The Sound You Will Hear is of Bubbles Popping

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I guess that Ben Bernanke’s “strategy” of showering the world with dollars is working — if one calls the creation of new asset bubbles a definition of “working.” The news of the Dow hitting a nominal record today along with news that housing prices across the country are rising significantly supposedly is a sign of recovery, or at least that is how it is being played out in the media.

However, I don’t think that this new “exuberance” reflects actual market fundamentals as much as it is a response to Bernanke’s counterfeiting operation as the dollars have to go somewhere, and they have done just that. Despite the fact that “experts” like Paul Krugman claim there is no inflation, we certainly are seeing it in the bond market (which looks also to be on shaky ground) and those of us who buy groceries and gasoline can attest to the real uptick in prices. Furthermore, even though real incomes either are stagnant or falling for most people, housing prices are going up, which certainly does not reflect economic reality.

I’m not necessarily a “gloom-and-doom” economist and I am not predicting that the sky will fall tomorrow, but when we see  this kind of combination of inflation, financial bubbles, and a weak economy I do worry a lot. A lot.

11:59 am on March 5, 2013