only Kansas City Fed President Thomas Hoenig and Dallas Fed President Richard Fisher who are sounding the alarm over the acceleration of inflation, but numerous officials of small and medium-sized banks, and local representatives of manufacturing and business enterprises. One economist noted the reports of wholesale price increases last week, which will soon be passed on to consumers, while another pointed to the continuing record drop in new home sales, as indicators that QEII did not "stimulate" the real economy, but only produced a greater impetus for speculation, which caused the higher prices.

One of the economists reported that, despite these negative signs, and growing pressure from within the Fed, Bernanke is convinced that his policy is working. He speaks of the "wealth effect," from the continued bailouts of the banks, and low interest rates. His argument is that this "wealth effect" is improving consumer confidence, which is reflected in the rapid appreciation of stocks. As consumers become more confident that the stock market will continue to go up, and since so many Americans have now gone back to stock investments, according to Fed statistics, this "wealth effect" will soon spill over into higher consumer sales. This, in turn, will lead to more hiring, and the job-creation rate will pick up. Asked if he believes this, the economist said, "It doesn't matter what I believe. It's what Bernanke believes, and he seems convinced he's right."

When briefed on this, Lyndon LaRouche said, "What, is he (Bernanke) really that crazy? This is insane. The only thing that will work is Glass-Steagall." LaRouche added that Bernanke obviously has no idea what "wealth" is.