The global financial system is in a difficult state as the world’s central banks react to equity markets as a guide to economic policy. Ben Bernanke has to assume some responsibility for this because of his August 2010 Jackson Hole speech about the importance of PORTFOLIO BALANCE CHANNELS. In an effort to get the “animal spirits” of investors flowing Bernanke pushed for a second round of QE to make interest rates so low that investors, insurance companies and pension funds would choose to buy equities and high yield corporate debt, taking on more risk so as to arouse the capitalist’s desire for higher returns. Once this path is trod and the FED is the bartender rather than the designated driver, the question arises about when the system is healthy enough to sustain increased growth without a continued monetary infusion.
Posts Tagged ‘Long Term Capital Management’
Notes From Underground: The FED’s new drinking game–every time you hear the word TRANSITORY, drink a shot (we are going to need it)
April 11, 2011The markets were a bit heavy today as profit taking set in amid rumors that GOLDMAN was selling some long-held commodity trades. I cannot confirm the rumors as nobody from the hallowed tower called to let me know but the rumors weighed heavily on the commodities and certain commodity-related currencies. The GOLD made all time highs and the SILVER put in 31-year highs and both wound up closing lower on the day. Such price action in the precious metals would serve warning about a correction, but as usual I advise consulting your favorite technician or book on technical analysis to determine the best course of action.