(The following news release is satire and reflects my own cynical interpretation of recent news events. But as they say, there is always some truth in humor.)
On Thursday, Attorney General Eric Holder introduced the country to the Oil and Gas Price Fraud Working Group to “…focus specifically on fraud in the energy markets” by monitoring “…oil and gas markets for potential violations of criminal or civil laws to safeguard against unlawful consumer harm.”
When asked directly about his first targets, Holder withheld comment. However, it is believed that Ben Bernanke, and perhaps even other so-called “doves” in the Federal Reserve, may be the first target of this crack team. Unnamed (but of course reliable) sources close to the administration indicate that Holder has possession of evidence demonstrating Bernanke’s implicit involvement in driving up oil and gas prices by flooding the planet with a surfeit of U.S. dollars. These dollars have found homes in markets particularly susceptible to easy money flows (coffee has also been a victim, but to-date, Starbucks has not requested Federal assistance). Bernanke has even been caught in public speaking on behalf of inflation and against deflation. In other words, Bernanke has supported higher, not lower, prices.
For example, in Jackson Hole, Wyoming last August, Bernanke lamented declining prices and telegraphed his intention to drive them up under the guise of economic growth and stability:
“First, the FOMC will strongly resist deviations from price stability in the downward direction. Falling into deflation is not a significant risk for the United States at this time, but that is true in part because the public understands that the Federal Reserve will be vigilant and proactive in addressing significant further disinflation. It is worthwhile to note that, if deflation risks were to increase, the benefit-cost tradeoffs of some of our policy tools could become significantly more favorable.
Second, regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally. Because a further significant weakening in the economic outlook would likely be associated with further disinflation, in the current environment there is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability.”
The risk of deflation was/is low because the Federal Reserve is determined to print as much as it takes. When asked about the Federal Reserve’s implicit or explicit involvement in driving up the prices of commodities, including oil and gas, Bernanke and other members of the Federal Reserve have gone on record with vigorous denials. Holder reportedly will seek perjury charges to further bolster his case.
Holder will need all the ammunition he can muster because the Federal Reserve has positioned itself right in the middle of President Obama’s task force:
“The working group will include representatives from the Department of Justice, the National Association of Attorneys General, the Commodity Futures Trading Commission, the Federal Trade Commission, the Department of the Treasury, the Federal Reserve Board, the Securities and Exchange Commission, as well as the Departments of Agriculture and Energy.”
Sources claim that the Federal Reserve is working to deflect attention from its easy monetary policies. As a back-up plan, the Fed is reportedly seeking the assistance of the Treasury in garnering Chinese and Japanese support for buying more American government bonds in case Holder’s task force takes away the Fed’s printing press. Representatives from Chinese and Japanese monetary authorities refused to comment on this story. However, the Japanese finance minister has gone on record as seeking ways to further weaken the Japanese yen – increased bond buying with freshly printed yen could present him a golden, uh, even greener opportunity.
Analysts believe the Federal Reserve may finally find itself in its most precarious position in decades, maybe generations. Holder issued a stern warning to those who would dare compromise the budgets of American consumers:
“Rapidly rising gasoline prices are pinching the pockets of consumers across the country,” said Attorney General Holder. “We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity. If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action.”
Traders on the commodity exchanges are also concerned. Holder will be dressing them down in between examinations of Federal Reserve policy statements and meeting minutes:
“The Working Group will also evaluate developments in commodities markets and examine investor practices, supply and demand factors and the role of speculators and index traders in oil futures markets.”
One speculator, who asked that his name be hidden for fear he could be excluded from the Fed’s discount window, expressed his exasperation before rushing off to hoard one last barrel of oil: “Now what am I supposed to do with all this easy money? Buy a house?”
Perhaps the Federal Reserve can negotiate special amnesty clauses in another round of quantitative easing.
Be careful out there!
Full disclosure: net short Japanese yen