As per Bloomberg report below, Janet Yellen said nothing about the risk that her easy monetary policy will inflate asset bubbles. DUH!? What Bloomberg missed is that we are already in a massive bubble or bubbles. While the primary bubble is singular in nature….CREDIT……adjacent bubbles are too numerous to mention here (stock market, real estate, bonds, car loans, student debt, etc…) In fact, the situation we face today is not that dissimilar from the situation we had faced at 2007 top. It is almost identical and I challenge anyone to prove me otherwise.
Is the FED aware of these bubbles while hoping for the best or are they completely blind? Unfortunately, I continue to maintain it’s the latter. As I have mentioned before, their 2008 FED Minutes is a clear indication of that. They are a reactionary force at best, only able to correct the direction after the fact. Somehow, the markets believe that the FED possesses a supernatural power to control and to direct the markets. And that is why I continue to maintain that market participants with such a view will pay dearly for their misconception over the next few years.
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Janet Yellen: Bubbles? What Bubbles? Google
Bloomberg Writes: Dovish Sign? Janet Yellen Says Nothing About Asset Bubbles
Sometimes what’s not said is more important than what’s said. In a speech today, Federal Reserve chief Janet Yellen said nothing about the risk that easy monetary policy will inflate asset bubbles. Leaving that topic out of her speech could be taken as a sign that bubbles are not at the top of her list of concerns—which could make her more willing to keep interest rates low to strengthen economic growth.
Yellen certainly knows that asset bubbles are on the minds of investors and analysts. They’ve been a prime concern of one of her Federal Reserve Board colleagues, Jeremy Stein, who announced earlier this month that he will resign on May 28 to return to teaching at Harvard University.
She certainly had the time and opportunity to bring up bubbles. Her prepared remarks to the Economic Club of New York were 3,830 words long and were followed by extensive remarks in a question-and-answer session.
The Financial Times’ Cardiff Garcia also made note of the curious incident today. He wrote, “In this speech, financial stability concerns weren’t raised at all.”