America Looks Richer Than Ever. What Happens When the Fed’s Asset Bubble Bursts?
by David Stockman
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The geniuses at the Fed, however, should not be confused at all. It’s all their handiwork.
In the land of the central bank printing presses, the rich do get richer, indeed, and not because they earned it on an honest free market operating based on sound money.
In fact, the chart above reflects the true failure of Greenspanian central banking. And when the massive inflationary bubbles embodied in this graph above finally do blow sky-high, don’t blame it on the free market.
In short, what amounts to free money has been the real culprit all along.
Editor’s Note: The Fed can inflate asset prices, but it can’t guarantee those gains will survive a crisis. The challenge for investors is to protect their savings—and recognize the opportunities that emerge when the bubble bursts.
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Early in my college days, the class was assigned to read about the Dutch Tulip Bulb mania.
If you haven’t heard about it, then your “Economics” and “Investing” education is sorely lacking. And you probably bet in the prediction markets, buy all the latest crypto, and a few lottery tickets with your spare change.
Basically, “Economics” is easy TANSTAAFL (“There Ain’t No Such Thing As A Free Lunch” From Robert Heinlein’s classic). Everything is a trade off. Do X and you can’t do Y. Everything changes.
Equally simple, “Investing” is putting your capital (savings) at risk in the prospect of getting it returned with some added value. If it’s “guaranteed to skyrocket to the moon”, then run away screaming “Ponzi”. If it seems too good to be true, then it ain’t.
I can cite some of the great financial wizards and moral philosophers:
“If it doesn’t make sense, it’s not true.” — Judge Judy
“But there is no foole to the olde foole, folke saie.” — John Heywood’s 1546 glossary
“The art of getting riches consists very much of thrift.” — Ben Franklin
“Patience is the companion of wisdom.” – St. Augustine of Hippo
“Price is what you pay; value is what you get.” – Warren Buffett
In summary, all empires end badly and it begins when they “counterfeit” the money.
I like to tell the story of when I visited to the Smithsonian, I saw a display of the French franc of Louis I to Louis XVII which went from a hockey puck of gold to a paper thin shirt button.
That’s the silent tax of “inflation”. All you have to look at it is the total amount of money put in circulation by the Gooferment. Sure they will hide it in all sorts of confusing numbers, but just add all the numbers up from year to year.
If you see a reasonable growth that matches our national productivity, then you’re safe. But you won’t see that.
The USA until 1910, didn’t manage money. Money was gold. Hard to fine and limited supply. The effect was deflationary. Prices DECLINED from the 1850’s to the 1910’s. Then the FED came in and started printing.
Argh!
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Posted by reinkefj 
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