Here's a clip from Gluskin Sheff's David Rosenberg who explains the debt-fueled stock-buying frenzy that Bernanke has sparked with QE2:
"If there is one sure way to tell that the Fed has managed to create and nurture a speculative-led rally in the equity market, look no further than what is happening to investor-based leverage growth -- it's exploding off the page. Yes, that's right. Debit balances at margin accounts skyrocketed $20.7 billion in February. Only two other times historically have we seen leverage rise so much so fast and both times it was during a manic phase -- during the tech bubble of the late 1990s and the credit bubble just a short four years ago." ("Surging margin debt and the instability QE2 has created", Pragmatic Capitalism)
When investors start borrowing boatloads of money to buy stocks, then the "big crash" cannot be too far off. A sudden decline in stock prices can quickly turn into a full-blown rout as margin calls send investors racing for cover and debt deflation dynamics pull the economy back into another slump.
Bernanke created this problem. And when the markets implode, it's Bernanke who should be held responsible.(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
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