Mother Of All Bubbles (MOAB) And Endless Monetary Stimulus

By Anthony B. Sanders

Is Yellen Really Charles Atlas?

This isn’t a Don Ho “Tiny Bubble.” But the Mother-of-all-bubbles (MOAB). Endless monetary stimulus from The Federal Reserve (and other Central Banks) has led to incredible distortions in asset prices.

If we look at the ratio of financial assets to disposable personal income, you can see the spikes in the ratio corresponding to the dot.com bubble of the 1990s, the housing bubble of the 2000s and the everything bubble of the 2100s. The commonality?  Fed interest rate low interest rate regimes. With each successive bubble burst, The Fed had to drop their target rate even further.

moabfed.png

But The Fed rate increases in 2008 weren’t enough, The Fed also adopted their QE quantitative easing) programs where they purchased more and more Treasury Notes and Bonds and Agency MBS. Particularly with QE3 (the large spike in the orange line).

moabfed2.png

Now former Fed Chair Janet Yellen is arguing for ‘lower for longer’ rates ahead of future crises. Does she mean that interest rates haven’t already been too low for too long already???

Perhaps The Federal Reserve feels like that 97-lb weaking who gets sand kicked in his face. So they keep distorting prices with endless monetary interference.

97lbsweakling

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