Americans might assume that the Fed learned some valuable lessons from the dot-com crash of 2000-2001. Unfortunately instead of addressing the growing problems in the U.S. economy after the dot-com crash, the Fed chose to repeat the same failed plan. The Fed once again cranked up the printing presses with the goal of driving down interest rates.
By surpressing interest rates to the psychotic level of one percent during the 2003-2004 time period, the Fed sent a powerful message to Wall Street that free market capitalism would be replaced by socialist-communist manipulation by the Federal Reserve System. The Fed was encouraging the ” Wall Street Casino ” to gamble at the expense of working-middle income Americans who would eventually pay the bills in 2008.
A new stock bubble began to grow ! With the S&P 500 at 840 in February, 2003, the S&P index began to grow in an exponential manner. Within one year, the index was up 36%. The stock bubble continued to grow until the S&P reached a new high of 1,560 in October, 2007. At this point most Americans believed in instant riches and were again heavily invested in equities.
Once again the bubble burst and America was plunged into the 2008 depression.This meant that $ 5 TRILLION of stock market wealth had disappeared. The S&P reached a low of 675 on March 9, 2009. This S&P low was 10% lower than it had been twelve years earlier when Alan Greenspan gave his ” Irrational Exuberance ” speech in December, 1996.
The stock market again reached new highs on November 22, 2013. The S&P 500 and the Dow are expanding upward and all indicators clearly indicate that this bubble will continue to grow through the first four months of 2014. Unfortunately, like all bubbles the Bernanke-Obama Bubble will burst. The question is: ‘ When will the Bernanke-Obama Bubble burst? ‘ The answer to that question will be discussed in the third article of this series titled: ” Financial Common Sense – Part 3. ”
R. Van Conoley