Reversing the Speculative Effect of QE Overnight

John P. Hussman, Ph.D.

As the Fed drove the monetary base to the most extreme level in history, the “reach for yield” didn’t stop at Treasury bills. With over $4 trillion in hot potatoes steaming uncomfortably in the hands of investors, they reached for yield in riskier securities (just as similarly uncomfortable investors chased mortgage securities during the housing bubble). This drove up demand for junk debt, leveraged loans, and equities, all of which became the beneficiaries of reckless but ultimately temporary yield-seeking speculation.

What makes this nearly beyond belief is that encouraging this yield-seeking speculation was one of Ben Bernanke’s intentional objectives. That’s not economics, it’s sociopathy.

How to Tell a Sociopath from a Psychopath

Sociopaths tend to be nervous and easily agitated. They are volatile and prone to emotional outbursts, including fits of rage. They are likely to be uneducated and live on the fringes of society, unable to hold down a steady job or stay in one place for very long. It is difficult but not impossible for sociopaths to form attachments with others. Many sociopaths are able to form an attachment to a particular individual or group, although they have no regard for society in general or its rules. In the eyes of others, sociopaths will appear to be very disturbed. Any crimes committed by a sociopath, including murder, will tend to be haphazard, disorganized and spontaneous rather than planned. 

Psychopaths, on the other hand, are unable to form emotional attachments or feel real empathy with others, although they often have disarming or even charming personalities. Psychopaths are very manipulative and can easily gain people’s trust. They learn to mimic emotions, despite their inability to actually feel them, and will appear normal to unsuspecting people. Psychopaths are often well educated and hold steady jobs. Some are so good at manipulation and mimicry that they have families and other long-term relationships without those around them ever suspecting their true nature.

DYI