Risk on

The Bernanke Put has pulled up in a tank on the front lawn of Greenspan's paltry moral hazard.

There's no more pretense that US central banking is about price stability in anything. Indeed, the US has embraced the complete opposite with the FOMC now openly aiming to boost asset and consumer prices. Not to mention, and Bernanke can't say it but obviously knows it, devaluing his currency.

In short, there is no price in America that is not under sustained and total assault by its central bank.

As highlighted at this blog many times, the fallout from this policy for emerging markets and those leveraged to them are profound.

There is no doubt in this blogger's mind that QEII has already staved off the double dip recession that was imminent in the US in August through reflation of the stock market. And to that extent QEII has worked.

But over the longer term, the US will now face another asset bubble, driven in part by an even bigger emerging market and commodities bubble as the economies that have until now relied upon export-led growth struggle between rising currencies and the offset of stimulating internal demand.

And all of the capital flows seeking to arbitrage this pricing volatility are still mediated by the same broken, ill-disciplined, risk-mad, sentiment-driven global market, which is itself beholden to the same global banks and other players that very nearly destroyed the world in the last cycle.

This blogger doesn't know how long the reflation will last. It could be killed by US housing, a sovereign default in Europe or a full-blown trade war any minute. It can only observe that we have learned nothing.