Wednesday, June 19, 2013

Life In The Bernanke Bubble

I have written before about the Bernanke Bubble. That is the act of forcing of unusually low interest rates and the printing of billions of new dollars by the Fed. There is no real economic growth underpinning the US economy. It is the bubble created by the Fed that is buoying the stock market. In other words, the Fed, in collusion with Wall Street brokers and the administration have created a facade of financial success so the market will go up and claims of an improving economy can be substantiated.

I have predicted that this bubble will burst. It will. Eventually, it must. I said, initially, this would happen by mid-summer. I was wrong. I didn't think it through. I reacted to little news articles where Mr. Bernanke thought it might be time to ease up on controls and the printing of dollars a little bit. The market immediately dropped. I really thought that was the start of the landslide.

The market is just a part of the economy. It looks into the future, reacting to what is expected to happen in the real economy. The real economy being manufacturing, jobs, wealth creation, and housing, all the things that are not doing well under Obama. There is no strength in the economy to shore up the market, so the Fed does it by using regulation and high speed printing presses.

One might think that the job of the Fed was to protect the American dollar and the countries financial strength. It should be. But since the days when Alan Greenspan, as Fed chairman, manipulated the economy to help Bill Clinton beat George H.W. Bush, it has been overtly political. In other words, Ben Bernanke's main task is to keep Barack Obama looking good economically. If he can. The only way, since the general economy is trash, is the Bernanke Bubble.

Although there are some signs of fear and trembling in the market, the are still the dogsbody talking head on the TV news predicting five more years with a Dow around twenty thousand.  I do not think so. I just read an article talking about how Mr. Bernanke has been at the job longer than he wanted. There was an article last week about his possible replacement. I believe his actual term is over just after the first of next year. He could go then. I don't think he will. I think, now, that he will continue to provide Obama with cover until after the elections.

As it becomes more obvious that he is leaving the panic will start. The market hates the unknown. When people see the smart money moving out, those that watch closely will follow. And as usual the last ones out will be the middle class investor who is not tied in and not quick to respond.

I could be wrong, but Bernanke wants out and the Feds actions are all that is supporting the market. Something has got to give. If the economy showed signs of real growth before the exodus, it would change things. With Obama's policies and agenda, I cannot see that happening. But that's life in the Bernanke Bubble.

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