With global risk markets staging a significant rally, it’s an appropriate time to update my bursting global Bubble thesis.
The current global backdrop remains alarming and, especially on bad days, darn right frightening.
A multi-decade experiment in unfettered “money” and Credit has encompassed the world. Unique in history, the global financial “system” has operated with essentially no limitations to either the quantity or quality of Credit instruments issued. Over decades this has nurtured unprecedented Credit excess and attendant economic imbalances on a global scale.
Few are yet willing to accept the harsh reality that the world has sunk back into crisis.
For seven years, I’ve viewed global rate policies akin to John Law’s (1720 France) desperate move to hold his faltering paper money and Credit scheme (Mississippi Bubble period) together by devaluing competing hard currencies (zero and now negative rates devalue “money”).
Back in early-December I posited that Mario Draghi had evolved into the world’s most powerful central banker.
January 15 – Bloomberg (Matthew Boesler): “The U.S. economy should continue to grow faster than its potential this year, supporting further interest-rate increases by the Federal Reserve, New York Fed President William C. Dudley said.
It’s being called the worst start for global securities markets ever.
The year 2015 was extraordinary. Incredibly, despite powerful confirmation of the bursting global Bubble thesis, market optimism remained deeply entrenched.
They finally did it – 25 bps, for the first rate increase since 2004. Surely it’s the most dovish Fed “tightening” ever. Indeed, it was really no tightening at all.