Heh, Bernanke warned us in 2002, in his now-famous “Deflation: Making Sure it Doesn’t Happen Here” speech.
He told us all that should–God forbid–asset prices (stocks, McMansions, etc.) ever fall, the Fed would step in and blow the mother of all bubbles.
Well, Bernanke is true to his word, for as reported this week’s “Credit Bubble Bulletin”, found here:
…Doug Noland does an excellent job of documenting exactly the size and scope of the gargantuan bubble Bernanke has blown in the ensuing decade since his famous oratory.
Here are the excerpts from the “CBB”:
“Market Risk (Spock note: “Market Risk” being assets) began the decade 1990s at $10 TN
Tripling to $33 TN during the booming nineties.
Importantly, the nineties saw a fundamental shift to market-based Credit instruments
with a proliferation of ABS, MBS, the GSEs and “Wall Street Finance”.
When Dr. Bernanke began his crusade against deflation risk back in 2002,
“market risk” was at $29.7 TN.
…surging to $53 TN by the end of 2007,
…before dropping abruptly to $44.8 TN in 2008.
During the past four years, “market risk” has inflated $16.7 TN, or 37%,
…to a record $61.5 TN.
…as a percentage of GDP, “market risk” began the 1990’s at 182%
…and closed the decade at 323%.
Post tech-Bubble asset prices had the ratio back to 284% by the end of 2002.
By 2007, however, it had inflated all the way to 378%.
In 2009 it fell back to 314%. It then ended 2012 at a record 392%.
…over the past 10 years GDP increased $5.2 TN, or 50%,
…while “market risk” inflated $31.8 TN, or 107%.”
(Spock Conclusion): I have watched in slack-jawed amazement as Bernanke has made good on his promise to “Whip inflation”. And whip it indeed he has done. At this point asset prices are EIGHT-TRILLION fiatscos higher than they were at the peak of the 2007 mania.
This guy is good. Really, really good.
And now he’s creeping toward the exit, victorious, and will leave the next Fed Head to deal with the mess.
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