Posted Jul 29, 2014 by Martin Armstrong
A lot of questions have been coming in about the Fed and Asset Bubbles. Quite frankly, the nonsense that the Fed creates them to hide the decay in the US monetary system is not much different from the analysis of global warming. Asset bubbles have existed from ancient times long before central banks existed. There was the 1720 South Sea Bubble and the Mississippi Bubbles. There was the 1637 Tulip Bubble. This is the same nonsense behind the gold analysis that has no real substance whatsoever taking bits and pieces here and there and trying to create some wonderful myth that money has to be some store of value when it never has ever been for not even a gold standard could beat the business cycle. Stalin killed Kondratief for saying that not even communism would defeat the business cycle. Paul Volcker delivered his lecture in 1979 calling it the Rediscovery of the Business Cycle where he states bluntly that Keynesian economics failed for the business cycle won.
Sorry – bubbles are inevitable and are driven by capital concentrations into an individual sector and/or country. They have always existed and the Fed cannot prevent them anymore than Keynesian economics can prevent booms and busts or the gold standard will ensure money retains its value while assets can rise with wages. This crazy idea of creating utopia is just insane. It is akin to global warming which people insist exists simply because temperature has risen since 1970 ignoring everything for millions or years before. This is narrow-minded analysis that is totally unsupported by fact used as propaganda for a predetermined agenda.
Sorry – bubbles are a natural part of the business cycle driven by humanity just as fashions change and suddenly everyone wants something. We even saw that with cabbage-patch dolls and transformer toys for various Christmas seasons. They too were bubbles driven by demand. Something is “hot” and that is the way it must be. It is humanity and trying to eliminate these cycles is to eliminate human nature.