Wednesday, December 30, 2009
It's virtually impossible to look back at the decade about to conclude and not see former Fed chief Alan Greenspan's fingerprints all over it. Though current Fed chief Ben Bernanke may outdo his predecessor by blowing even bigger bubbles, their size and destructiveness will not be seen until the 10's, a decade that, as far as bubbles are concerned, will be all his.
As for the 00s, the Associated Press files this report on the many Greenspan bubbles.
A string of exploding investment bubbles that started with the dot-coms and ended with mortgages and oil dominated the years from 2000 to 2009. And it looks like the next decade will be no different.Despite the claims of many in Washington and on Wall Street, they'll never be able to do much about either investor ignorance or hubris, so the only way to prevent more bubbles is to stop the easy money policies, but, given where we are today, that seems to be out of the question.
A mix of investor hubris, ignorance and piles of easy money created the bubbles. New ideas about where to invest seemed foolproof and greed crowded out doubts. Many investors looking for the best returns failed to see the potential problems with an Internet business that had no sales plan, or that thousands of expensive homes bought with no down payment might end up in foreclosure.
Now, these investors who fled the last blowups risk running smack into others. The Federal Reserve is keeping borrowing costs low to help revive the economy, and that means there's still plenty of easy money around, helping traders to inflate the price of everything from stocks to commodities such as gold.
"They've put out the biggest punch bowl in U.S. history and people are guzzling from it," said Haag Sherman, chief investment officer at Salient Partners in Houston.
There's lots more in this story - from the Nasdaq bubble all the way through the housing bubble along with a little gold-bashing and a reminder that Ben Bernanke doesn't see any signs of a bubble at the moment.