This post is by reader Edward Charles Ponzi Jr. He can be reached at “ed” “the” “dci” all as one word, no quotes, at gmail dot com.
While the Chairman’s Speech had many Angry Bears discussing Social Security finances, one Bear (a Prudent one) was thinking of some different issues altogether. Doug Noland — economist at Prudent Bear Funds — publishes a regular feature: “The Credit Bubble Bulletin”. The Bernanke speech of Jan 18 was featured in this weeks Bulletin, along with some other Fed-centric comments. With all of Noland’s Bulletins — you must scroll down to the LAST SECTION to read his comments — the beginning is a long list of current data. In this case the last section is: “Mishkin on Asset Bubbles and Monetary Policy”.
Excerpt: “I hope readers will recognize that we today confront one of the Corrosive Consequences of Inflationism: Complacency and lack of resolve to deal with critical issues. Confidence in the Fed’s capacity to cut rates, manipulate market behavior, and “reflate”/”reliquefy” has never been as unyielding as it today. If the power of the Fed was not made clear in the early nineties, it was in 1998, 1999, and 2000-2003. If the banking system needs recapitalized, there’s no problem. Hedge fund and Y2K scares, the Fed’s on the case. If a collapsing tech Bubble is weighing on growth, simply inflate home prices. If the corporate bond market suffers from bursting Bubbles, fraud, and problematic risk-aversion, well, just communicate to the marketplace that it’s the Fed’s policy to garnish outsized financial profits on the risk-takers and leveraged speculators. When the debt load – for individuals, businesses, governments, speculators – for the entire nation – becomes too onerous, just inflate system Credit, liquidity, asset prices, incomes, earnings and tax receipts.”
As I am a Prudent Bear Fund stockholder — I read his work regularly. I am not sure I have ever seen the issue of Credit Bubbles come up here in Angry Bear Land. We’re all BEARS aren’t we?