Skip to comments.Yellen Is Flat-Out Wrong: Financial Bubbles Are Caused By The Fed, Not The Market
Posted on 07/05/2014 4:57:34 PM PDT by Lorianne
More of the same from Janet Yellen in her latest speech, but her focus on resilience caught my attention as it relates to very recent developments. The taper threat experience last year may have been a warning, but it doesnt seem like it resonated with her or policymakers. The major bond selloff, which led to global ripples of crisis in credit, funding and currencies, was the opposite of flexibility. Perhaps a better definition of the word would be a place to start.
But her meaning was a bit different, in that it is clear (from this speech and prior assertions, wrong as they were, about the mid-2000s housing bubble) she sees bubbles as market events in which the central banks role is primarily shock absorption. In other words, idiot investors wholly of their own accord create bubbles and its the job of the munificent and enlightened Federal Reserve to help ensure that such market madness is contained without further economic destruction.
At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a bubble and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.
(Excerpt) Read more at davidstockmanscontracorner.com ...
Socialism Is Legal Plunder - Bastiat
DISMANTLE their constructs, foreign and domestic.
Unfortunately, what was then recognized as monetary foolishness is now considered to be the highest of wisdom. This history of central banks is a history of inflation and currency devaluation. The only answer is not to audit the Fed but to abolish the Fed.
Nope. (good post sasquatch, short & succinct)
The problems are private and public debt and big spending with lack of production and exports.