We weren’t the only ones who seized on the comments yesterday from Brian Sack of the New York Fed. Gluskin Sheff’s David Rosenberg also realized just how telling they were.
The line in the speech that set us off was this: “Nevertheless, balance sheet policy can still lower longer-term borrowing costs for many households and businesses, and it adds to household wealth by keeping asset prices higher than they otherwise would be.” Perry Mason couldn’t have teased out a more incriminating statement. Rosenberg thought so, too. From his comments today:
I just love that one comment to the effect that QE “adds to household wealth by keeping asset prices higher than they otherwise would be.” When will these guys ever learn that maybe, just maybe, these Fed policies aimed at targeting asset prices at levels above their intrinsic values is probably not in the best interests of the nation? As our friend Marc Faber likes to say, the “Bernanke put” is cut from the same cloth as the fabled “Greenspan put” — only the strike price is different.
Imagine running a policy aimed at getting people to spend money based on an artificial level of asset values — what an admission. Then again, this is what the Fed has been all about since the LTCM bailout of 1998. We’re still not convinced after reading this sermon that this next “pull-another-rabbit-out-of-the-hat” experiment is going to end with very much success. There is something to be said about paying for our mistakes and to have the Fed try to rekindle an asset-based economy that has only ended up in generating a series of burst bubbles over the last 12 years, not to mention encourage a lifestyle of living beyond our means, is irresponsible at best, dangerous at worst.