by Mike Whitney
November 11, 2009 “Information Clearing House”
The Fed’s monetary stimulus is driving the market higher. What started as a trickle has turned into a torrent buoying stocks and commodities on a river of liquidity. Oil has more than doubled in the last 8 months while stock indexes have gained 50 percent or more in the same period. Even the shunned homebuilders and battered financials have staged a comeback. Meanwhile, consumer credit continues to shrivel and the “real” rate of unemployment climbs inexorably towards 20 percent. Overpriced equities with bloated P/E ratios of (average) 19 continue to produce record profits for breathless speculators, while the productive economy languishes in a Depression. The Fed’s zero-rate policy and easing programs have created another bubble, further widening the chasm between the investor class and the working rabble.
Former Fed governor Frederic Mishkin delivered a defense of Bernanke’s stock/commodities bubble in an article in this week’s Financial Times titled “Not all bubbles present a risk to the economy”. Oddly enough, Mishkin makes no attempt to dispute the Fed’s bubblemaking strategy, but only to clarify the difference between good and bad bubbles. This may go-down as the most poorly-considered public relations campaign in history.
Dandelion Salad 