Once upon a time central bankers used to be seen and not heard; the Old Lady of Threadneedle Street occasionally “raised an eyebrow” but very little else. Today they are as ubiquitous as reality TV and even less entertaining… The game show host of the week is none other than the Chairman of the Federal Reserve and in his new role as educator of the masses he is spreading lies and misinformation in much the same way that he does in his day job.

 The ECB is well capitalised”, he told a group of students at George Washington University. Of course it is, if you assume that the odd trillion of toxic collateral that has been passed their way by European banks, in exchange for some real “folding”, is valued at par, sans haircut or any attempt to mark the price to market.

 His biggest whopper, which he made under oath to Congress in 2009, was that “the Federal Reserve will not monetize the debt”. Yet three years later he hasn’t been locked up, but is still in office spouting yet more nonsense. He also told the students, many of whom will have been scarred for life by this experience, that a return to the gold standard was an anachronism that couldn’t, and wouldn’t, happen. You get given a hard time being just plain bullish on precious metals, but mention the “S” word and the men in white suits (sent by the men in the grey ones…) are on their way pdq.

 This is typical of much of what some quaint folk like to call democracy. We are not going to have a debate about this because it’s all far too complicated and you won’t understand and explaining it will eat into the time that you would rather spend watching X Factor…

 The truth about the “failure” of the gold standard in the ‘30s was that governments deliberately meddled with it to disguise their own policy mistakes that led to the Depression. Bernanke, allegedly, is an expert on the history of this time but as Napoleon said “History is a set of lies agreed upon”. (He’s nearly as good as Churchill for a good quote isn’t he?) By denying any debate we are forced into tinkering around with fiat paper and ever increasing debt.

 A full gold standard would indeed be a big ask, but let us at least acknowledge that having some backing to what we now nervously call money might just have some merit. In fact it has a stupendous amount of merit, but sadly very few takers. So please wake up USA and vote Ron Paul or you will all be making history that you will have to lie to your grandchildren about…a lot.   www.viewfromthebridge.co.uk

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So Greece has been saved – is that right? Well according to ISDA (the International Swaps and Derivatives Association) a “Restructuring Credit Event has occurred with respect to the Hellenic Republic” which in the vernacular means the Greeks are bust; tell us something we don’t know! The importance of this statement is that credit default swaps (CDS) on Greek debt are now triggered and holders will have their losses made good. There were any number of scurrilous rumours that ISDA would not declare a credit event to preclude their illustrious members from paying out, but when the net downside of $3 billion needs to be shared out amongst the likes of Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, UBS, BNP Paribas and Societe Generale, then a quick whip round in the bar after close of business and the jobs a good’un.

 Their meeting went on for quite a lot longer than it takes to answer the question – “Has Greece defaulted? Yes or no.” – so it is quite likely that some on the list felt they were in for more than their fair share. Whilst the net exposure is small the gross tally is $68.9 billion according to Bloomberg so there is a lot of room for “error” here. In fact one Austrian bank, a “bad” bank left holding the baby (Greek CDS amongst other toxic waste) after an earlier reconstruction has owned up to a €1.3 billion hole in its balance sheet as a result. Undoubtedly they will not be the last casualty in this chapter, but it won’t be any of the “big boys” this time around or there wouldn’t have been a “credit event” would there?

 Given the shenanigans in this apology for a currency “union” you really shouldn’t be surprised to discover that there is far more Greek debt around than we thought we had given them “credit” for. On top of the sovereign debt it seems there is another $100 billion or so of paper, issued by the Athens Urban Transportation Co, the Hellenic Railway and assorted Greek banks amongst others, “guaranteed” by the Hellenic republic. Guarantees in financial circles tend to come with a pinch of scepticism, but when combined with Greek mythology they become truly “heroic” assumptions. And no one thought to mention these obligations before putting the taxpayer on the hook for the €130 billion bailout? Heaven forbid that anyone gets to see the full picture…

 And what did the politicos make of this deal of the century? The Greek finance minister, Evangelos Venizelos, said that the deal had helped Greece to avoid a “nightmare scenario” and given it a “new opportunity”. Blah, blah, blah! Have another box of cream donuts before you “waste away” along with your country’s economy. Far more realistically la Merkel admitted to the Bundestag that there were “no guarantees” (there’s that word again…) that the second bailout would work and that “the risks of turning away from Greece now are incalculable. No one can assess what consequences would arise for the German economy, or Italy, Spain, the eurozone as a whole and finally for the whole world.”

 Well Angela, one way or another, I think we are going to find out just what those consequences are going to be sooner than you might think. www.viewfromthebridge.co.uk

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Today I watched in “awe” Bernanke’s testimony to the Congress. In terms of its “awfulness” it exceeded expectations on every level. He started by telling us that unemployment had fallen from 9% to 8.3%, which, even if you believe the Bureau of Labor Statistics “surprising” stats, as Bernanke himself put it, is hardly a result three years after the “end” of a recession. He had the grace to admit that the recovery was below par despite expanding the Fed’s balance sheet in an unprecedented manner.

 He reiterated the fact that monetary policy will remain accommodating by maintaining the current low rates of Fed funding until late in 2014. In August last year that target had been moved out to 2013 but he admitted that the FOMC had not foreseen the further weakening in the economy, which required the extension to 2014, at the time of their meeting in January. And now he asks us to believe his forecasts for GDP in 2013.

 Ron Paul asked him if he shopped for his own groceries. After a telling pause a bemused Bernanke said that he did. In that case, “Why do you continue to lie about the rate of inflation?”, asked the inimitable representative for Texas’s 14^th district. I didn’t take in the less than credible response; my attention having been diverted to the contemplation of what Ben might have in his supermarket trolley.

 He was asked about the plight of savers caught in the poverty trap of said accommodating policy. His answer was that savers (a very different breed from investors you will agree; a fact lost on this economically impotent potentate) should have their money in the stock market. His argument being that if the Fed’s policies helped the economy to recover, equity markets would grow too. So far the trillions of bail out dollars and money printing have indeed pushed the markets up from their 2008 lows, but mainly because there was no other place for the money to go, so the housing bubble is replaced by another ramp in asset prices. His silence on the next phase of quantitative easing has, however, derailed that particular ploy for the time being. Another month or so of swooning stock markets and the presses will be back to running at full tilt – it is an election year after all.

 Large corporates don’t need funding because they have got lean and mean, in large part, by cutting their workforces, but entrepreneurial small businesses in the US can’t get the working capital they need even if they are pulling bars of pure gold out of the ground for free. And when he said that the housing market remains weak because borrowers are unable to meet the banks’ borrowing criteria I nearly regurgitated a mug of Starbucks finest into my lap! Has he already forgotten that the failure of the banks to adhere to anything close to sensible lending policies started the financial Armageddon that he is yet to find a way out of?

 And then the quote of all quotes and the double espresso was properly shot gun sprayed across the room…. “The ECB is well capitalised”. I am sure I heard him say it, or am I really the deaf old bastard that everyone tells me I am? Yes! I know the answer to that question, but the sun will rise in the west before he is proved to be right. www.viewfromthebridge.co.uk

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