The house of cards is being exposed – and a crisis of confidence is at this point unavoidable. A domino collapse of currencies, Credit and banking systems, and economies has become a frighteningly high probability outcome.
Every segment of the economy will be impacted – many deeply. Expectations for a quick recovery are wishful thinking.
This was inevitable. Aggressive monetary stimulus foments market distortions, while promoting risk-taking, leveraged speculation and latent risk intermediation dysfunction. Years of deranged finance ensured unprecedented economic imbalances and deep structural impairment.
It was as if global markets pulled elements from the 1994 bond market dislocation, 1997’s Asian Bubble collapses, the 1998 Russian/LTCM fiasco, and the 2008 market crash – and synthesized them for a week of ridiculous market instability and dysfunction…
The coronavirus outbreak will eventually pass, though I have serious doubts contemporary finance will pass this test.
Manias are accidents in the making. And after an agonizing week, markets crave for emergency central bank stimulus – yet another rash morning shot of the “Hair of the Dog.”
Coronavirus cases in China have surpassed 76,000. Deaths have reached 2,345.
Confirmed coronavirus cases almost doubled over the past week to 67,000. It’s only fitting that global stocks rally to record highs as the faltering China Bubble places the global Bubble in serious jeopardy.
Central bank monetary stimulus has succeeded in completely turning risk analysis on its head. In all the craziness, China fragilities are a positive.
Welcome to The First Major Pandemic Scare for –after a most freakishly protracted boom – a highly integrated world. Here’s what it could mean.