QE/LSAPs and Bubbles
Here is an interesting piece on the potential for new
bubbles being created as a consequence of Fed’s highly accommodative policies:
According to the above piece:
“Instead, the Fed has
kindled speculation. Investors are desperate for yield and are paying up for
riskier assets. In areas like real estate, structured finance and equities, the
markets are ahead of the fundamentals. It doesn’t look to me like a bubble yet.
But I would call it the Dysplasia Stage, abnormal growth that looks
precancerous.
It’s not just an
economic or financial issue, it’s cultural and psychological. We seem to have
unlearned what real growth is and simply substituted speculative bubbles.
Policy makers are either paralyzed or barrel forward because this is all they
know how to do.”