Doug Noland: Washington Finance and Bubble Illusion

...

Central banks should not be in the business of favoring individual asset classes, sectors or groups in society. Never should a small group of unelected officials have such discretion to create Trillions of "money" and allocate wealth. After all, if "printing" Trillions to buy marketable debt was such a fine idea, why did central bankers wait until deep crisis to implement such a doctrine?

The new regime that developed specifically favored securities markets, Wall Street and the wealthy. It has fancied the financial speculator at the expense of the saver. The new regime favored financial engineering to productive investment -- the white collar to the blue collar. There was no problem seen with deindustrialization and persistent huge Current Account Deficits. No issue whatsoever exchanging new financial claims for Chinese imports.

The new regime has spurred wealth redistribution that is at the root of a divided country, political dysfunction and escalating geopolitical risk. And there is little mystery surrounding weak economic underpinnings, dismal productivity trends and stagnant wages and living standards. Contemporary finance has proven itself especially deficient in allocating resources throughout the economy. Markets have been over-liquefied, too distorted, grossly speculative and too monstrous to be an effective mechanism for resource allocation.