Bernanke’s Magic Hat

“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.” Lincoln’s Second Annual Message to Congress, December 1, 1862.

Bernanke‘s Magic HatJust as President Abe Lincoln inherited a country at a historic crossroad, so has Chairman Ben Bernanke. Lincoln thought well outside the box by and was able to reach into his hat-o-tricks and pullout some magic. Fortunately, his efforts eventually united a broken and disparate country laying the foundation for greatness. Now it is Mr. Bernanke’s turn.

So far, Academic Ben has shown some magic of his own. Reaching deep inside, we see that his hat-o-need-a-miracle is full of all sorts of wondrous solutions…..From traditional rate cuts to tapping the lesser known discount window and all the way back again, the Fed Chief has been wrangling with just how to get some breathing space between today and an eventual foreclosure of the good-ole U. S. of A. In an effort of global proportions, the latest move to avert an all out economic nosedive was to bring together a global consortium of governments in the hopes of providing the liquidity to allow for the banking sector to work its way through the short term. The unfortunate fact is that it appears as if Mr. Bernanke is not convinced that the U.S. can actually pull this one off alone.

According to Bloomberg reports,

In a Florida speech directed to bankers last week, he Fed Chairman Ben Bernanke requesting that lenders “forgive portions of mortgage debt held by homeowners at risk of defaulting.”

This is not a good sign as it is smelling like our sugar-daddy is running out of ideas and we dare say…options. This last move was historic in size and depth. “What else is does Bernanke have in his tall hat?” is weighing on the minds of many investors. Here is a novel idea…how about an immediate pullout of U.S. troops from IRAQ which, at last report, was costing us….(from )

There is a growing concern that there will be a failure and that the latest moves are set to help avert the impending reality. Rumors aside, the probability is growing that a major catastrophe is brewing and the longer the credit markets are locked-up, the higher the likelihood.

Do not confuse this and assume it is the rant of a perma-bear, looking to profit from scare tactics. Rather, I hope it is the voice of financial responsibility and the economic reality. We are still setting up for problems if this latest magic trick does not quickly do the job by acting like Super Drain-O in unclogging our financial plumbing.

What is left to be yanked out of Bernanke’s Hat? Perhaps rate cuts that will lower mortgage rates for the new legion of renters. As this would bring down the dollar’s value, we could find ourselves looking for additional partners to help. This time we could go outside the boundaries of our planet to seek out new financing in new planets and to boldly go where no Fed has gone before.

Or maybe we could look to chucking the whole idea of a centralized currency and institute a barter system along with a cigarette exchange program. It seems to work at Rikers Island. I, for one would recommend Mr. Spitzer research the benefits of this plan during his upcoming visit. In doing so, he could well appoint Ashley Alexandra Dupre as “Head Investigator.”

If that all fails, there is still the potential for the U.S. and Canada to merge. Think about it for a moment: Our health care problems will vanish, we can stop putting CAN prices in books and the truth is that French is really a lovely language. Well….I feel much better now…..