As Barry suggests, have we just seen the end of the Bernanke put? Based on the way markets are trading today it would appear Ken Rogoff was right that Bernanke doesn’t have the stock market’s back.
However, in all likelihood Soros is right about how policymaking powers-that-be will be forced to bailout Too Big To Fail banks should the financial system begin to teeter again. In which case the only real question is for how long can the current central bank shell-game be sustained in a low-to-no growth economic environment?
No one — not Ben Bernanke, not Alan Greenspan, not Milton Friedman if he were alive, nobody — knows for sure just how much more room the Fed’s balance sheet has before non-negligible inflation kicks in. However, former Fed Chair Paul Volcker for one is starting to get nervous.
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