The experts predicted a taper for six weeks ago. They had predicted this all summer. I kept saying it would not happen. It didn’t. The experts then expressed surprise. Silly experts.
The FED is now trapped. It will continue to inflate at $1 trillion a year. If it doesn’t, we will get a replay of 2008. Some experts are now coming around on this.
The bubbles are expanding once again. So is debt. A Reuters story reports:
When he was chief economist at the Bank for International Settlements, Bill White issued a series of prescient pre-crisis warnings of bubbles and imbalances that were building up in the global economy. He was politely ignored.
White worries that policy makers are not learning the lessons. It will be harder to return to strong, sustainable growth because fiscal and monetary stimulus is storing up medium-term difficulties, he told a London audience last week.
“Not least of them is that the very easy monetary conditions that we’ve seen since the crisis have basically impeded the process of de-leveraging,” White said.
In the Group of 20 leading economies, government, household and corporate debt is now 30 percent greater than it was before the crisis, he said, citing BIS figures.
“We haven’t actually dealt yet with the problems of the advanced market economies and in addition, with the crisis having spread to the emerging market economies, we now have a problem that is bigger than before,” White said.
The FED’s Keynesian economists think the FED can do this indefinitely without negative feedback. They do not understand the Austrian theory of the business cycle. They do not understand that central bank monetary inflation creates huge distortions in the capital markets. Bernanke found out in 2008, as Austrian analysts said he would. He responded by inflating on a scale never seen before in American history.
Yellen will inherit this economy. She is more of an inflationist than he is.