Former Fed Chairman Ben Bernanke posted a fairly humorous article on his blog earlier today, though I’m pretty sure the comedy was unintentional. He spent most of article defending the Federal Reserve, and claiming that their inflationary practices didn’t increase income inequality (which itself is pretty laughable). But among his many side splitting opinions, is his belief that stock prices are finally back on track, and implied that they will maintain their inflated climb. Here’s what he wrote.
Stock prices have risen rapidly over the past six years or so, but they were also severely depressed during and just after the financial crisis. Arguably, the Fed’s actions have not led to permanent increases in stock prices, but instead have returned them to trend. To illustrate: From the end of the 2001 recession (2001:q4) through the pre-crisis business cycle peak (2007:q4), the S&P500 stock price index grew by about 1.2 percent a quarter. If the index had grown at that same rate from the fourth quarter of 2007 on, it would have averaged about 2123 in the first quarter of this year; its actual value was 2063, a little below that. There are of course many ways to calculate the “normal” level of stock prices, but most would lead to a similar conclusion.
I guess Bernanke thinks this is normal:
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