Deepening Debt Crisis: The Bernanke Reappointment: Be Afraid, Very Afraid

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The Fed’s motto from Bubblemeister Alan Greenspan to Ben Bernanke has been “Asset-price inflation, good; wage and commodity price inflation, bad.”

Here’s the problem with that policy. Rising prices for housing have increased the cost of living and doing business, widening the excess of market price over socially necessary costs. In times past the government would have collected the rising location rent created by increasing prosperity and public investment in transportation and other infrastructure making specific sites more valuable. But in recent years taxes have been rolled back. Land sites still cost as much as ever, because their price is set by the market. Land itself has no cost of production. Locational value is created by society, and should be the natural tax base because a land tax does not increase the price of real estate; it lowers it by leaving less “free” rent to be paid to the banks.

The problem is that what the tax collector relinquishes is now available to be paid to banks as interest. And prospective buyers bid against each other until the winner is whoever is first to pay the land’s location rent to the banks as interest.

This tax shift – to the benefit of the bankers, not homeowners – has made Mr. Obama’s hope of doubling U.S. exports during the next five years ring hollow. This is the upshot of “creating wealth” in the form of a debt-leveraged real estate and stock market bubble. Labor must pay more for debt-financed housing and education, not to mention payments to health insurance oligopoly and higher sales and income taxes shifted off the shoulders of financial and real estate.

Once the Republicans were certain which way the vote would go, they were able to voice some nice populist sound bites for the mid-term elections this November. Jeff Sessions of Alabama and Sam Brownback of Kansas voted against Mr. Bernanke’s confirmation. Jim deMint of South Carolina warned that reappointing him would be “The biggest mistake that we’re going to make for a long time.” He added: “Confirming Bernanke is a continuation of the policies that brought our economy down.”
Long Read Here..