"But we travel in a world with a systemic bias to optimism that
typically chooses to avoid the topic of the impending bursting of
investment bubbles. Collectively, this is done for career or business
reasons. As discussed many times in the investment business, pessimism
or realism in the face of probable trouble is just plain bad for
business and bad for careers. What I am only slowly realizing, though,
is how similar the career risk appears to be for the Fed. It doesn't
want to move against bubbles because Congress and business do not like
it and show their dislike in unmistakable terms. Even Federal reserve
chairmen get bullied and have their faces slapped if they stick to their
guns, which will, not surprisingly, be rare since everyone values his
career or does not want to be replaced à la Mr. Volcker.
So, be as optimistic as possible, be nice to everyone, bail everyone
out and hope for the best. If all goes well, after all, you will have a
lot of grateful bailees who will happily hire you for $300,000 a pop."
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