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The Masked Tulip

Bernanke’s Dilemma

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Alan Greenspan popped the late-1990s stock market bubble and threw the economy into recession. Will the new Fed chief do the same with the housing bubble?
If Ben Bernanke is unlucky, he may inherit the whirlwind when he succeeds Alan Greenspan as Federal Reserve chairman early next year. The Greenspan Fed is once again pursuing a high-risk strategy while concealing its real intentions from the public: raising short-term interest rates in the name of fighting inflation, but actually aiming to defuse the price bubble in housing. The last time the Fed tried this maneuver, it was hoping to subdue the stock market bubble. That gambit ended badly: shareholders lost $6 trillion, and instead of subsiding gently, the bubble collapsed and the economy went into recession.

Bernanke’s Dilemma

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Sounds like a conspiracy theory to me.

Energy prices are rising, commodity prices are rising and the US trade deficit makes a sharp drop in the dollar a distinct possibility. These are all more convincing arguments for rasing rates than the popping the housing bubble.

Leaving rates low would have been a much more 'high risk strategy' I would have thought.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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