Submitted by Tyler Durden: Ex-Fed Governor Kevin Warsh provided much food
for thought during his appearance on CNBC this morning. Over the course
of the following clip, he addresses concerns from just how bad the
reality of the global economy must have been for Bernanke and his merry
men to have gone "all-in" aggressive - reflecting on this as a panic-like reaction during times now where we are not panicking, the ineffectiveness of QE3 "iPhone 5 will do more for the real economy than QE3",
fears over how bad this could get as "there is a reason 'exit' is a
four-letter word." Warsh notes the paradox of Bernanke "trying to pull a
rabbit out of a hat' each time the economy loses control while calling
for Washington to do more - as the politicians know "there's not much we
need to do, Bernanke has our back." We are not in a panic, we are in a
lousy recovery and when asked what he would do, Warsh added that there
is a ton Washington can do - and the key difference between him and
Bernanke is the ranking of costs and benefits - indeed with WTI already
over $100/bbl, the costs are rising.
His comments are far-ranging but mostly 'disappointed' in our view that Bernanke has done this. "We are running these program like infomercials" is how he describes the short-term actions of the Fed, but the following conclusion is perhaps the most humbling for any and every bull long-only manager who has backed up the truck of unreality:
Look at the markets now; asset prices continue to melt up. When asset prices are driven less by fundamentals and more by speeches and policies coming out of Washington, you're taking risks. Risks are highest in the economy when measures of risk are he lowest; and when I look at the VIX at this level and you compare that to the headlines you read every morning, they certainly don't seem in sync, and that's exactly when shocks happen.
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