“‘We have come dangerously close to the collapse of the entire system and the public seems to be completely unaware of that, including Congress and the regulators,’ Peterffy said…”
Central banking traditionally operated as a judicious and conservative institution, with an overarching mandate focused on promoting monetary and financial stability. Historically, recognition that missteps can impart such profound societal hardship necessitated an incremental and risk-averse approach. Stability and doing… Read More ›
Wealth was redistributed – and count me skeptical that the flow was from professional speculators to retail traders.
A significant “risk off” deleveraging event is likely now unfolding. The dislocation in the short stock universe has inflicted serious losses across hedge fund strategies. These drawdowns dictate risk control measures, moves to reduce exposures including long holdings.
This is one of the most dangerous and dishonest false narratives of our times. “…even though the amount of debt relative to the economy has gone up, the interest burden hasn’t.”
Does this ensure accelerating general price inflation? Not necessarily. There remains the possibility for the bursting Bubble scenario with collapsing asset prices, de-leveraging, illiquidity and resulting deflationary pressures. But especially after what was experienced in 2020, we must assume global central banks would respond in concert with multi-Trillions of additional monetary inflation.
For years now, my beginning of the year “Issues” pieces have featured a key Credit Bubble maxim: “The Bubble either further inflates or bursts.” While easier to dismiss than ever, this dynamic has never been as germane. The Fed-induced Bubble is raging out of control. Monetary Disorder is acute and highly destabilizing. Sustainability must be questioned.
The issue of “sound money” is viewed as hopelessly archaic, a reality that my 20 plus years of CBBs has failed to alter. The challenge to warning of the myriad pernicious dangers associated with Monetary Inflation is made no easier by markets creating Trillions of added perceived wealth
Whether it’s the U.S., China or elsewhere, Bubbles reach a point where risk becomes impossible to control.
The U.S. Bubble Economy structure has evolved into a voracious Credit glutton. There’s a strong case for significant additional fiscal stimulus. The case for boosting monetary stimulus is not compelling. Financial conditions have remained ultra-loose. Credit stays readily available for even the riskiest corporate borrowers, as bond issuance surges to new heights. While formidable, the remarkable speculative Bubble throughout corporate Credit is dwarfed by what has regressed to a raging stock market mania.