Dylan Grice has compared U.S. Federal Reserve Chairman Ben Bernanke to Rudolf von Havenstein for his love of money-printing. But, unlike when von Havenstein was head of the German Central Bank in the late 1920s, Bernanke isn’t creating a wheelbarrow of cash for bread scenario. He’s creating asset bubbles that threaten to pop and crush the global economy.
From Dylan Grice (emphasis ours):
Today we look back and chuckle at von Havenstein’s naïveté, so staggeringly dense it might have bent light. But how much more do today’s central bankers know? Though there are no people with wheelbarrows, there may as well be, for Bernanke and his co-believers are equally oblivious to their contemporary equivalent: asset market inflations. From emerging markets to precious metals to agriculture, it’s like déjà vu all over again. Nascent bubbles are emerging. But to what Havensteinian conclusion does the warped logic of our central bankers lead them? Why, the world needs more liquidity of course!
Grice is concerned about the emerging markets bubble because of the current chatter around it. While he can see the case around China and Brazil, and is somewhat more sceptical about India and Russia, Grice says it may sounds like a bubble to many investors. The “this time is different” crowd have found their new muse (post internet, real estate, etc.), Grice recommends, if you’re worried, to look at a short-term inflation hedge.