Now the big gun is about to begin. Miss Bubblicious is being crowned for her reign in the final bubble of all bubbles. Anyone that can remember Dr. Bernanke during his first years cannot forget the statements that were made repeatedly going into 2008 to Congress expressing his unwavering confidence in the economy and its ability to withstand any "slowdown" that might occur in housing in spite of his repeated assurances there would be no slowdown in housing for months. Even when housing and the economy in late 2007 began to flag he assured Congress it would be minimal and short term only. The rest is history....a panic ensued as an enormous liquidity crisis developed. The massive structural malinvestments created by the over-leverage money printing through derivatives began to unwind and the demons began to infiltrate all corners of the fiat money system.
Here we are now 5 years later and not only were the underlying structural problems NOT addressed, but the bubble was reinflated with even more leverage and once again the piper must be paid. With interest rates at near zero and massive fiat printing, what will be the course of action to stem the next "Crisis in CONfidence" when the exit door begins to get crowded? What rabbit is left in the hat for the Fed Mistress? What will Miss Bubblicious be called upon to do for her masters?
Having observed Miss Yellen during her recent testimony, I sense there may be some very uncomfortable times ahead waiting for her and for us. She seems ill-equipped for her job as liar in chief. The only question one might have is could she possibly pretend to "tighten" as Dr. Bernanke did prior to the last collapse that resulted in him ushering in a mountain of printed money to stem the hemorrhage created by a minimal interest rate increase. Unfortunately for Miss Yellen her toolbox is very light compared to the Bernank, and there are an awful lot of very big players looking to exit this stage as soon as the signal goes off that the music is to be turned off. Most importantly we now have a destroyed bond market with the Fed as the 800lb Gorilla in the room. If we disturb that market with evidence that we MIGHT be stopping printing and interest rates get near the 3.50 level then mathematically this game goes into HYPERCRASH! Turn off your lights and get out the Alpo.
So you see....faux attempts at "tightening" with bond rates just going up 50-75 basis points could be disastrous with a cascade of events that she would not be able to reverse this time. So one way or another there will be even greater QE within the next year. You see...... its Math....its the Law of Physics.....its Nature......