Friday, February 12, 2016

A Cunning NIRP Plan

Ben Bernanke: We need to create a wealth effect. Now! Any ideas?

Sensei Bobo McChuckles: What if we eliminated one of the ways investors/savers could easily increase their wealth?

Ben Bernanke: I suppose we could set short-term interest rates to zero, but what good would that do? How would eliminating one way to easily increase wealth make everyone wealthier?

Sensei Bobo McChuckles: It would convince some to embrace riskier assets more prone to momentum. Momentum is good. As money piles in it would encourage even more money to pile in. It would create a momentum-based virtuous cycle of paper wealth creation!!

Ben Bernanke: Genius! Any risks?

Sensei Bobo McChuckles: Well, there would be some downside if momentum ever started to falter.

Ben Bernanke: How bad could it get?

Sensei Bobo McChuckles: Virtuous bubble cycles depend on ever-increasing confidence. Let's just say that our conversation should never be made public.

Ben Bernanke: It would look bad if the markets knew that I was consulting a clown?

Sensei Bobo McChuckles: Exactly.

Several years pass.

Janet Yellen: We need to create a wealth effect. Now! Any ideas?

Sensei Bobo McChuckles: What if we eliminated one of the ways investors/savers could easily avoid losing money?

Janet Yellen: I suppose we could set short-term interest rates below zero, but what good would that do?

Sensei Bobo McChuckles: I'd explain but I'm actually off to perform at a birthday party in Tokyo for a little girl with big dreams. Dogs! Ponies! Clowns!

Janet Yellen: A Japanese dog and pony and clown show?

Sensei Bobo McChuckles: Exactly. Would you believe that some people actually wonder how I became a Federal Reserve financial consultant?

5 comments:

dearieme said...

Confucius he say: man holding TIPS chuckling at moment.



Welcome back.

Stagflationary Mark said...

dearieme,

I am not the legendary Chinese clown known as Chuck Ling! I did meet his brothers Pump Ling and Dump Ling though. Man, they've certainly been busy lately. ;)

midwesterngirl said...

It's great to see you posting again! We all know how NIRP will end...War.

Shookie said...

Welcome back.

Stagflationary Mark said...

I've been AWOL. Sorry about that. Other than today's post, will probably return to that state. Sorry about that too. ;)