I'm on shaky grounds trying to talk about macroeconomics, but I don't think loose monetary policy counts as a bubble, exactly.
It would be a bubble if everyone believed that loose monetary policy was going to last forever. The Fed is well aware of the trillions of dollars they've created and they have the ability to make it go away, once the economy is moving again to their satisfaction.
Planet Money did a segment on this last week.[1] The problem is, a lot of that money never made it out into the regular economy -- when the Fed creates money, it's really creating it for banks which are supposed to have incentives to loan it out. But mostly, according to that show, the banks aren't lending it out. At the very least, this shows they don't have the requisite irrational exuberance for it to be a bubble.
One thing for sure: it seems that banks have less incentive to make productive investments than the Fed thinks they do. A possible reason why: "manager capitalism"[2] yields higher incentives for short term speculation, bonuses, etc. Maybe a trickle of that money has made it into VC but I have no idea how to determine that.
It would be a bubble if everyone believed that loose monetary policy was going to last forever. The Fed is well aware of the trillions of dollars they've created and they have the ability to make it go away, once the economy is moving again to their satisfaction.
Planet Money did a segment on this last week.[1] The problem is, a lot of that money never made it out into the regular economy -- when the Fed creates money, it's really creating it for banks which are supposed to have incentives to loan it out. But mostly, according to that show, the banks aren't lending it out. At the very least, this shows they don't have the requisite irrational exuberance for it to be a bubble.
One thing for sure: it seems that banks have less incentive to make productive investments than the Fed thinks they do. A possible reason why: "manager capitalism"[2] yields higher incentives for short term speculation, bonuses, etc. Maybe a trickle of that money has made it into VC but I have no idea how to determine that.
[1] http://www.npr.org/blogs/money/2015/03/20/394274484/episode-...
[2] http://www.vanguard.com/bogle_site/sp20030611.html