BERNANKE’S BUBBLE: A LETTER TO THE ECONOMIST (February 21, 2011)
“Let all investors give thanks to Ben Bernanke,” you open your article about the long rally in the equity market with a cheer (“Betting on Ben,” February 19, 2011). What with the unprecedented near-zero prime rate of interest and relentless quantitative easing, the chairman of the Federal Reserve has indeed created a new bubble in the equity market. The rally that began last summer seems unending. And the market is quickly approaching the highs that preceded the crash a bit more than two years ago. The only remaining question is when Bernanke’s bubble will burst, which is perhaps why he does not dare even think of raising the prime rate or easing on quantitative easing. The way things look at present, he may have another few months to go in utter oblivion of central-banking traditions. “When you buy equities,” you aptly conclude, “you are betting on Ben.” Cheerio!