“Bubbles were blindingly obvious,” said James Bullard (Fed Governor) on CNBC this morning. Zero Hedge picked up on the interview which can be seen here.
“Blindingly obvious” yes but we have a little problem; Janet Yellen who is the proposed next chairperson of the Fed “missed” them. She missed the stock and real estate bubbles leading up to 2000 and 2008 and is obviously blind to the current systemic credit bubble.
Alan Greenspan has said that you can never recognize a bubble until after the fact and Ben Bernanke is famous for his belief that bubbles can be “contained.” Now, James Bullard tells us that the bubbles were blindingly obvious. Really? To whom? To us foolish bloggers and Austrian economists who not only saw them but warned of them as they were in progress? Or were they “obvious” to those pulling the levers but nothing could be done because “bubbles” were merely an offshoot of the credit expansion that had to and still must continue…or the entire global fiat system will collapse?
Bullard went on to state that the Fed doesn’t want to “support fiscal recklessness.” How quaint? Does he not already see that the “fiscal recklessness” that has already taken place has fiscally wrecked us as a nation? The Fed is now purchasing about 70% of all Treasury bonds issued and they already own 1 in 3 of all “10 yr. equivalents,” was this not “support?” If this is not complete foolishness to buy the securities of a fiscal derelict and in the process aid them to bankrupt themselves even further?
From what we have seen over the last few years (and more often recently) where one after another, Fed governors contradicting each other in public, the only description can be termed as “dysfunctional.” Nearly every single day we hear of a Fed governor saying one thing and then followed by another saying the exact opposite the following day…or even in the very same day! They act like an out of control bobsled that bounces from one side of the track to the other, banging from wall to wall, all the while “over steering.” This is what we are left with, “moral suasion” otherwise known as jawboning. Fed governors are paraded in front of the public day after day and say “whatever it is that is necessary” at the time. When I say “at the time,” I mean that they will say things to make markets move in whatever direction that they feel is needed for time in the immediate. They may need stocks up, or interest rates or gold down. They may need a stronger or weaker dollar depending on whatever the “story du jour” happens to be. Whatever the day requires…will then determine who is sent up to the plate. A hawkish story? A dovish story? Taper? No taper? Whatever is necessary…they have a “batter” for that!
Thinking back to high school and college days where sides were chosen for a debate, sometimes you were put on a side that you just knew was wrong…either morally, fundamentally or logically. So, what to do? “Spin, twist or outright lie” were the only options which is exactly where the Fed and its members find themselves. Were they dumb enough when they took the job in the first place to believe that “printing” 100% un backed currency could work? Maybe? Do they ALL now understand exactly where this whole charade stands? Probably. Does it even matter? No, other than for the sound bites offered up to the unknowing in the hopes of “moving the herd” in a direction that can prolong the game. Whether they individually know or not is only of importance between them and their own God, if they do know then shame on them…if not? …well even more shame on their degrees hanging on the walls.
You ask what the problem is. The Fed now has no options left. They can step on the brake (no they can’t), stomp the accelerator and turn the steering wheel in any direction as far or as many times as they’d like. This will not stop the crash that is coming. When you begin a monetary system that is a 180 degree antithesis to Mother Nature…it will fail and fail miserably. The biggest problem is that this “experiment” is a global one. This is not “some country” that will fail and have to pull up their bootstraps, no, we are talking about the reserve currency of the world that is the foundation for virtually every single banking and financial system on the planet. Understand that a dysfunctional man cannot repeal Mother Nature or her laws and well more than half the battle is already won.