As I watch the stock exchanges, I worry ever more about the world economy. As far as I can see, there is irrational exuberance all around. I am quite convinced that Ben Bernanke’s quantitative easing, coupled with the near-zero prime rate of interest, is behind it. Followed by other central bankers, he is creating an amazing bubble. The mother of all bubbles, as a matter of fact. Every time some sort of trouble starts around the world, I feel that it is rather welcome to cool off the stock exchanges, but no luck so far. The possible demise of the euro is not enough to deter the investors. Neither is the strife in the Middle East, topped by the war in Libya. Strangest of all, the devastation and the resulting nuclear mess in Japan have barely impressed anyone. The stock exchanges keep edging upwards come what may. This morning I was stunned by the following announcement I stumbled upon in the Financial Times: “Withdrawal of Fed stimulus bigger risk than Japan, Libya, or eurozone, says Larry Kantor at Barclays Capital.” This I read as the proof of my apprehension. For crying out loud, what will happen when Bernanke’s bubble eventually bursts?

Addendum (June 11, 2016)

Five years hence, the mother of all bubbles is still going under the careful watch of central bankers around the globe. It keeps growing with the help of relentless quantitative easing combined with near-zero prime rates of interest. According to some analysts, everything is overvalued by some eighty percent by now. The bubble will burst any day now, or so they claim over and over again. But what if quantitative easing keeps going unabated? After all, it amounts to nothing more than printing of money. Add near-zero prime rates of interest, and no troubles around the world can burst the bubble any longer. Wars, natural disasters, and economic conundrums galore amount to mere blips under the circumstances. The only remaining risk to the economic bliss is the withdrawal of the above stimuli by central bankers. Disciples of Ben Bernanke one and all, they are no fools. If anything, the stimuli will only keep growing. And growing. So what if everything is a thousand or even a million percent overvalued? The mother of all bubbles will just keep growing. And growing. And growing.