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.
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.