'..Central banks have inflated the greatest Bubble in history, a Bubble that created only greater excesses and global imbalances. Already deep structural maladjustment worsened, and vital financial and economic reforms were forestalled.''Quality contemporaneous analysis is valuable for providing a historical account to be called upon in the future to counter historical revisionism. Especially in these days of record prices for most assets around the world (securities, real estate and otherwise), it’s important to appreciate the unmitigated disaster that inflationism turned out to be. Bernanke was the lead instigator of “mortgage finance Bubble” reflation that culminated in the “greatest financial crisis since the Great Depression.” No Credit is given for reflating Bubbles.
A top Wall Street executive was lauding the Fed’s “brilliance” Friday morning on Bloomberg Television. Yet the Fed has done nothing close to brilliant for a long time now. The Bernanke Fed doubled-down on experimental inflationist monetary management. While there have been numerous zealous bouts of inflationism throughout history, I know of none that emerged from the test of time as esteemed policymaking. The proponents of contemporary central banking disregard a crucial fact: Now approaching a decade since the start of the crisis period, the world is more addicted than ever to ultra-low rates and massive QE. Inflationism is always a trap.
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If things weren’t already ludicrous enough, the Fed went off the deep end with Bernanke’s 2013 assurances that the Fed would “push back against a tightening of financial conditions.” With booming equities, corporate Credit and derivatives markets having come to dominate system financial conditions, the Fed at that point was basically pre-committing to zero tolerance for market disruptions, corrections, recessions and bear markets. This was a gross assault on free-market Capitalism – a twist of the knife - administered without protest.
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It is taken as fact that the U.S. (and the world more generally) is better off today because of the extreme crisis-era measures taken by the Fed and global central bankers. I vehemently disagree. Today’s faux prosperity is built on a fragile foundation of electronic debits and Credits – contemporary (speculative) finance too often divorced from real economic wealth creation. Central banks have inflated the greatest Bubble in history, a Bubble that created only greater excesses and global imbalances. Already deep structural maladjustment worsened, and vital financial and economic reforms were forestalled.
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..the next crisis will be no fun whatsoever. A 1929-like systemic crisis of confidence event would not be a surprise.
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".. much like 2007, actual macroeconomic risk may be highest when market measures of volatility are lowest. Central banks have been quite successful in stoking risk-taking by investors in financial markets… Clearly, market participants believe central bankers use QE, among other reasons, to put a floor under financial asset prices.” - Warsh.'
- Doug Noland (
Source, October 7, 2017)
Context The Great Economist Carl Menger - By Joseph Schumpeter(Banking Reform - Monetary Reform) - '..The Theory of Money and Credit .. an invaluable guide for ending the business cycles of our own time.''..monetary knowledge .. of currency reform under difficult conditions you have to go to Carl Menger.''..since the destruction of the international gold standard in 1914.'Money (and Credit) Production'Academic research indicates that QE in the US contracted rather than expanded economic activity..''..Our central bank has clearly learned nothing from earlier crises..''..most are unprepared for the worst bear market ever..'(Haptopraxeology) - '..We have lost three centuries as a result of ignoring our scholars!'