Boom and busts in US in the past 2 decades

Jin's report on the previous 2 bubble busts in the US. A good study for those who wants to understand where economic booms and busts come from, and that stimulus and bailouts WILL NOT work. The booms and busts in the past century (not the subject of this short report) show the same patterns which I am presenting below.

Refer to the link for the numbers: http://www.federalreserve.gov/monetarypolicy/openmarket.htm#2008

Here's a summary:

  

Alan Greenspan, the supposed 'great maestro' of the Federal Reserve, printed a bunch of money out of thin air, thereby lowering rates from 8% in july 1990 to as low as 3% in 1992. This started the housing and stock market boom. He tried to increase rates incrementally, up to 6.5% in May 2000. Of course, this pricks the stock market bubble. The stock market fizzled out and culminated in the big bust in 2000-2001. 

To save his buddies and help George Bush, he again printed a whole bunch of money out of thin air, thereby lowering the rate to 1% by June 2003. This whole new bunch of money went into speculations in real estate (although I think its roots can be traced as far back as 1992). The Americans went on a GIANT consumption binge - borrowing, importing and consuming foreign products much more than what the Americans themselves can pay with exports. We saw people buying multiple homes and renovating them, in the hope of selling them to someone else. This wild speculation was further fuelled by the moral hazards of Fannie and Freddie, entities created by the Federal government to encourage home-buying.

Alan greenspan tried to increase interest rates by 0.25% every 3 months, from around early 2004 onwards, reaching 5.25% by June 2006. This action starts to prick the housing bubble. 

After taking over from Greenspan in Feb 2006, and towards the end of 2006, Bernanke should have noticed the real estate bubble about to burst. So he promptly lowered rates. He appeared in the media numerous times to assure everyone that everything is alright. The real estate bubble burst in late 2007-early 2008, although AFTER the bubble had already started to burst, Ben Bernanke was still reassuring everyone that everything is alright. (a video here for your viewing pleasure: http://www.youtube.com/watch?v=9QpD64GUoXw)

To save his buddies and help Obama, Bernanke printed a crazy whole new bunch of money out of thin air, thereby lowering the interest rates to 0-0.25% by late 2008, and had remained at that level till TODAY! He tripled the Fed's balance sheet from $900 million to close to $3 trillion. Expect massive inflation as the magic money works its way into the economy.

We see a pattern of booms and busts here, which is really the creation of the Central Bank. This 0-0.25% rate is ushering in the FINAL and BIGGEST bubble of them all --> the US government bond bubble/the USD currency bubble. Just like how the magic money flowed into the stock market in the 1990s, and how the magic money flowed into the real estate market in the 2000s, this new magic money is flowing into US government bond at a massive amount. The government is borrowing like never before. In 2013 and 2014, they have more than $5 trillion in debt repayment. We should see a big crisis, with investors dumping bonds and the USD. Some other events may happen in the interim which may take people's attention away from the US, but the end result will not change.

When we hear central bankers talk about exit strategies from the stimulus, they are lying. There's no exit strategy without a big collapse. Of course, maybe Bernanke's exit strategy is to exit and flee when his term is up for renewal in jan 2014.