The Mess That Greenspan Made - Part 8

Learning the Wrong Lessons … Again

This New York Times review of the Federal Reserve’s 2009 transcripts provides ample evidence that, as was the case for the Great Depression some 80 years prior, the wrong lessons are being learned from the financial crisis and the Great Recession it spawned.

When Ben S. Bernanke walked into the Federal Reserve’s ornate boardroom in December 2009, the officials who were gathered around the long table gave the Fed’s chairman a standing ovation.

Mr. Bernanke had just been crowned Person of the Year by Time magazine. The recession had ended, unemployment had crested and Mr. Bernanke was widely regarded as singularly responsible.

But the return to normalcy that Mr. Bernanke and his committee began to chart at that end-of-the-year meeting soon proved premature. The Fed had arrested the financial crisis, but the moment would also turn out to be the beginning of a yearslong series of failures to provide a sufficiently large dose of stimulus to restore the battered American economy to its previous health.

Then again, maybe it’s just me…

I’ve always assumed that an economy and financial system that lurched from one central bank enabled asset bubble to another wasn’t “normal” when, in fact, maybe it is.

It appears that the lesson being learned over the last six years is that, unlike the internet stock bubble-to-housing bubble transition, the Fed just didn’t do enough to facilitate the housing bubble-to-whatever we end up calling the next bubble transition.

Thursday Morning Links

MUST READS
In Eye of Economic Storm, the Fed Blinked – NY Times
The Fed worried about Elizabeth Warren in 2009 – Politico
Fed Transcripts Show Blurry Line Between Politics, Policy – Bloomberg
UK interest rates mark six years at record low of 0.5 percent – BBC
ECB gets ready to unleash €1.1 trillion QE blitz – Telegraph
European Central Bank faces questions on stimulus, Greece – AP
RBS Investment Bank Said to Cut Up to 14,000 Jobs in Revamp – Bloomberg
Putting the enormous job cuts at RBS in perspective – Quartz
In one month, gas prices in state have surged about $1 a gallon – LA Times
Tomorrowland: How Silicon Valley Shapes Our Future – Spiegel
Obesity Is Hurting the U.S. Economy in Surprising Ways – Bloomberg
Why This Tech Bubble is Worse Than the Tech Bubble of 2000 – Blog Maverick
NASDAQ 5000 – Crash? Bubble? Fair Value? – Cumberland Advisors

MARKETS/INVESTING
Euro hits 11-year low, stocks edge higher – Reuters
The only 5 investments you need to own – MarketWatch
Is it time to buy Russia or run from it? – Bloomberg
Bull, ‘most hated ever,’ set to turn 6 – USA Today
S&P 500 earnings point to stock-market correction – MarketWatch
Signs to Watch for a Major Peak in Stocks and New Bear Market – FSO
Gold flat around $1,200/oz ahead of ECB meeting, U.S. data – Reuters
Regulators Investigating Precious Metals Manipulation ‘Encouraging’ – Kitco
Chinese Gold Financing Deals Explained – BullionStar

ECONOMY/WORLD/HOUSING/BANKING
Share of consumer spending on health care hits another record – MarketWatch
Brazil hikes interest rates again, adding fuel to the fire – CNBC
China to lower the annual GDP growth target to 7% – China Daily
Liquidity evaporates in China as ‘fiscal cliff’ nears – Telegraph
India’s manufacturing, services growth outpaced China in Feb – Financial Express
Raghuram Rajan, the unsung hero of India’s bull market – Economic Times
Toronto buyers resort to sub-prime loans as prices soar – FP
Home equity loans face new risk – CNBC
Housing Market Gets Stronger in 2015 – Kiplinger
How Janet Yellen’s Latest Swindle Works – ZIRPQE

 

Easing is Easy

Amid all the hoopla surrounding the Nasdaq Composite Index recapturing the 5,000 level for the first time since March 2000 and other stock indexes around the world notching fresh record highs, we are reminded that the world’s central banks have been quite busy in recent months, greasing the wheels, as detailed in this story at Bloomberg.

Not shown above, India just announced another rate cut today and, of course, Canada (also not shown, for some reason) has been slashing rates with another cut expected to come before the end of the week. Then there’s Denmark who, according to another report at Bloomberg, “can’t print money fast enough”.

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Wednesday Morning Links

MUST READS
Global stocks pull back further from record highs – Reuters
American Companies Are in Love With Themselves – Bloomberg
U.S. Companies Are Stashing $2.1 Trillion Overseas to Avoid Taxes – Bloomberg
Top U.S. General Says Washington Should Consider Arming Ukraine – Time
Some 12,000 Russian soldiers in Ukraine supporting rebels: U.S. commander – Reuters
Wall Street Has Its Eyes on Millennials’ $30 Trillion Inheritance – Bloomberg
What to do with a big, fat inheritance – CNN/Money
Halt to Obamacare subsidies could come swiftly – Politico
How Warren Buffett Does It – NY Times
Greece’s Next Move – New Yorker
The Fed Is Weird. Get Over It. – Bloomberg
Warren Warns Fed to Curb Emergency-Lending Powers – WSJ

MARKETS/INVESTING
Stock futures lower as investors await ADP data – MarketWatch
How a 25-Year-Old Investor Spurred Lumber Liquidators’ Plunge – Bloomberg
Innovation, not easy money, is behind the Nasdaq’s return to 5,000 – MarketWatch
Nasdaq 5,000 Is Different This Time……But Not In A Good Way! – Contra Corner
It’s Not A Stock Bubble But A Bigger Corporate Bubble – Alhambra Partners
Draghi Split From Yellen Drives Treasury Premium to 25-Year High – Bloomberg
Gold snaps 2-day losing streak; U.S. data in focus – Reuters
Where Did The Gold In Fort Knox Come From? Part One – BullionStar
From prime rib to chips and dip: Lean times at mining’s annual conference – Reuters

ECONOMY/WORLD/HOUSING/BANKING
Target to cut thousands of jobs – CNN/Money
Sluggish U.S. car sales blamed on blustery weather – Reuters
Eurozone economy picks up speed as retail sales rise – BBC
Rajan Cuts India Rates After Modi Agrees to Inflation Target – Bloomberg
Macau casino revenue plunges record 49% in February – Straits Times
After Chinese Smog Documentary, Oil Industry Pushes Back – WSJ
Denmark Can’t Print Money Fast Enough – Bloomberg
Get Ready for Another Real Estate Bubble – Fiscal Times
Zero Down Payment Mortgages Return! – Confounded Interest
Shelby Says Fed Should Be Held Accountable for Its Actions – Bloomberg
Fed’s Yellen Reports Assets Worth Between $4.9 Million and $13.3 Million – NewsMax

 
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