No Double Dipping or "What's Past is Prologue"

Freeman here. Ben Bernanke, please read this post.

I am sick and tired of reading about sports, so I thought I would take a second to speculate on the near future of the stock market. I mean, seriously, I leave for one month, and the entire editorial board becomes a bunch of meat-heads. So be it, sports are popular, and my articles are not. But that is not going to stop me from publishing.

Shakespeare taught us in The Tempest, that "past is prologue"- or in layman's terms- "history repeats itself." If this is the case, the market will be bearish (bad) in the foreseeable future.


Market Watch had an article today about the near certainty of a double-dip in the market because of a systemic failure to correct our nation's monetary and fiscal woes. Greenspan's easy monetary policy following 9/11 and the dot.com bubble is well documented as a leading factor for the housing bubble and Dow Industrial's 14,000 levels during the late-Bush presidency. Not only has Bernanke copied Greenspan's plan, but he has doubled-down. While Greenspan dropped short-term interest rates to 1%, Bernanke is approaching 0% (and you thought Alan was easy). Similarly, while Greenspan increased monetary supply by 22%, Bernanke upped it 94% in one year. This is an unprecedented and unsustainable supply of money- does Bernanke not read Shakespeare?

To his credit, Uncle Alan wanted to create a "soft landing" for the market in the early 2000s- a noble objective, indeed, but market forces are undeniable and it makes little sense to delay the inevitable. As all Isaac Newton fans and choice-o-philes know, "for every action there is an equal and opposite reaction"- the reaction here being the same as an "unintended consequence." Because a primary goal of mine has long been to help our readers avoid unintended consequences, I felt the need to pass this article along. In so reading, please remember that the past is prologue, and we are doomed to repeat previous mistakes unless they are corrected.

From the article:

"It makes no sense to "rescue" the economy by having politicians borrow and spend trillions of dollars. It also makes no sense to fix the horrible mistakes of the housing-bubble years by having the Fed create electronic money out of thin air to buy "toxic assets" from investment banks that would otherwise be insolvent."