'..with tens of Trillions of securities mispriced these days on a global basis .. No one – average investor or sophisticated financial operator – has a clue as to the degree Fed policies have distorted asset prices. A credible macroprudential regulator would not promote securities market inflation. And when it comes to courage, history has shown it takes tremendous courage to halt monetary inflation.'<blockquote>'Fox’s Maria Bartiromo: “What do you say to those critics now, so many years later who everybody now can judge you, and they judged you from the moment we sort of got to dry land, what do you say to them who say, ‘look, we shouldn’t be bailing out anybody, you guys bailed out everybody, and that’s not the way the Constitution should go, that’s not democracy – that’s not Capitalism?’”
Ben Bernanke: “Well sure. Somebody once said that 'Capitalism without bankruptcy is like Christianity without hell,' basically. You need to have market discipline and all that. But in the middle of the most intense financial crisis in the history of the United States – maybe the history of the world – we had to do whatever we could to keep the system from falling apart. And that’s what we did. And, if anything, the effects of the financial panic on the U.S. economy were even bigger than I thought. And I was very much concerned about that. Now, once the crisis was over, absolutely, everything we could do to make sure it didn’t happen again. To make sure banks are sufficiently well capitalized. That they’re not going to be too big to fail. All those things are really important. But in the middle of a crisis you can’t do that.”
(Noland: I argued at the time of the crisis that, of course, policymakers would not allow the system to collapse. But I also warned against actions that carried a serious risk of inflating an especially dangerous Bubble at the heart of “money” and Credit. By no later than 2011, the Fed needed to have taken steps to nudge the financial markets back in the realm of “market discipline and all that.” Rather, it did the exact opposite. Pushing experimental central banking to “open-ended” QE in 2012 was a monumental mistake. Further delaying “normalization” and telegraphing a willingness to “push back against a tightening of financial conditions” in 2013 only compounded the error. Bank capital is not at this point a leading issue – not with tens of Trillions of securities mispriced these days on a global basis.)
..
Hilsenrath: “You describe in the book how you came to Washington a Republican and left public office an Independent. What changed in the process?”
Bernanke: “I didn’t really change. The political environment changed. I’ve always been moderate in my inclinations. As an economist I was very market oriented, so that put me more on the Republican side. But I was very unhappy with the big increase in partisanship in Washington – the inability to get things done and the increasing influence of the far right and far left in the debates, which was in my view, it’s fine to bring in different points of view, but if it means you can never get anything done – that you're basically going to be focused on shutting down the government –those kinds of things. I thought that was very counterproductive. And so in particular, I was unhappy with both extremes, but on the right – the populist Republican perspective was very anti-Fed and very opposed to what we had done. Obviously, it would be a little inconsistent for me to support the view that went against what we had done…”
(Noland: This is another one of those instances where the monetary administrators somehow remain oblivious to the profound effects of their inflationary monetary mismanagement. As I’ve argued over the years (paraphrasing the late Dr. Kurt Richebacher), the only cure for Bubbles is to not let them inflate. Bubbles, after all, are mechanisms of wealth redistribution and destruction. A burst major Bubble will leave in its wake tremendous social and political tension. These serial booms and busts have inflicted terrible damage upon our great country – economically, socially, politically and geopolitically. Indeed, inflationism is the leading cause of our troublingly divided country – as well as an increasingly fractious world. It was an issue near and dear to the hearts of our nation’s Founding Fathers. And this type of experimental inflationary monetary policy should never have been decided by a small group of unelected officials. One cannot overstate the ramifications and consequences of printing Trillions of dollars and grossly manipulating the financial markets.)
..
(Noland: The Fed needs to extricate itself from manipulating the financial markets. It needs to end backstopping market liquidity. It must never again print Trillions of new “money” out of thin air. Because so long as the marketplace perceives that the markets are "too big to fail", there will be speculative excess, major securities markets mispricings and Bubble fragilities. No one – average investor or sophisticated financial operator – has a clue as to the degree Fed policies have distorted asset prices. A credible macroprudential regulator would not promote securities market inflation. And when it comes to courage, history has shown it takes tremendous courage to halt monetary inflation.)
..
Over recent years, painful short squeezes often provided lift-off for another bull market leg higher. To be sure, once squeezes gain a head of steam, predicting when they’ve run their course tends to be tricky business. But I’m sticking to the view that the global Bubble has burst and contagion has set its sight on the Core. Despite this week’s powerful squeeze, I don’t believe markets have overcome deleveraging/de-risking pressures. I expect wild volatility to continue to weigh on leveraged currency “carry trades.” I would be surprised if the hedge fund community doesn’t suffer year-end outflows. And I certainly don’t think we’ve heard the last of China’s financial and economic woes. Yet in these unstable markets, anything can happen.
- Doug Noland,
Courage to Print, October 10, 2015</blockquote>
Context<blockquote>
'..monetary policies for almost 30 years now have been disastrous..''..not only Brazil is in crisis, but also Russia, and that China is in troubled waters..''..the unfolding global crisis has penetrated The Core.'(Global Credit) - Symptoms of Too Much Debt</blockquote>