THE PROBLEM IS THAT THE FED HAS BEEN PRINTING MONEY LIKE MAD FOR DECADES....!
HAVING GONE GIDDY ABOUT THE DE-INDUSTRIALIZATION OF THE US ECONOMY AND THE DEFEAT OF THE UNIONS IN THE 1980'S...
IT WAS THOUGHT THAT NO AMOUNT OF "MONEY PRINTING" COULD CAUSE "BAD THINGS" IN THE REAL ECONOMY...
THEREFORE....ASSET INFLATION IN THE FINANCIAL ECONOMY COULD PROCEED APACE...AND THE RICH WOULD GET FABULOUSLY RICHER AND THE WORKING CLASS WOULD BE HELPLESS TO PREVENT IT...
AND...GUESS WHAT? THAT IS EXACTLY WHAT HAPPEN...!!
ASSET INFLATION WAS IGNORED AS "GOOD INFLATION"....AND THE WORKING AND MIDDLE CLASS DECLINED ....EVEN AS CHEAP CHINESE GOODS FLOODED THE US MARKET!
NOW...WELL...SORRY BUNKIE... INFLATION IS INFLATION IS INFLATION! AS MS WOOLF MIGHT SAY...
NOW ALL THAT MONEY THAT WAS PRINTED FOR THE NEWLY LIBERATED RICH...AND WHICH WAS PILED INTO ASSETS...AND EXPANSION IN CHINA AND ELSEWHERE....IS COMING HOME TO ROOST...
EVEN THE RICH CAN HAVE TOO MUCH MONEY!! THAT IS THE MESSAGE TO BERNANKE.... BUT THEY AREN'T LISTENING...
SO NOW, THE ASSET BUBBLES ARE NOT RESPONDING TO THE "NEW MONEY"....THE BUBBLES ARE WAY WAY BEYOND SOUND ECONOMIC PRINCIPALS....
EXAMPLE....HOUSE PRICES STILL FAR EXCEED THE "RENTAL VALUE" OF THE HOUSE!!
THAT IS AMAZINGLY.... THAT YOU'D BUY SOMETHING THAT WOULD NOT HAVE A POSSIBLE RETURN ON IT'S CAPITAL INVESTMENT...
BUT WE WERE RELYING ON THE FED'S PERMA-ASSET INFLATION THAT HAS PREVAILED FOR THE LAST 20 YEARS...THE SO-CALL "GREENSPAN PUT"...NOW APTLY CALLED THE "BERNANKE PANIC!"
SO AS I'VE SAID HERE MANY TIMES...
YOU CAN'T CURE A HYPER-LIQUIDITY BUBBLE ECONOMY ....WITH MORE LIQUIDITY!!
YOU CAN'T CURE A DRUNK BY PROVIDING HIM MORE BEER!!
I WONDER WHAT PART OF THAT THE FED DOESN'T QUITE UNDERSTAND!!
