What Bubble?

Bill Tatro
Posted: May 07, 2013 12:01 AM

So the Federal Reserve officials create the speculative bubble in the dot-com era due to the accessibility of easy money and then look at each other with the “Louis of Casablanca” facial expression and say, “Were shocked — shocked at what is going on.” 

Of course, riding to the rescue was not the Lone Ranger and Tonto or even the cavalry; it was, of course, “the Maestro” Alan Greenspan, who created the bubble in the first place with the so-called simple solution of 1% interest rates.  Undeniably, the unusual length of time that interest rates were kept at this low level spawned a whole new financial bubble in the housing sector. 

Accordingly, a brand new bubble dictated a brand new language and the industry did not disappoint as demonstrated by such phrases as “no docs,” “negative amortization,” “zero points,” “liar loans,” and, of course, my favorite, the “NINJA loan” (no income, no job, no assets.)

Surprise, surprise — yet another financial bubble subsequently burst in spite of the continued reassurances from the newly appointed Federal Reserve Chief at that time, Ben Bernanke, who’s notorious comments regarding subprime, “No problem,” have been quoted quite often. 

Unlike Greenspan’s Casablanca, Bernanke seemed to be much more like Alfred E. Neuman of Mad magazine fame who continually said, “What, me worry?”  Of course, in the Federal Reserve’s grand tradition and even echoing my mother’s own words, “If you make the mess, you clean it up,” the Fed once again rode to the rescue with the old Japanese saying of “quantitative easing” which is simply Rising Sun slang for “someday hara-kiri.”  Thank God, we’re saved once again! 

However, keep in mind that “being saved” currently does mean being employed, achieving a better standard of living, or personal well-being — it only means keeping your banker happy. 

As the current bubble in equities continues to get larger and larger, the self-styled creator (a.k.a. the Federal Reserve), once again professes total dismay at anyone who would question either their tactics or their motives. 

And absolutely nobody believes the word “bubble” should be applied since it is supposedly as far away from reality as you can get.  Consequently, there is no more, “I’m shocked,” and no more, “What, me worry?”  There’s only the illusion that ECB President Mario Draghi’s famous line of, “Whatever it takes,” is the new normal.

When this most recent stock market bubble pops, which is only a matter of time, it will be very interesting to see who or what carefully removes the bubblegum off Ben Bernanke’s face while also painstakingly eradicating the gum from his whiskers — now that’s a visual that I can certainly live with.