Continuing an unbroken string of cronyism, President George W. Bush has named his chief economic adviser, Ben Bernanke, to head the Federal Reserve, when Alan Greenspan retires in January.

Bernanke is an advocate of “inflation targeting” — where banks set a target inflation rate and attempt to stick to it. This is widely used in Europe, for instance.

I let you know a few weeks ago that this appointment was upcoming.

“Of all the Fed governors, Bernanke is the one I would be most fearful of,” said Rich Parker, head of trading at Stamford Group.

“He is too fast with the trigger and his take on inflation and deflation has been proven wrong.”

Neither is the appointment popular among Republican loyalists who do not see him as a team player.

Mr Bernanke, like Mr Greenspan, believes that it is difficult for central banks to intervene to prevent “asset bubbles”, such as house price booms, from taking place. — BBC News

Hopefully this makes some aspects of economics a little clearer to some of you. The Federal Reserve has always been in control of the inflation rate, whether directly or indirectly. It’s an integral part of the so-called fractional reserve system, where the bank literally manufactures money out of nothing to loan to individuals and businesses.

It’s time we get off this fiat-money trip, before the whole house of cards collapses, and return to a currency backed by something of value, such as gold or silver.