The world is defenseless against the next financial crisis, warns ‘central bank of central banks’

The reason we had the Crash in 2008 was because the Fed kept rates too low for too long. In response to the tech implosion and then the 9-11 attacks Allan Greenspan and the FOMC panicked and ended up inflating a worldwide housing boom which morphed into the disaster (to put it mildly) which is the Great Recession. There’s more to it than that but that’s basically what happened.

Consider now that Ben Bernanke (and Janet Yellen) have kept interest rates much lower for even longer than Greenspan did.

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Our Economy’s Real Problem: The Fed’s Easy Money

There is distortion and malinvestment throughout the world economy. It’s everywhere. From Japan to Europe to China to South America to the USA and beyond the economy is misfiring thanks to the massive monetary experiments of the world’s central banks of the past 6 years. (And even before that.)

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Malinvestment: “Today’s asset bubbles in stocks, junk bonds, housing, art, bat guano futures, etc. are being driven by the Federal Reserve”

Malinvestment is a very important concept to understand. It simply means the allocation of capital in ways which appear to be (and may be) rational in a period of artificially cheap credit, but in ways which in the end prove to be inefficient once the market corrects for artificially low rates. (Created by a central bank.) Malinvestment is a symptom and a driver of economic bubbles.

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After 100 Years Of Failure, It’s Time To End The Fed!

Indeed. End the Fed.

Sounds so radical doesn’t it? Isn’t the Federal Reserve there to smooth out the economy, to stabilize the currency? To make sure the world doesn’t blow up?

What if I told you that it doesn’t smooth out the business cycle, but exacerbates it. That the dollar has lost 95% of its value since the establishment of the Federal Reserve. And that the world has “blown up” multiple times under the Fed regime? 

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“Housing Bubble 2.0” – Same As “Housing Bubble 1.0”; Just Different Actors

Why would house prices go up while real wages go down?

The first real percolation in the housing industry in the USA, post first bubble, was in Washington DC and New York City. Why? Because that is where the Federal Reserve spigots are. Newly printed money flowed through the system to government contractors and bankers first. Manhattan and DC real estate barely saw the recession, the crony capitalists did quite well over the last 5 years.

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Revolutionary France’s Road to Hyperinflation (Think it can’t happen here?)

Periods of extremely easy money rarely end well.

The political and banking classes both demand easy money right now. (They always want it.) Print more and more money and the world will continue on as it has (limping that is) for the past 5 years. This is the “new normal.” Sure it’s corrupt, sure it’s counterfeiting, sure it encourages unsound economic and political decisions, but hey we need to do what we need to do.

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Tis the Season for Gratuitous Consumption

I must admit, I would gratuitously consume this if I could.

Recently I wrote a piece entitled Boycott Back Friday. Generally it was well received. Being fans of capitalism and the voluntary exchange of goods and services we made the point that it was entirely reasonable to opt out of the buying frenzy from a pro-market perspective. To value time (time is money) with one’s family and more than standing in line to buy things is the very essence of what a free market is all about.

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Easy money from the Fed drives a bubble in art?

Miro, one of my personal favorites.

3 key components to wealth which lasts generations are said to be gold, land, and art. The first 2 classes are somewhat obvious, but art is less so. Yet the rich over the centuries have always invested in paintings and sculpture.

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Sorry Greenspan, but you own the housing bubble

Sure the Community Reinvestment Act (a totally crony law) had something to do with housing’s abrupt rise and fall in this country. And there were other factors besides Fed policy. But the primary reason why the global housing bubble, and before that the tech bubble, blew up and then collapsed is because of the easy money policies of one Alan Greenspan.

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