Friday, October 17, 2014


Via Zero Hedge, we learn that in a speech on October 9, 2014 Federal Reserve Bank of St. Louis President James Bullard said that market players were making a mistake if they believed that the Federal Reserve would continue dumping cheap money into the economy every time the Dow Jones hiccups.

His tough love posture had him recommending that market players begin to recognize that the Fed was serious about removing its artificial crutch (low interest rates) that has created the conditions for markets to surge, saying "We should be willing to remove some accommodation ...".

Then something happened. The markets began to tank.

With markets tanking, on October 16th Mr. Bullard reaffirmed everything many of us have known for years. The Federal Reserve is really the only thing keeping the stock market inflated, commenting "if the market's right and this [market downturn] is portending something more serious for the U.S. economy, then the [Fed Open Market] committee would have an option of ramping up QE at that point."

Translation: We're willing to dump more money into the market.

And just like that, the stock market begins to recover.

Two things here. First, we're living in a Fed created market bubble. Period.

Second, if the Fed's new tough love policy - articulated by Mr. Bullard on October 9th - is any indication of their commitment to getting things right, we're screwed. I'd like to say that Congress needs to take over but they're probably more lost than the Fed when it comes to knowing what to do about our market situation. Their response to 2008 makes this much clear.

With trillions already committed to the next bailout, we're now inflating our way into a bubble collapse that will make 2008 seem like child's play.

- Mark 

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