I am comfortable predicting powerful contagion effects – a likely chain reaction of de-risking/deleveraging that will reverberate across global markets. There should be no doubt that Bubble dynamics function poorly (being kind) in reverse. I can’t help but think that global bond markets are sending a warning.
It will be a heck of a challenge to explain this period to future generations. Decades of inflation culminated in unmatched monetary disorder. There is literally “money” sloshing everywhere (for the taking) – at home and abroad. Credit is readily available to even the lowest quality borrowers. Unprecedented speculative leverage fuels myriad Bubbles. Easy money and asset inflation breed corruption.
Monetary disorder evolved to become deeply systemic. It was on full display this week, especially Friday. The mania and the frog in the pot syndrome. Instability has been percolating (fragilities building) for so long that we’re numb to it all. In the markets, it’s more than comfortably – it has become exuberantly, manically numb.