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By Michael Trinkle, ForexTraders The growth phase engineered by Ben Bernanke and his team at the Federal Reserve is a financial bubble. That much is understood by many, with reactions differing only to the extent that the bubble can be traded profitably, but as far as the consequences and dangers of bubbles and their bursting, there is not that much disagreement at least among those who recognize the nature of the recent expansion. The Fed is of course always responsible, at least partially, for turnarounds in the business cycle; ideally, it anticipates recessions and even initiates them by tightening, and triggers boom periods by keeping rates low. That is what the bank has been doing under Greenspan, and it is also what brought us to where we are right now. But there is a crucial difference between the 90s, when the investent environment was boosted by the end of Communism as a global challenge and the undeniable productivity gains that were effected by the digital revolution, and today, when the boom is being created almost entirely by a globally lax monetary policy stance, and artificially cheapened credit at least in the developing world market. That is the core and the crux of the matter – markets are being run by the Fed and a couple of powerful central banks, and unlike at any time before the recent crisis, the ups and downs of asset markets are entirely dependent on the availability of money for speculation and gambling. Seemingly disparate interests like the Chinese workers urge to feed his children, construction companies belief in the next empty skyscraper, bullishness of gold bugs, and even the peace of the world depend on the central banks keeping the game going, and little else. It is not a surprise, then, that central bankers and their political slaves (or partners, tactfully put) are extremely averse to any suggestion that their stimulus, or financial cocaine, be withdrawn from the addicted patient. The Japanese dont do anything about their holy Mount Debt-San, and to what extent this manic approach to money creation reaches in the U.S. was once again demonstrated when the Fed Chairman took off his mask of neutrality and told his audience at the U.S. House today that while addressing the deficit is “important”, it would be most effective “if we did that over a timeframe of 5 or 10 years and not try to do everything immediately”. This is the same hypocrisy adopted by Bernankes political colleagues over the years. Delay the payback time, keep borrowing, and invent arguments to justify your ” misrepresentations of the truth”, to quote the political doublespeak. This very same gentleman was by his own admission utterly unable to anticipate the subprime crisis which developed over a period of about 3-4 years under his nose, and he now expects us to trust his judgement about the future state of the U.S. economy some 5-10 years into the future. That may not make sense, but we shouldnt expect sense from the master of contradictions. In fact, not even the Representatives who are so fervently advocating cuts should be taken seriously, as their behavior is not at all very different in essence from the stance of the Chairman. The worthy Chairman knows that his legacy as a human being, his reputation as an academic, and his status as the Chairman all depend on his network of illusions survive as long as possible into the future. He is one and the same with his bubbles, he lives in them and believes them, and his intellectual life will end as soon as they pop. He has no responsibility, by law, to anyone but his conscience, and decency which require microscopic precision to be detected, even though their existence cannot be denied without evidence. We may doubt, but we cant and don`t refute. The U.S. Representatives, meanwhile, have only their political future to worry about, and the prospect of lynch mobs when everything ends up as Mr. Bernanke tries to delay. Neither the noble Ben Bernanke nor the worthy members of Congress are ignorant of where we and the world are headed. Neither party has a real desire, and indeed power, to stop or reverse our course, but they all speak and adopt various postures and grimaces as it suits their personal interests. And one would say that this is what we all are doing, since in a capitalistic system we are made to believe that the best outcomes are achieved for all when everyoe tries to maximize his personal gains. More articles from ForexTraders….