Stocks | timiacono.com - Part 2

In Davos, former Treasury Secretary and would-be Federal Reserve Chairman Larry Summers warns the U.S. central bank to put off any increases to short term interest rates, citing deflation and secular stagnation as the two major threats of the current era of central bank omnipotence (that, lately, is evolving into something of a currency war).

Summers also doesn’t think the European Central Bank’s money printing extravaganza, announced to much fanfare yesterday (and sharply higher stock prices around the world) is going to do the eurozone much good, that is, save for another round of asset inflation.

“Smooth Exit”

I couldn’t help but get a good chuckle at the couple of paragraphs below that appeared midway through this Bloomberg story that sung the praises of Federal Reserve Chair Janet Yellen who is rapidly approaching her one-year anniversary as central bank chief.

Granted, the phrase “smooth exit” is not Ms. Yellen’s and it only appear in bold type above as a result of Bloomberg’s slightly annoying practice of not allowing readers to take in more than a Twitter-size chunk of small text before getting to a few simple words in big text again (in itself, kind of a sad commentary on how things are evolving).

Nonetheless,  given the history of the nation’s central bank over the last couple decades, a history that has been replete with bursting asset bubbles (and Yellen is clearly cut from the same Greenspan/Bernanke cloth), it seems a “smooth exit” is setting the bar far too high.

Perhaps “No Calamity” or “No Apocalypse” would have been better.

It Didn’t Have to Be This Way

Stephen Roach talks to Kelly Evans of CNBC about how the Federal Reserve is currently making the same mistake it made during the last two asset bubble inflations.

Coming up on the 10-year anniversary of this blog in March, it’s worth pointing out that Roach graced the very first post (on the old blog), noting the following:

“It didn’t have to be this way. The big mistake, in my view, came when the Fed condoned the equity bubble in the late 1990s. It has been playing post-bubble defense ever since, fostering an unusually low real interest rate climate that has led to one bubble after another. And that has given rise to the real monster — the asset-dependent American consumer and a co-dependent global economy that can’t live without excess US consumption. The real test was always the exit strategy.”

Not much has really changed at the Fed, or so it seems…

Trouble in the Oil (and Debt) Patch

This WSJ story ($) detailing the sharp increase in U.S. shale oil related debt along with Texas energy company WBH Energy LP going belly-up prompted this item from Russia Today.

The funny thing is that, absent any coordinated action, oil producers around the world are likely to cause an even bigger glut (and even lower prices) over the short-term as they attempt to compensate for prices that have already tumbled more than 50 percent.

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