Global markets have found themselves again at the precipice.
Additional Friday losses made for a terrible week in European equities.
With a view that Thursday’s important policy developments and market reactions are best not expunged from our analytical consciousness, it’s worth a brief market recap.
All great monetary fiascos are forged upon a foundation of misperceptions and flawed premises.
The “Granddaddy of All Bubbles” thesis rests upon the view that the world is in the midst of the precarious grand finale of a multi-decade global Credit and financial Bubble. When a Bubble bursts, system reflation requires an even larger fresh new Bubble.
Bloomberg: “The October Jobs Report Gives Fed Officials a Green Light to Raise Rates.”
Bubbles always feed – and feed off of – good stories. Major Bubbles are replete with great fantasy. Even as China’s Bubble falters, the recent “risk on” global market surge has inspired an optimism reawakening. August has become a distant memory.
More than two months have passed since the August “flash crash.” Fragilities illuminated during that bout of market turmoil still reverberate. Sure, global markets have rallied back strongly.
Getting “history right” has been a CBB focal point From Day One. In last week’s media barrage, Dr. Bernanke repeatedly stated that fiscal policy had turned contractionary – (or at best neutral) suggesting that fiscal stringency was a key factor in the Fed sticking with ultra-loose policies. In Friday’s WSJ op-ed, Blinder and Zandi write, “Policy makers who botched the regulatory job before the crisis and shifted to fiscal restraint prematurely in 2011.”
They were wrong.
When the Washington establishment believed THE Bubble had burst back in 2000/2001, the leading academic espousing inflationism was beckoned to Washington to provide cover for the Fed’s experimental post-tech Bubble reflationary measures.
This week provided further evidence that the bursting global Bubble has progressed to a critical juncture, afflicting Core markets and economies.