Bubble economies enabled by the Fed
Bob Morris @ Feb 9th 2008 11:05 - Category: Credit crisis
Greenspan and Bernanke have taken a hands-off approach for two consecutive great bubbles, first in TMT — telecommunications, media and technology — and second, in housing. A hands-off approach is a polite way of saying they facilitated this.And what is the point of a 125-basis-point rate reduction, other than to provide reinforcement for the people who borrow short and lend long? From bankers who have committed every crime you could possibly accuse a banker of, to hedge funds who borrow short, leverage, and invest long in the stock market — that’s who really benefits from the interest-rate reduction. The economy, broadly defined, does not.
– Jeremy Grantham, Chief Investment Strategist, GMO
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