Just when you thought it was safe to go back in the water…er, markets
Interesting news out of the goat rodeo in Jackson Hole, Wyoming. MSN Money is reporting that stocks are seeing a surge based on Fed Chairman Ben Bernanke’s reassurance that he’ll be doing all he can to prevent market forces from working the way they should. In other words, the false bull rally will continue for a little while longer.
Let me sketch out a scenario here. For about a decade, the Fed had been keeping interest rates too low and puffing up the economy beyond the point where growth and stability may be sustained. When the bottom fell out in 2008, the Fed doubled down on its bad bets and lowered rates to practically zero. When the markets turned down again on news that more of the same bad medicine wouldn’t sustain a long-term bull market, the Fed tripled down on its bad bets:
…the Fed could take additional steps to stabilize the economy, such as buying more long-term securities. He also said the bank didn’t consider deflation a “significant risk.”
Why ever would you think deflation isn’t a “significant risk,” Mr. Bernanke? Is it perhaps because you’ve already more than doubled America’s money supply in the short span of two years? Or is it perhaps because you’ve run out room to mess with interest rates but you’re not in danger of running out of green and black printer’s ink?
Monetizing the debt is going one step further in a series of steps that have only led to unsustainable growth in the near term, followed by market collapse and long-term pain. And the later we allow the market to find its natural bottom, the more drawn out and severe that pain will be.
Guess what, Bernanke? You are not smarter than billions of people. You cannot wave your magic wand and keep the economy going forever. The problems that you’re facing are problems of your making. And you need to stop what you’re doing.