Jbog,
Of course, it will bust, but that doesn't say anything or mean anything. Bernanke is doing all that he can (and he's even getting resistance--sure to increase--from inside the Fed).
The fact of the matter is that over 12 trillion dollars has been lost in household assets, since the start of the Great Recession (really a Depression, IMO.) At the height of the housing bubble, the household debt-to-income ratio was 134%!! (And the average American household had 13 credit cards!!) It has now come down to 120%, an improvement, to be sure, but still not that great. The economists that I follow say that more household de-leveraging is necessary before (American) consumer demand can increase significantly. Depending on which analyst you agree with, that means at least another $3 trllion of household de-levergaing or up to $6 trillion being predicted by other analysts.
Since the numerator of the income-to-asset ratio is not going to increase anytime soon, that means that all you can play with is the denominator. And that's exactly what Bernanke is hoping to accomplish. Since no one can increase home values, that means that equities must be Bernanke's target. An asset bubble in equities? Maybe. But please don't start lecturing us about the evils of asset bubbles. (I'm sure Bernanke understands it quite well, anyway.) Bernanke has to help force money out of the bond markets and back into equities. The increase in equity assets will, hopefully, lead to the vaunted "wealth-effect." Well, at least that's the idea.
Personally, I think both the Left-wing and Right-wing attacks on Bernake are totally misguided, but I'm sure you don't agree.
Whether Bernanke can save the economy (from further deterioration) and the Obama Presidency is an open question.
BTW, I predict that Rand Paul and Jim Demint will try to shut down the government in the near future. And both of them will call for the elimination of the Fed. From one perspective, they understand exactly what Bernanke is trying to accomplish.
And yes, jbog, none of this deals with the structural problems in the U.S. economy. But try telling us something that we don't already know.
Bladerunner
Market Data 
Markets 
AI
