Bernanke claimed, among other things, that the Federal Reserve's low interest rate policy was not primarily responsible for causing the housing bubble. This is false on its face, because the housing bubble was not just a bubble in house prices; it was first and foremost a bubble in mortgage refinancing and thus credit. That's why this was called a "credit crisis." You cannot have a credit bubble without rates that were too low. One of the points that Bernanke makes is that other countries with higher rates of interest also saw housing bubbles, and that therefore, you cannot blame the bubble in the US on the Fed's interest rate policy. What Berannke fails to acknowledge is that a rate that was appropriate in Dusseldorf, Germany may not have been appropriate for a borrower in Madrid, Spain, Indeed, one of the problems with the euro area is that capital from Germany was being exported to the periphery as a result of a uniform interest rate that was inappropriate for both Germany as well as Spain. Bernanke also claims that countries like the UK, with their own monetary policy and higher interest rates also experienced their own housing booms. But what he fails to recognize as in the case of Latvia, is that a country's monetary policy can be overwhelmed by that of a much larger country like the US or Japan. In Latvia's case, people were borrowing money in yen, where they could do so at a lower interest rate, and purchasing real estate in Latvia. Therefore, the cheap money policy in Japan was responsible for creating a housing bubble in Latvia. And this is something we've seen time and again in global markets. People and assets may be local but capital and credit is international. In our view, the fundamental problem ben bernanke and his disciples have is that they believe the interest rate should be immune from the laws of supply and demand that set every other price in the economy -- that the interest rate is somehow special. But is it? Well, lucky for us we have just the man to talk to about this, legendary investor Jim Rogers, who we broke the news to about Ben Berannke's lectures on our show.
And as if Bernanke's propaganda and revisionist monetary history were not enough to give a jolt to Jim Roger's nervous system, the news that MF Global and Jon Corzine may have defrauded customers, specifically by giving "direct instructions" to transfer 200 million dollars from a customer fund account to meet an overdraft in one of MF's brokerage accounts with JP Morgan in London was enough to do the trick. According to a congressional panel investigating the matter, MF Global's treasurer, Edith O'Brien, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was "Per JC's direct instructions," according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News. Could this finally be the break MF Global customers have been looking for, and what will come next? Will JP Morgan be implicated in this fraud, and will Jamie Dimon be held personally responsible for a fund transfer that happened under his watch, and at his company? Jim Rogers thinks someone should be in jail, so we ask him who.
And in our "Loose Change" segment, we cover the latest world bank president nomination, a Korean-born American professor from Dartmoth by the name of Jim Wong Kim. Is this good sign for the future of internationalism and the World Bank? The peanut gallery will pass its verdict.