Saturday, February 23, 2013

US Fed Ben Bernanke: No Asset Bubbles

Ben Bernanke denies that there has been an inflation of asset bubbles.

From the Bloomberg,
Federal Reserve Chairman Ben S. Bernanke minimized concerns that the central bank’s easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month, according to three people with knowledge of the discussions.

The people, who asked not to be identified because the talks were private, said Bernanke made the remarks at a meeting in early February with the Treasury Borrowing Advisory Committee. Fed spokeswoman Michelle Smith declined to comment.

The Fed chairman brushed off the risks of asset bubbles in response to a presentation on the subject from the group, one person said. Among the concerns raised, according to this person, were rising farmland prices and the growth of mortgage real estate investment trusts. Falling yields on speculative- grade bonds also were mentioned as a potential concern, two people said…

Speculation about scaled-back asset purchases by the Fed was fanned by the Feb. 20 release of minutes of the central bank’s last policy making meeting in January.
Of course, it would be natural to expect  Mr. Bernanke to dismiss the idea of bubbles. For an acknowledgement would mean that he would be forced to reverse current policies. And this would undermine his theory of how the world operates, or of the interests (political, economic or financial) whom they have been implicitly protecting. 

Importantly, an admission would translate to self-indictment of the policies he and his team has implemented.
As I have pointed out, whether former Fed chair Alan Greenspan or incumbent Ben Bernanke (via the Bernanke doctrine), these guys project to the public of their belief that the conditions of asset prices determines economic growth via the “wealth effect” transmission.

Their concept of the economy hasn’t been about making and producing things for people to consume, but for assets to drive people’s consumption habits. Thus, all these global central banking balance sheet expansions. I say global, because evidently much of the world central banks has espoused, imbued and or mimicked the Greenspan-Bernanke paradigm.

The reality is that such ideology camouflages the real intent:  the desire to prop up the highly fragile and insolvent privileged banking cartel whom have been tightly linked to the equally bankrupt welfare-warfare state as financiers, and whose intertwined relationships have been underwritten by central banking PUT. 

Of course another perspective is to preserve the “Deficit without Tears” framework, where the US gets a free lunch arrangement with the world by exchanging green pieces of paper with goods produced by the rest of the world, via the US dollar standard. Arguing that no asset bubbles exists implies that the US must continue to rely on the growth of "financialization".

Like in 2007, eventually the laws of economics will expose on such a sham that will be ventilated on the markets.

Mr. Bernanke, like most the mainstream experts, got it all so horribly wrong in 2007

Here is a video of comparing the predictions of Peter Schiff and of Ben Bernanke during the ballooning housing bubble in 2005-2006.

In the world of politics, the laws of demand and supply just doesn’t apply.

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