Tags: Stockman | Fed | bubble | Rogers

David Stockman: Fed Is Creating the 'Mother of All Bubbles'

By John Morgan   |   Friday, 08 Nov 2013 11:02 AM

Americans should be bracing for the explosion of a "mother of all bubbles" brought about by the Federal Reserve's gross and irresponsible manipulation of interest rates, according to David Stockman, the colorful supply-side economist and director of the Office of Management and Budget under President Reagan.

The central bank has created a false prosperity that shows up in an overpriced stock market, Stockman told Fox Business Network.

The Fed's massive stimulus since 2008 is "the greatest gift to the 1 percent, to the speculators, to the leveraged traders, to the carry trade ever imagined," he said.

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"Now we have the greatest mother of all bubbles. And there's nobody left in the stock market today except drugged-up day traders and robots who are being mainlined by the daily injections of liquidity from the Fed. This is utterly irrational."

The United States is at the mercy of the same crew of central bankers who brought the nation the dot-com crash and the housing bubble, according to Stockman — not exactly a track record of success. And, he added, long-time Fed banker Janet Yellen has been nominated to be the next Fed chair.

"It tells you the clear and present danger in America is that the Fed is run by people who are in some medieval castle somewhere, and they lost track of the real world."

Stockman said artificially low bond rates have forced stock prices skyward, and essentially "are part of the same bubble."

Meanwhile, he said investors are hearing the same perilous siren call from retail stock analysts that they heard at the 2007 peak before the U.S. financial meltdown: "Come on in, the water's warm, we're just getting started."

Veteran investor and financial author Jim Rogers, himself no stranger to hyperbole, told Reuters TV that the Fed is only one of numerous central banks around the world that are all printing money in pursuit of economic growth.

"The world is floating around on a huge artificial sea of liquidity," Rogers declared. "It's going to dry up and when it dries up we're all going to pay the price for this madness."

Rogers predicted it could be 2015 before the Fed begins to reduce its huge monetary stimulus, but there will be no avoiding the harm to an inflated stock market when the tapering finally begins.

"These are not very smart people," he said of U.S. central bankers such as outgoing Fed chair Ben Bernanke and Yellen. "They are government bureaucrats and they think like government bureaucrats."

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