By Jack Lee, 18 Nov. 2013
David Stockman: Fed is creating the mother of all bubbles. Stockman was the director of the Office of Management and Budget under Reagan. He claims the Federal Reserve under President Obama has created false prosperity in the stock market leading to the formation of a high risk bubble. He says it has been a bonanza for the one percenters, the leverage traders and the stock speculators, but it’s placed the United States economy is back in the hands of the same crew that brought us the dot-com crash and the housing bubble. And that’s not confidence inspiring.
Stockman’s rationale reads like Econ-101, you can’t keep holding back interest rates while creating $85 billion dollars a month to buy government bonds for very long without creating a massive bubble on the point of a needle called debt. As Stockman points out, there’s no underlying equity being created. However, the debt keeps accruing and that gives us this false sense of prosperity. Of course the Federal Reserve tells us don’t worry, we’re going to gently apply the brakes and slow the quantitative easing in a way that we’ll hardly notice. Oh really? Then why does the mere mention of the Feds backing off the throttle send the stock market reeling into a massive sell off?
Stockman says, “…there’s nobody left in the stock market except drugged up day traders and robots who are being mainlined by the daily injection of liquidity from the Fed. This is utterly irrational.”
Stockman doesn’t discount the fact that the Fed employs some very bright people, but he says they are bureaucrats and they think like government bureaucrats. They are out of touch with the real world and real world economy.
The financial author and CNN commentator, Jim Rogers, echoes Stockman’s sentiments. He says the Feds have a created a sea of liquidity and when it dries up we’re all going to pay the price. “There will be no avoiding the harm when the tapering begins.”
(Fed Nominee Yellen shown left) Fortune magazine recently asked Janet Yellen, next in line to Chair the Federal Reserve, if she was at all concerned about the stock market being over valued? She said flatly, no, that the market is fairly valued and she saw reason to fear a bubble forming in the market. Critics argue that the Feds have kept interest rates artificially low and this has the effect of making the market look cheap.
Fortune concludes, “Back in the ’80s, though, lots of U.S. companies were rated AAA. Few are today. The most common rating for U.S. corporate bonds is BBB+, one notch above junk. The expected yield on those bonds is 5.9%. Use that yield, and we’re not that far away from where the Fed model starts flashing sell.
We might get there pretty soon. When the Fed slows its bond buying, which most people expect will happen by the middle of next year, interest rates on all bonds are likely to go up, not just Treasuries. And corporate bond yields don’t have to move up much before stocks go from looking cheap, to rather expensive. Bubble territory is not as far away as it looks.”
Nobody has a crystal ball when the bubble is going to pop, we can only trust that it will. This is an economic reality that is so basic it rivals the law of supply and demand in terms of simplicity. If there’s a bottom line, it’s this, you can’t borrow your way into prosperity, at some point you have to create equity and there is no equity in what the Feds are doing, it’s all debt and it’s all on us to repay it.
For more on this story read http://www.washingtontimes.com/news/2013/apr/2/are-housing-investors-creating-a-new-bubble/
The markets unregulated will have an even bigger crash. Both Political parties participate.
Welcome to the free markets can not be against regulations then complain!
Not a whisper about them bribing the Children of Chinese Leaders?
Not a whisper of foreign Money in our elections via Citizens United?
The whole primary was about not regulating the markets!
We need to write a modern Glass Stegall bill that breaks up the banks and stops them from gambling away our deposits.
Put in the Robin Hood Tax of 1¢ per transaction and get a record of all the corrupt high speed transactions
And after they crash it Europe will attack us cause they have had it with the so called free markets
The Tea Party supports the crash coming so why all the propaganda?
Wall Street runs the country and wants to destroy us to tear up our land and why does the Tea Party want to get rid of min wage? To enslave Americans into Chinese slave workers.
Don’t do much with the stock market, but understand what to do when there’s a red light flashing behind me. Here a major warning from an expert.
Andrew Huszar: Confessions of a Quantitative Easer:
Nov. 11, 2013 7:00 p.m. ET
“I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.
Five years ago this month, on Black Friday, the Fed launched an unprecedented shopping spree. By that point in the financial crisis, Congress had already passed legislation, the Troubled Asset Relief Program, to halt the U.S. banking system’s free fall. Beyond Wall Street, though, the economic pain was still soaring. In the last three months of 2008 alone, almost two million Americans would lose their jobs.
The Fed said it wanted to help—through a new program of massive bond purchases. There were secondary goals, but Chairman Ben Bernanke made clear that the Fed’s central motivation was to “affect credit conditions for households and businesses”: to drive down the cost of credit so that more Americans hurting from the tanking economy could use it to weather the downturn. For this reason, he originally called the initiative “credit easing.”
Continued..
http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884
Dewey no one has suggested markets should be unregulated.
Regulations should be specific and easy to understand and implement for banking, investment, or any other entity the government overseas. that way everyone understands, regulators can easily monitor as they are required to do and there are no loop holes to exploit.
Regulations should NOT BE designed for social engineering or to give an advantage to one group over another.
Businesses should rise and fall on their own merits.
Tax rates on business should be competitive in the world and as simple as possible.
The free market is not a license for do what you want. It is the ability to do business without unreasonable restrictions and burdens or preferences given one over another by government. Business and the free market are supported by the rule of law but laws should apply to everyone equally.
I got news for you Dewey…foreign money made it into our elections long before the Citizens United case was resolved by the Supreme Court. There was the cute little scandal under Bill Clinton when one of his bundlers was prosecuted for donating money from the Chinese. Readers may recall Charlie Trie and Johnny Chung as well as other questionable people.
On Wall Street, as on main street and in DC, ideological battles are ongoing.
To suggest that all people on Wall Street think alike is absurd.
It is equally absurd that Wall Street wants to “enslave” workers.
Your conspiracy theory just does not hold up under common sense and observation.
Those who believe in eliminating the minimum wage are interested in creating low wage jobs for teenagers and others without training or experience. They believe that government artificially deciding how much entry level work is worth stifles job creation and puts upward pressure on all wages so that when all is said and done we get inflation and loss of hours or jobs…nobody really gets ahead and many are denied access to a job.
Some people find charts helpful in understanding the similarities between the bubbles we’ve already had and the one that’s coming.
The Motley Fool has a chart that shows the dot com bubble, the housing bubble, and the soon to hit ?? bubble:
Who knows what they will call it. Looks like it could be a doozy!
All of this comes from bureaucratic manipulation…stupid regulations written to engineer social status and/or make big money for corrupt politicians.
From Newsmax Poll
Overall, do you approve or disapprove of President Obama’s job performance?
Approve
13,832(10%)
Disapprove
118,267(89%)
Compared to previous presidents, how would you rate President Obama?
Average
2,768(2%)
Better than most
12,272(9%)
Worse than most
117,239(88%)
Do you approve of his job handling the U.S. economy?
Approve
13,759(10%)
Disapprove
117,781(89%)
Do you believe President Obama’s new healthcare law, known as Obamacare, has helped or hurt you?
Helped me
8,373(6%)
Hurt me
100,073(75%)
No difference
23,435(17%)
Do you trust President Obama?
Yes, I trust him
13,703(10%)
No, I do not trust him
118,028(89%)
Visit Newsmax’s mobile homepage
No, I do not trust him 118,028(89%)
Ahhhhhhhhh make that 118.029
I don’t know if this is the same poll rush was talking about today but the one he was referencing was weighted toward democrats, used cell phone numbers and included Hispanics. That’s not good for Democrats.
Also heard Obama attended an Oregon Ducks basketball game and was booed by a number of those in attendance. (Michelle’s brother is the coach)
I am not even going to read.
Bottom Line have ya ever studied for your brokers lic?
have ya worked in the markets?
I have, And yes No regulations are a Tea Party dream for the Koch brothers to rule! I have studies the Tea Party for many many years before it was named
Grassroots? LOL No people responded to propaganda
Remember the US Tea Party Koch Site in 2002?
Booing any president is disgusting. I say we have never seen this disregard against any sitting president like him or not until the Black man was elected. just Sayin
He is not my favorite President but I fight him on real issues. One can not be Christian and hate at the same time.
propaganda is anti American
http://2.bp.blogspot.com/-YPbXke2Q8M4/UooKa2XfatI/AAAAAAAAWEk/KnaDq5ViNbM/s1600/images.jpg
Sorry Dewey the left booed George Bush at a baseball game.
Please stop saying that Obama is “hated”. Nobody at Post Script has ever said they hated him to my recollection!
He is the President of the United States and as such he is no different from any other president. He is subject to criticism and praise just like any other president. Criticism is not hatred! It is simply disagreement.
Ok so that is the whole left? I hated GW’s fake war for profit and I gave him respect. That one incident is a present for the hate now? Welcome to the middle east!
We know there were isolated incidents but never before has a couple of Billionaires funded so much hate and propaganda that media is full of paid liars of Hate. I do thank You for that though. I do not surround myself with people who hate and are mean spirited and will not put up with it.
The president of the USA should not ever be treated this way. GW was much hated for lying about the war and trying to privatize Social security but there was never this kind of paid propaganda to this Koch brothers level before and that is to which I speak.
This whole Country is now an embarrassment and the world laughs at us.