The dot-com boom went bust… the housing boom went bust… now we have the Fed boom.
These booms are all identical in that they were all founded on an irrationally exuberant belief in some fundamental story that, eventually, gives way to the cold hard truth of reality.
The Fed boom farce is founded on a belief that the “masters of the universe” at the Fed can, from the comfort of their FOMC meeting room in Washington DC, not just plan the most fundamental trends in our massive macro-economy (namely prices and employment) but also manage to erase all the errors accumulated by millions of foolish and fraudulent participants (households and firms) during past economic tumult.
One very problematic way that this boom is different though is that it’s not a belief in a single industry sector or a particular asset class but in the institution that many believe currently backstops the entire system itself.
When the trends turn on this boom… look out!
So, that begs the question… Does Janet Yellen, a frail diminutive academic, have what it takes to meet the demands of the ensuing crisis?
I think not...
The Fed is going to need a new Chairman.