Gregor Weekly Model Portfolio Update: 04 November 2009

Gregor Macdonald
November 4th, 2009

The FED is trapped in a tar pit of its own making. I say good riddance. Until Ben Bernanke does otherwise, let’s keep reminding that he never saw the saw the credit bubble coming, (and his role in its creation). Or, he did see the credit bubble’s formation and burst, but now actually believes its a benefit to the system to not acknowledge it. One imagines reading the FED’s Wickipedia entry 50 years from now, with an icy cold description of both Greenspan and Bernanke, and their rebuke of history. A high school student can read books on exponential debt growth, and so can I, and so can you. So what’s with the hubris of this post-war generation of economists and financiers, that believed they could stand over an acceleration of debt growth without systemic consequence? This Summer the FED chairman appeared on TV, and gave his explanation: the credit crisis was the result of a behavioral overreaction.

Now, once upon a time in a land not far away a group of market participants known as bond vigilantes would have provided a healthy, counterbalance to such serial fail-ups in the Central Bank. But, that was before the global daisy chain of reciprocal monetization among the world’s central banks. This is why the bond vigilantes are now found… (this article continues for subscribers through the membership gateway, on the right side of this page)