ACTUAL PICTURE OF FEDERAL RESERVE VICE CHAIRMAN STANLEY FISCHER HUNTING BUBBLES
Guest Post by Anthony Sanders
Fed’s Fischer Leads Committee Watching for Asset-Price Bubbles (Here Are Bubbles To Watch, Stan!)
The Federal Reserve’s Stanley Fischer is now leading a committee to watch for asset bubbles. Fed officials want to ensure that six years of near-zero interest rates don’t lead to a repeat of the excessive risk-taking that fanned the U.S. housing boom and subsequent financial crisis.
Let me help you out, Stan!
Here is a chart of the S&P 500 stock market index against The Fed’s Balance Sheet to proxy for near-zero interest rates. Yes, it looks a bubble to me!
Here is a chart of average hourly wage earnings growth YoY against The Fed’s Balance Sheet. No bubble in wages.
Similarly, there is no bubble in real median household income since The Fed’s massive intervention. Quite the opposite, in fact.
How about home prices? Yes, there appears to be a bubble in home prices since 2012 given the poor growth in wage earnings.
Gold? Gold was soaring until 2011 with the growth in The Fed’s Balance Sheet, but has been declining/stagnant since then. So, no current bubble.
There you go Stan! Home prices and equity markets are in a bubble (thanks to NO bubble in wages and earnings). And no current gold bubble either. It’s hard to sustain housing and stock market bubbles with stagnant wage earnings and household income.
So I would watch the equity markets and home prices for excessive risk taking by wealthy investors.
Stanley Fischer with “Orange Lady” Christine Lagarde from the International Monetary Fund (IMF) looking for asset bubbles over coffee. And apparently Lagrade has been promoted to General in the Global Monetary Army.
