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The Man Who Advises the New York Fed Says It and Other Central Banks Are “Fueling a Ponzi Market”
(Excerpt): On Monday, a member of the New York Fed’s own Investor Advisory Committee on Financial Markets, Scott Minerd, published a critique which he headlined as follows: “Global Central Banks Fueling a Ponzi Market,” with this scary subhead: “Ultimately, investors will awaken to the rising tide of defaults and downgrades.” The thrust of the article is that central banks (which include the New York Fed’s Wall Street money spigot that was launched on September 17, 2019) are creating a Ponzi scheme of liquidity that is hiding the true state of risk in both the stock and bond markets. The implication is that without the Fed’s cheap money flooding markets, interest rates on questionable debt would be much higher, thus providing a red flag for investors.
Sounds a lot like our old MFO friend, "Scott". I wonder...
Yeah - He used to rely a lot on “Zero Hedge” as I recall. That’s not a source I give much credence to. Some of this I’m getting reading the FT (on Kindle). But it’s hard / impossible to link it here, so I scrub up similar stories from admittedly lesser sites to share on the board. There seems to be a substantial “camp” of observers who think the Fed & other central banks are fueling a bubble in many assets with easy money policies. But you can find just as many others who dispute it.
It’s possible, however, that Scott was ahead of his time. These ideas might have been widely disparaged a few years back. Now they’re becoming more mainstream. Suspect we’ll know better which side has it right in a few years time.
"It’s possible, however, that Scott was ahead of his time. These ideas might have been widely disparaged a few years back. Now they’re becoming more mainstream. Suspect we’ll know better which side has it right in a few years time."
LOL - Just got around to reading Ed Studzinski’s remarks in David’s January Commentary. Admittedly, pulled this out of context - but still somewhat bemused that the P word also appears in Ed’s lengthy discussion of risk:
“One would like to think that the lessons of Teapot Dome and Ponzi have been learned, but maybe not. The next downturn will tell, one way or the other.”
Sounds a lot like our old MFO friend, "Scott". I wonder...
Yeah - He used to rely a lot on “Zero Hedge” as I recall. That’s not a source I give much credence to. Some of this I’m getting reading the FT (on Kindle). But it’s hard / impossible to link it here, so I scrub up similar stories from admittedly lesser sites to share on the board. There seems to be a substantial “camp” of observers who think the Fed & other central banks are fueling a bubble in many assets with easy money policies. But you can find just as many others who dispute it.
It’s possible, however, that Scott was ahead of his time. These ideas might have been widely disparaged a few years back. Now they’re becoming more mainstream. Suspect we’ll know better which side has it right in a few years time.
I'm a Scott. But not that Scott.
I think bubble is the better term term to describe what the Fed is creating. Calling their easy money policies a Ponzi scheme clouds the definition of that useful term.
Musical chairs is another choice. As in: What happens when the Fed stops pumping money into the repo market? The inflation for the bubble comes from too much money chasing too few good investment ideas. Stock prices are (among other things) held up by companies purchasing their own stock with money available at easy rates.
I never thought of myself as being in a camp. But I suppose I am. My grandfather was a bank examiner for the Comptroller of the Currency during the Great Depression. He was a boy during the Long Depression. And a young man of commerce through multiple panics in the early days of the 20th century. His ideas found fertile ground in me.
Your quote from Ed's column reminded me of grandpa's definition of the business cycle as the time it takes us to forget lessons learned the hard way. I am of the opinion that we have forgotten the lessons of the Great Depression, and haven't taken in the lessons of the dot.com bust and Great Recession; so we are likely due for another lesson.
Drive Nature off with a pitchfork, she’ll still press back, And secretly burst in triumph through your sad disdain.
“I think bubble is the better term term to describe what the Fed is creating. Calling their easy money policies a Ponzi scheme clouds the definition of that useful term...”
Shakespeare might say: “What’s in a word?”
Want “bubble” instead? You will compel me than to post this article (which I’ve held in abeyance a few days). Everything's a Bubble: Dallas Chief Kaplan Admits Fed Is Inflating Assets
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Derf
It’s possible, however, that Scott was ahead of his time. These ideas might have been widely disparaged a few years back. Now they’re becoming more mainstream. Suspect we’ll know better which side has it right in a few years time.
Yeah, sort of what I'm thinking too.
“One would like to think that the lessons of Teapot Dome and Ponzi have been learned, but maybe not. The next downturn will tell, one way or the other.”
I think bubble is the better term term to describe what the Fed is creating. Calling their easy money policies a Ponzi scheme clouds the definition of that useful term.
Musical chairs is another choice. As in: What happens when the Fed stops pumping money into the repo market? The inflation for the bubble comes from too much money chasing too few good investment ideas. Stock prices are (among other things) held up by companies purchasing their own stock with money available at easy rates.
I never thought of myself as being in a camp. But I suppose I am. My grandfather was a bank examiner for the Comptroller of the Currency during the Great Depression. He was a boy during the Long Depression. And a young man of commerce through multiple panics in the early days of the 20th century. His ideas found fertile ground in me.
Your quote from Ed's column reminded me of grandpa's definition of the business cycle as the time it takes us to forget lessons learned the hard way. I am of the opinion that we have forgotten the lessons of the Great Depression, and haven't taken in the lessons of the dot.com bust and Great Recession; so we are likely due for another lesson. That's Horace's line, not grandpa's.
Want “bubble” instead? You will compel me than to post this article (which I’ve held in abeyance a few days). Everything's a Bubble: Dallas Chief Kaplan Admits Fed Is Inflating Assets
Linky