Janet Yellen and the Fed Bubble Machine
November 15, 2013
Janet Yellen, Federal Reserve boss Ben Bernanke’s successor, told her Senate confirmers not to worry. Asset bubbles are not an issue. She reassured the Senate Banking Committee that the Fed’s policy of jacking up the values of equities and housing will not skewer markets.
She dispelled concern over a real estate bidding war launched by private equity firms that is gaining momentum in depressed housing markets. Yellen said the private cartel of banksters masquerading as a federal government agency will “have to watch this very carefully, but I don’t see that as an asset bubble. I see that as a very logical response of the market to generate a recovery in very hard-hit areas” such as Phoenix and Las Vegas.
In other words, shysters gaming the system is very logical and healthy.
Analysts see mega-low interest rates – now effectively zero – as driving up prices on assets such as farmland. Over the past year, the government has taken action four times against excessive risk in the market for high-risk, high-yield loans.
Yellen, however, does not see this as a problem. She does not see “bubble-like conditions.”
“I don’t see evidence at this point, in major sectors of asset prices, misalignments,” she confidently averred yesterday. “Although there is limited evidence of reach for yield, we don’t see a broad buildup in leverage, where the development of risks that I think at this stage poses a risk to financial stability.”
She said bond buying – creating $85 billion per month out of thin air – will continue under QE infinity until employment rises. No taper is in sight as previously hinted.