Yellen Is Flat-Out Wrong: Financial Bubbles Are Caused By The Fed, Not The Market

Conta Corner ^ | 03 July 2014 | Jeffrey P. Snider

[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 doesn’t 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-2000’s housing bubble) she sees bubbles as “market” events in which the central bank’s role is primarily shock absorption. In other words, idiot investors wholly of their own accord create bubbles and it’s 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.

[PGalt]

Socialism Is Legal Plunder - Bastiat

DISMANTLE their constructs, foreign and domestic.

http://www.usdebtclock.org

[JoeFromSidney]

Throughout the Nineteenth Century there was a whole series of people referred to as "monetary cranks." They all pushed the same notion, that what was needed was "more money." Whether it was 16 silver to 1 gold, or "greenbacks," or whatever, they were all promoting inflation. William Jennings Bryan's famous "cross of gold" speech was a call for deliberately debasing the dollar and inflating the currency.

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.

[sasquatch]

Obama plant.
Questions?

[PGalt]

Questions?

Nope. (good post sasquatch, short & succinct)

[familyop]

The problems are private and public debt and big spending with lack of production and exports.