The second quarter was momentous for reasons beyond huge securities markets gains. Speculators and investors do “now believe central banks will exercise complete control over asset prices for the foreseeable future.” There is no longer any shred of doubt: Highly synchronized global market Bubbles are the ultimate “Too Big to Fail.”
The rapid recovery phase will prove dreadfully short-lived. Here’s why the next decline could be even worse than the initial COVID crash.
“The Fed is trapped.” It’s trapped by Bubble Dynamics – a historic Bubble that either inflates or collapses. What the Fed labels as “markets functioning” is at this point a “functioning” speculative Bubble. And feeding this dynamic exacerbates inequality, social instability and financial and economic fragility.
Federal Liabilities surpassed 100% of GDP for the first time in at least six decades. The quarterly Z1 data gets worse from there. Here’s where we’re headed and what it means.
I try to stay laser-focused on the analysis, conscious not to stray into the conspiracy realm. The Fed may buy S&P futures contracts at key market junctures and the government might at times fudge the numbers. I don’t know, and I’m not going there. Some will question the veracity of Friday’s payrolls data.
It’s easy these days to question securities market sanity. Yet it’s a fundamental tenet of Credit Bubble analysis that things turn crazy at the end of cycles. In the waning days of history’s most spectacular financial Bubble, should we be too surprised by Complete and Utter Craziness?
The world was late in a historic Bubble period prior to COVID. Whether in the markets, real economies, politics or geopolitics, Bubble Dynamics play a profound role. Understanding that enables us to foresee what comes next.
Depression was a consequence of egregious boom-time excess rather than the Fed’s post-crash failure to print sufficient money. Now COVID19 strikes at peak fragility.
At its roots, QE is a mechanism of wealth redistribution. Zero rates transfer wealth from savers to borrowers and speculators.
Moreover, there are myriad costs associated with central banks nullifying the business cycle.
Now on a weekly basis, we’re witnessing things that couldn’t happen – actually happen.