"Arrogant and incapable of learning."
When a teacher uses those words to describe a student, it's an isolated (if regrettable) situation. But the repercussions are widespread when "arrogant and incapable of learning" fits the Federal Reserve like a glove.
Still clueless after all these bubbles
Frederic Mishkin, a former member of the Fed's board of governors, wrote an article in last Tuesday's Financial Times that displayed that he, and presumably other Fed heads, have learned exactly nothing from the disastrous consequences of their activities in printing money over the past couple of decades.The headline sort of says it all: "Not all bubbles present a risk to the economy." That is completely false. Any genuine bubble poses great risk, which is why they should be avoided, as I have warned repeatedly since at least 1997.
Meanwhile, when the two biggest bubbles our country had ever seen (those in stocks and real estate) were under way, most people appeared to be incapable of identifying them. Now the word "bubble" is bandied about constantly, as almost everyone seems to believe several are under way in various places (but that's another subject).
In any case, crowd psychology gone mad can produce a bubble in most anything. But when that mentality bumps into central banks like the one that has evolved in the United States under the tutelage of the Fed's Alan Greenspan and Ben Bernanke (who are now being emulated nearly everywhere), incredibly disastrous policies follow.
Nothing to fear?
Mishkin opens by arguing that a potential new round of asset bubbles would not, contrary to what some people have suggested, "provide a case for the U.S. Federal Reserve to exit from its zero-interest-rate policy sooner rather than later."So for anyone who ever gets tempted to be sucked in by the Fed's tough-guy talk, this is another example that nothing short of radically higher inflation or, more likely, a far lower unemployment rate will cause the Fed to tighten the money supply by raising interest rates -- unless, of course, the printing press is taken away first. (That, too, is a subject for a different week.)
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Folks might remember Greenspan's mantra that a bubble couldn't be determined in advance, when in fact the bubbles that I just referred to were impossible to miss for anyone with any common sense (though, as I mentioned, many people did miss them).
Now Mishkin would have us believe that he (and, I guess, other Fed heads) can in fact identify bubbles as long as they're of a particular variety, one that he dubs "credit-boom bubbles." Essentially he describes the recent real-estate bubble, which was fueled by incredibly insane lending policies, the ones I railed against as they were being pursued circa 2001-08.
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Bad bubbles, good bubbles
Mishkin distinguishes that bubble from what he calls a "pure irrational-exuberance bubble," by which he means an equity bubble, like the one that culminated in March 2000. He says that there's a difference (there is -- debt bubbles are far more dangerous) and that a pure irrational-exuberance-type bubble is nothing to worry about, because that tech-driven bubble was "followed by a relatively mild recession."Of course, that recession was mild because of the government money printing that ensued, which helped precipitate the credit bubble that Mishkin now believes is something we might want to (only) think about preventing.
You see, he isn't really certain that these credit bubbles ought to be stopped. He suggests that if it were determined that a credit bubble was under way, "there might (my emphasis) be a case for monetary policy to step in."
Mishkin impossible
So after all the job losses and the near-vaporization of the financial system -- which caused the Fed essentially to give money away by driving interest rates basically to zero while simultaneously scaring the Fed and Treasury into spending trillions of dollars in the form of lending and bailout schemes -- the orchestrators of the biggest bubbles in history have learned exactly nothing.Rate this Article
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no one wants to to the hard work or the wright thing.... just the easy way and skrew the consequences...when will America stop being so short sited? In the long run we suffer far more then if we had done the write thing. stop spending money we do not have...stop working on topics that should be in the middle or bottom of the to do list and get to the ones at the top. where they heck is there priorities? small business is what made us the richest country in the world. until the government gets that little fact in there heads we are all just doomed. more and bigger government just adds to our dept. I am just a common since man with poor spelling skills but i saw each bubble years before i even hurd talk. Like Bill said, it was just common cense. i will say this again....