Flash Point: ****-For-Brains Bernanke

The place holder “****” may be filled in by you , dear reader, allowing you to accord Ben Bernanke the degree of respect that you think he deserves. Each “*” is the place holder for a string of characters from 0 to n where “n” is an arbitrary number. So some words that would fit these rules are: ‘mush’, ‘good’, ‘genius’, ‘outstanding’, ‘eh?’, and so on. The context for assessing respect may be based on the article in the Irish Times, Bernanke warns banks on excessive risk. In particular, this quote:

In a speech in Chicago, the US Federal Reserve chairman said he was watching for signs that banks were resorting to speculation [i.e. risk] because of low interest rates, highlighting the danger that easy monetary policy could inflate new bubbles in asset prices.

Bernanke, has done two things of note. He has driven interest rates to record lows, farther out the yield curve than any of his predecessors. In fact, real interest rates (adjusted for inflation) are negative for short term maturities and close to zero for longer term maturities. This has forced investors, whether they be banks, retail investors or institutions, to buy riskier assets and equities to try and create some positive return on their money.

The second thing that Bernanke has done is flood the market with liquidity, much more than the market could digest since most of it remains locked up in bank reserve accounts at the Fed. Some of this liquidity is undoubtedly driving the stock market to record highs, a fact confirmed by the market’s divergence from economic fundamentals.

In other words, Bernanke has destroyed savers and forced investors of all stripes to chase risk to try and get some return on their money. This guy has the unmitigated gall – we’ve not used this term before, but the alternative is a string of epithets – to create a situation and then blame the logical outcome on the very people whom he has forced his policies upon. Bernanke is blowing bubble after bubble – bonds, stocks – and he can’t even see it. This guy has “***”-for-brains.

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