"They're printing money because they're scared of what might happen if they don't. his very real political dilemma is what is missing from the simplistic understanding of inflation as always and everywhere a monetary phenomenon."
- Albert Edwards, strategist at Societe Generale
On Wednesday markets were stunned with Bernanke's decision to refrain from tapering of its $85 billion large-scale asset purchase programme. The programme, which is intended to stimulate the struggling economy, has raised some concerns about runaway inflation and currency destruction. A couple of days after the unexpected announcement, Societe Generale veteran strategist Albert Edwards said policymakers around the world are creating conditions for the next global credit bubble, especially Fed's Chairman and U.K. Finance Minister George Osborne. Bernanke's support of further monetary stimulus is pushing the economy towards another boom that is posing certain risks for the economy. Edwards was surprised that dovish Bernanke was able to persuade other FOMC members to stay pat on their policy. According to his estimates, even a $5 billion taper, which would lead to a modest reaction, would be welcomed as following through with Bernanke's previous statements, and would eliminate market uncertainty. Eventually, the Fed has lost control over its stimulus programme, and underestimates just how much panic the world "taper" would cause in financial markets.
Meanwhile, the case of growing bubble for Britain's housing market already seems inevitable as home prices soared 3.3% in the 12 months to July, as always, with London leading the way with double-digit house price inflation.
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