Dan...
As always, thanks for sharing your Roach with us <gg>.
Roach remains very skeptical about the ability of the various primary Central banks around the globe to maintain their balancing act, and with that I agree. I do think he seemingly has missed a transition from straight monetary policy coupled with currency intervention to the added very powerful (and dangerous) tool of manipulation of equity markets and data and it remains to be seen how that will play out.
"* Third, it perpetuates the risks of an asset-driven economy. The lingering asymmetrical biases of post-bubble monetary policy accommodation and the surging asset markets such policies support, keep the US economy heavily dependent on wealth effects. That exacerbates the imbalances of reduced saving and increased indebtedness. Should the economy suffer from a shortfall of income generation — precisely the case with America’s jobless recovery — an asset-driven economy may be all the more vulnerable to the inevitable back-up in real interest rates that normally afflicts an unbalanced economy."
It is clear (at least in my mind) that the goal of that manipulation is to substitute forced asset growth for monetary policy here in the US, and that is the goal of the Greenspan Gambit which has worked far better than I would have ever guessed. Whether or not that success can be sustained into the future and what other dislocations will ensue (following the laws of unintended consequences) is one primary question Roach focuses on, and I personally continue to believe that the risks are for a painful end to it all. The mere fact that the Fed has made clear its reluctance to raise rates despite the much ballyhooed "recovery" is ample evidence for myself that even the Fed (Greenspan) does not believe they have succeeded in turning the economy around on a sustainable basis.
mlsoft
In edit, I would add that for the Gambit to succeed on a longer term basis, it is not enough for Greenspan and the Fed to keep the markets at current levels -- instead they must continue to push them ever higher. With the markets already at historically absurd valuations, that is going to be an extremely difficult task for them to manage.
AI
