Economics, Monetary Policy

Market Prices vs. Bernanke Prices

Image Credit: Shutterstock

Image Credit: Shutterstock

How shall we understand the big drop in stock and bond prices of the past two days?  Put simply, as a return to something more like market prices of assets than like the manipulated Bernanke prices to which we had become accustomed.

Benjamin Strong, the leading Federal Reserve actor of his day, famously decided to give “a little coup de whiskey to the stock market” in 1927. Ben Bernanke, in contrast, gave the stock and bond markets a barrel of whiskey.  We will observe how bad the hangover will be.

2 thoughts on “Market Prices vs. Bernanke Prices

  1. Basically your contention is that on Tuesday investors believed they would continue to drink forever, but on Wednesday they realized that they would have to stop?

  2. I think Bernanke knew exactly what he was doing. He didn’t want QE to turn into another scandal. A lot of people did not understand that the Federal Reserve is pumping up the market…the gains are not in response to increased productivity resulting from free enterprise. I think he is taking the heat now so Obama won’t have to. It’s called controlling the conversation.

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