FedClowns: 'Yes, We Have No Bubble'

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machinehead's picture
machinehead
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Joined: Mar 18 2008
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FedClowns: 'Yes, We Have No Bubble'

From Bloomberg:

Nov. 17 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said it’s “far from clear” whether the Fed should use interest rates to stem a surge in financial leverage, and urged further research into the issue.

“Higher rates than called for based on purely macroeconomic conditions may help forestall a potentially damaging buildup of leverage and an asset-price boom,” Yellen said in the text of a speech today in Hong Kong. At the same time, “use of monetary policy for these ends necessarily compromises the attainment of other macroeconomic goals,” she said.

Further research into the connections among monetary policy, the banking and financial sectors, and systemic risk is needed to help answer this question,” Yellen, a voting member of the rate-setting Federal Open Market Committee this year, said in her remarks, referring to whether to use rates to influence asset prices.

Yellen’s remarks come just as debate intensifies over whether the Fed’s current commitment to keep rates low for an “extended” period may be fueling rising asset prices in Asia. While officials from China, Hong Kong and Japan said in the past week that the stance is spurring speculative capital, Fed Chairman Ben S. Bernanke said yesterday it’s “not obvious” there’s a bubble in the U.S. and Yellen said today the U.S. stock market is not overvalued.

Bernanke said in response to audience questions after a speech in New York that “it’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.” Fed Vice Chairman Donald Kohn, speaking yesterday at Northwestern University in Evanston, Illinois, also said low rates don’t appear to be fueling another bubble in U.S. financial markets.

http://bloomberg.com/apps/news?pid=20601087&sid=alJ9TOiV1erY&pos=4

Lord, spare us from these woolly academicians -- Janet Yellen says 'more research' is needed to determine whether Benny Bubbles' zero interest rate policy has created Bubble III. Benny, contentedly sucking his thumb in the corner, says it hasn't.

'More research' -- good God, woman! We haven't just done the research; we've LIVED IT for the past two decades. In 1991, the Fed slashed rates to bail out Citibank. What happened? Tech stocks launched, and kept smokin' the whole decade.

In 1994, Mad Al Greenspan cut effective reserve ratios to zero with his criminal 'overnight sweeps' subterfuge. The result? A resplendent Bubble I into the turn of the century -- Nasdaq 5000 and all that.

Then, during 2001 to 2003, Mad Al took his policy rate all the way to zero. You remember -- the orgy of consumer purchases; the 125% no-doc loans which drove property prices into the stratosphere? Bubble II, as it's fondly remembered.

Now Janet and Benny and Donny don't think it's happening all over again. Why does inductive logic escape these PhD Econs? As my old barmy buddy Hypertiger used to rant, what these eggheads need is a re-education experience, digging ditches with their bare hands under the armed supervision of consumer-depositors who pay 29.99% interest on their credit cards. Yes, a merry time would be had by all, I reckon.

 

 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: FedClowns: 'Yes, We Have No Bubble'
machinehead wrote:

Lord, spare us from these woolly academicians

Why does inductive logic escape these PhD Econs? As my old barmy buddy Hypertiger used to rant, what these eggheads need is a re-education experience, digging ditches with their bare hands under the armed supervision of consumer-depositors who pay 29.99% interest on their credit cards. Yes, a merry time would be had by all, I reckon.

I'd settle for that but pitchforks and torches would be a real hoot.

THANK YOU FOR THE READ!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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