Some will look at the KIK deal and conclude that this is evidence of a healthy capital market. I see it it quite the opposite. This type of financing is an accident waiting to happen. The fact is that Bernanke’s money policies have long since crossed over from being something that contributes to economic health and stability, to something that is adding to systemic risks and instability. I suspect that Bernanke is well aware of this fact, so are other members at the FRB. If you’re looking for evidence that Bernanke has pushed the string too far, the KIK deal is all you need to look at.
If Bernanke is honest with the facts, he would wind down QE as fast as he could. If he doesn’t, then his warnings over the past few months about the risks of cheap money are just a lie. So Ben has a hard choice in front of him. Either he backs off of his reckless money policy, or his legacy goes up in smoke. The bubbles are popping up all over in 2013, I don’t think that Ben wants to go down in the history books as another Fed Chairman that creates bubbles that come crashing down.
I don’t know if Ben’s got the guts to back off. He might just try to hang on until his term ends next year and then run for the hills.
And if he does try to back off and the markets start to wobble, he’ll be called up for a few ‘discussions’ at the White House. After all, there’s a facade to be kept up here.