The 2008 transcripts were released in late-February. Most media operations published stories about the Fed’s absent-minded professors who missed the importance of failing financial institutions during 2008. This was not news.
…the initial stories across news channels were full of ridicule and indignation at the FOMC’s real-time ignorance as banks and markets collapsed.
By the mid-1990s, distortions were growing more difficult to understand. The artificiality of jobs, for one. The hollowing out of the economy.
John Hussman (Hussman Funds) wrote in his February 3, 2014, Weekly Market Comment: “The latest data from the NYSE shows equity margin debt at a new all-time high. Relative to GDP, the current 2.6% level was eclipsed only once – at the March 2000 market peak.”
One can almost imagine ex-chairman Bernanke shaking his head in disbelief. (For the record, I cannot conceive of Simple Ben possessing the capacity for what follows, so this is an indulgence in creative writing
When markets tumble, the immediate cause is often baked into the cake years before. The structural (decades old) trouble with large, U.S. publicly traded companies is managements that care first, second, and third about boosting the stock price today: carpe diem, and so forth.
“Enjoy it while it lasts”
-Sir Alan Greenspan, June 13, 2007,after suggesting “the global liquidity boom, which he dates back to the end of the Cold War, is nearing its end.”
Even a non-calculating observer knows of the strong relationship between POMO operations and the stock market over the past few years. Most important is the artificiality of pushing up the stock market and its inevitable deflation.
Frederick J. Sheehan is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009) and “The Coming Collapse of the Municipal Bond Market” (Aucontrarian.com, 2009…
Stanley Fischer is in the pipeline for the vice chairmanship of the Federal Reserve Board of Governors. In this capacity, he would bang heads to gather FOMC votes for (Presumptive) Fed Chairman Janet Yellen. According to the New York Times, Fischer would “exert a moderating influence on Ms. Yellen,” (” For No. 2 at Fed, White House Favors Central Banker in the Bernanke Mold.”)