Bernanke Hallucinating That Printing Money and Buying Bonds Can Save the Economy

If Fed Chairman Ben Bernanke honestly believes what he said at Jackson Hole on Friday — that he can save the economy by printing more money and buying more bonds — he’s hallucinating.

Through the first quarter of this year, he printed $1.5 trillion of paper money and promptly bought $1.5 trillion in mortgage bonds, government agency bonds, and Treasury bonds.

But the entire effort was a dismal failure; the U.S. economy is still sinking and most large American banks are still weak.

The underlying reason: While the government has been borrowing massively, nearly everyone else has embarked on unprecedented debt LIQUIDATIONS.

In other words …

While Washington is gorging itself on new debts, nearly every other sector is undergoing massive liposuctions.

How do we know? Because that’s what the Federal Reserve itself is reporting — unambiguously and conclusively.

Based on the Fed’s latest Flow of Funds report (Table F4, “Credit Market Borrowing”), governments are borrowing massively.

But the collapse in private sector credit is so dramatic that among ALL the major categories the Fed tracks, NOT ONE is expanding its debts. Rather, every single sector is in advanced stages of unprecedented and massive debt liquidations!

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