Today, Paul Krugman of the New York Times, liberal Keynesian and chief free money proponent asks why some investors hate the Chairman of the Federal Reserve, Ben Bernanke.
I Am Become Ben, Destroyer of Worlds
Joe Wiesenthal reports on Bernanke rage among hedge funders, and sure enough, here’s Paul Singer declaring not just that he dislikes Bernanke’s policies but that BB is destroying the very fabric of society.
I still don’t have this rage entirely figured out. In substantive terms, it’s really hard to justify. After all, the Fed is normally expected to cut rates when unemployment is high and inflation low; with unemployment high and inflation running below the Fed’s target, easy money is just what the textbook says you should be doing (and quantitative easing is just an attempt to get some traction with normal policy rates up against the zero lower bound). It’s the economic situation — an economy so depressed by private sector deleveraging that conventional monetary policy has reached its limit — that’s radical here, not the Fed’s response.
What about the self-interest of the hedgies? A guess may be that given they way they’re normally rewarded, with fees based on total profits (not profits relative to a market-average baseline — e.g., 2 and 20), they find themselves hurting financially from a low-yield world. Also, for whatever reason old hedge fund guys tend to be goldbugs and hyperinflation hypochondriacs — hyperchondriacs? — who are simultaneously sure that BB’s policies will produce Weimar redux and furious that so far they have done nothing of the kind.
He wonders why everyone hates zero percent interest rates because they are good for everyone and that inflation is better than the alternative. Ask those who live off the interest how they’re doing. But its not interest rates that has everyone all pissed off. It is something else entirely.
BERNANKE HAS DISRUPTED THE PRIMAL FORCES OF CAPITAL’S NATURE!
Buy creating capital (no pun intended) through the simple act of digital printing, and buying “assets” day after day, week after week, month after month and year after year, he has seismically shifted the rules of investing, capital formation and the ebb and flow of markets.
He has single handedly so warped investor psychology that there is a bone-fide expectation (self-fulfilling) that markets only go in one direction.
It removes the opportunity that comes with the mispricing of assets in a moribund economic environment. Instead, most assets are simply “too expensive” based on any traditional metrics or historical norms and those prices are “justified” based on the flow of cash from the FED. And please don’t give me a boilerplate answer about how the market has a 15 multiple. That is mostly based on Apple’s huge earnings and the too big to fail banks and their fictitious “earnings”.
So, why is Ben hated? There you go. Plus, this is the same reason that this is “the most hated rally in history”.
Here is the speech that Mr. Bernanke should receive: