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“Bernanke is the most dangerous man to hold high financial office in the history of the United States.”

Former Reagan Budget Director David Stockman was out with a blockbuster op-ed in the New York Times over the weekend (State-Wrecked: The Corruption of Capitalism in America). He found time also to be interviewed on Fox. He pretty much nails the Fed’s pumping of the NYSE bubble and the phony economy –

h/t lew rockwell

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  1. He didn’t manage to say when this stock market bubble was going to burst, but the article suggests in the next few years.
    That’s not much help.

  2. Predictions are really difficult, especially when they involve the future.

    But money is beiing printed on a massive scale in all the major economies and it is bound to end badly. The stock market bubbles are well inflated in both the USA and the UK, fuelled by newly printed money quantative easing.

    Also the UK budget showed that the government is desperate to reinflate the house price bubble by shamelessly interfering with market forces. A UK sub-prime disaster in the making.

  3. Funny thing, though.

    The usual suspects were saying that the ” money printing ” would mean a endless spikes in commodities, but many commodities have been flat or down over the past year or two.

    The Iron Laws of Whatever are not so ironclad in this new place we are in.

  4. Bernard –

    No-one has a crystal ball. All you can be sure of is that inflationary bubbles don’t end well.

    Phantom –

    An endless spike? What’s that? No, no-one said that. Yes, some commodities have come off from their 2009-11 peaks, in great part because money is being shovelled into stocks. It’s a simple supply/demand equation.

    It’s still a case of money printing being the prime mover in markets, making them bounce all over the shop. This is not really sensible. Price discovery should be a matter of fundamentals, not the Bernanke printing press.

  5. More on Stockman’s new book:

    “The Great Deformation takes on the stock arguments in favor of the bailouts that we heard in 2008 and which constitute the conventional wisdom even today. A “contagion effect” would spread the financial crisis throughout the economy, well beyond the confines of a few Wall Street firms, we were told. Without bailouts, payroll would not be met. ATMs would go dark. Wise policy decisions by the Treasury and the Fed prevented these and other nightmare scenarios, and staved off a second Great Depression.
    The bailout of AIG, for example, was carried out against a backdrop of utter hysteria. AIG was bailed out in order to protect Main Street, the public was told, but virtually none of AIG’s busted CDS insurance was held by Main Street banks. Even on Wall Street the effects were confined to about a dozen firms, every one of which had ample cushion for absorbing the losses. Thanks to the bailout, they did not take one dollar in such losses. “The bailout,” says Stockman, “was all about protecting short-term earnings and current-year executive and trader bonuses.”

    Ten years earlier, the Fed had sent a clear enough signal of its future policy when it arranged for a bailout of a hedge fund called Long Term Capital Management (LTCM). If this firm was to be bailed out, Wall Street concluded, then there was no limit to the madness the Fed would backstop with easy money.

    LTCM, says Stockman, was “an egregious financial train wreck that had amassed leverage ratios of 100 to 1 in order to fund giant speculative bets in currency, equity, bond, and derivatives markets around the globe. The sheer recklessness and scale of LTCM’s speculations had no parallel in American financial history…. LTCM stunk to high heaven, and had absolutely no claim on public authority, resources, or even sympathy.”

    When the S&P 500 soared by 50 percent over the next fifteen months, this was not a sign that American companies were seeing their profit outlooks increase by half. It instead indicated a confidence on Wall Street that the Fed would prevent investment errors from receiving the usual free-market punishment. Under this “ersatz capitalism,” stock market averages reflected “expected monetary juice from the central bank, not anticipated growth of profits from free-market enterprises.”

    Link here

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