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Thread: Bubbles thread

  1. #1321
    Senior Member sundancekid's Avatar
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    Quote Originally Posted by LivinLOS View Post
    The unwinding of this will create events never before seen globally.. Previous periods of credit excess were never global in nature.
    Well, of course we're going to have another bust sometime in the future. Guess that cyclical element is what Minsky and the Austrians have in common. Although we would differ on the actual causes...

    I've said for years already that the stock market is overpriced, and certainly would not rule out a large correction or even a recession in the near future. But 2008 was a real Minsky Moment, and we're no where close to those conditions today in my opinion. As I said last year, we're more like 1998 than 2008.

    To address you latest scary chart, Minsky (and Keen) mostly focus on private debt. That's were the irrational exuberance comes from. As an Austrian, you tend to focus mostly on federal debt. I've been saying for years that the QEs would not be inflationary, and that has proven correct both in the US and Japan. And for the record, QE in the US ended exactly when I said it would 555. Looking forward, the Fed will have no problem unwinding these securities. They might just hold them to maturity, and as a consequence will have no impact on inflation or on the private sector’s balance sheet. That will probably happen over decades, and IOER might just become the new standard... Certainly no Mother of Bubbles on the horizon as I see it.

    EDIT: Ok, perhaps that post was too US centric. Very interesting to follow what's happening in China at the moment. As Rifkin and other have pointed out, we may be on the cusp of a third energy revolution. Difficult to say who's going to come out ahead, but the US is certainly lagging in that respect.
    Last edited by sundancekid; 29th April 2017 at 21:41.
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  2. #1322
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    Why the gloom? .... a quarter or 2 of slower growth and it's bubble bursting time!

    Someone has to stay optimistic .... perhaps because there are piles of (corporate) money sloshing around looking for yield ....

    Global pandemic - nope; imminent asteroid impact -nope; super volcano - nope; WWIII - nope .... even more mundane things like rampant inflation - nope.

    Sure - we're due for a late decade dip - maybe even a bit of recession, but great unwind - nope. QE infinity here to stay and while the global population keeps expending, added now by our robot 'helpers' - don't see anything catastrophic on the near horizon and probably (hopefully) my lifetime.
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  3. #1323
    Senior Member Waharoa's Avatar
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    ^Hang on... what about Islam?

  4. #1324
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    What about it...? :-)

  5. #1325
    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by K2 View Post
    Why the gloom? .... a quarter or 2 of slower growth and it's bubble bursting time!

    Someone has to stay optimistic .... perhaps because there are piles of (corporate) money sloshing around looking for yield ....

    Global pandemic - nope; imminent asteroid impact -nope; super volcano - nope; WWIII - nope .... even more mundane things like rampant inflation - nope.

    Sure - we're due for a late decade dip - maybe even a bit of recession, but great unwind - nope. QE infinity here to stay and while the global population keeps expending, added now by our robot 'helpers' - don't see anything catastrophic on the near horizon and probably (hopefully) my lifetime.
    And there was me thinking I had you to the darkside..

    QE infinity here to stay is where you lose me.. Its been tried, many many times in the history of fiat money, never has it been successful.

  6. #1326
    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by sundancekid View Post
    To address you latest scary chart, Minsky (and Keen) mostly focus on private debt. That's were the irrational exuberance comes from. As an Austrian, you tend to focus mostly on federal debt.
    Thats not a correct impression of my focus.. QE and low interest rates are the enablers of the debt, the federal debt is simply a easy to point to symptom, an easily shown, and somewhat accurately recorded therefore easy to track, metric of the problem. Fractional reserve banking itself (when freed from commodity or other backing as started in 71) is the danger.

    We now live in a world where the entire global banking system cannot survive shrinking of balance sheets, something that happens in ordinary business cycles. QE and cheap / free money is trying to paper over that basic fundamental flaw, and in doing so creating massive wealth inequality between those with investable assets piggybacking the irrational exuberance, and those without it, who is seeing the middle class being crushed by these policies.

    Stock market valuations are a symptom, hotspot property markets are a symptom, pension fund failures and underperformance is a symptom, debt loads both public and private are a symptom, the fact that an IMF report says estimated 20% of US corporations would fail if interest rates rise even mildly is a symptom, the financial death of savers and push into consumption is a symptom, the belief in a 'fed put', implicit backstops, and to big to fail is a symptom, (I can keep on all morning but you get the idea)... These symptoms show an unsustainable system, my picture of global QE shows an unsustainable system, beijing property prices show an unsustainable system, etc etc etc.. That which cannot be sustained will not be.

    Saying theres no inflation when stock markets reach new highs with terrible earnings, saying theres no inflation when a average shanghai apartment costs 800k in a place where minimum wage is 200 USD a month, or west Australian homes are 12 times earnings, saying theres no inflation when every 3rd financial article is saying the record price of wine, cars, art, etc.. Those show a missunderstanding of what inflation is. The liquidity isnt distributed evenly through the system, in fact that concentration of liquidity is even more likely to make it vanish in a puff of smoke when its needed.

    Anyway, maybe I should lay off the coffee..

  7. #1327
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    All of your observations are accurate LIL, what is missing is a catalyst or a reason for any kind of bubble to burst.
    Inflation doesn't seem to manifest anymore unless you are outside the mainstream financial system.
    Infinity QE must be being offset by something new. Expanding markets, populations and middle classes must be absorbing the shock for now. I believe this is it, simply because the belief of those middle classes in the current system is virtually unshakeable. Why else would they work for decades, and pour every cent that have in, just to pay for a roof over their heads? How else would they believe in a market (Pensions/Superannuation) which "guarantees" a comfortable lifestyle for them in retirement? No, their bubble won't burst, until the day they realize it just ain't going to happen for them...
    Last edited by Changone; 30th April 2017 at 14:19.

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  9. #1329
    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by Changone View Post
    All of your observations are accurate LIL, what is missing is a catalyst or a reason for any kind of bubble to burst.
    Inflation doesn't seem to manifest anymore unless you are outside the mainstream financial system.
    Infinity QE must be being offset by something new. Expanding markets, populations and middle classes must be absorbing the shock for now. I believe this is it, simply because the belief of those middle classes in the current system is virtually unshakeable. Why else would they work for decades, and pour every cent that have in, just to pay for a roof over their heads? How else would they believe in a market (Pensions/Superannuation) which "guarantees" a comfortable lifestyle for them in retirement? No, their bubble won't burst, until the day they realize it just ain't going to happen for them...
    Things appear sustainable until the appearance changes, that can take a long time as its purely the sentiment that changes, not the issue... While the collective belief, even in intelligent, market educated folks like Kev, think that QE infinity can work, it will (all the while causing ever greater dislocations) But it only takes a small crack in that to send the dam breaking. What makes it (those 3 most dangerous words in investing) different this time, is that its global, every country is in the same cycle, there will be no pockets of growth or safe havens geographically. Previous fiat bubbles were always restricted to locations, countries and societies, now its a global game.

    As to pensions, its all part of the boomer generation.. They had the ride, the resources, they spent them on the now, in fact over spent them on the now incurring mind blowing debt, and have near zero saved for retirement. They somehow believe that the contributions they made, which were consumed and more at the time, on themselves, are going to be there for them.

    Thats going to be a rude awakening.

  10. #1330
    Senior Member sundancekid's Avatar
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    Quote Originally Posted by LivinLOS View Post
    QE infinity here to stay is where you lose me.. Its been tried, many many times in the history of fiat money, never has it been successful.
    Coming back full cycle then it seems 555. Since we last had this discussion I still note that there are no commodity based currencies anywhere in the world. Huh? They're all fiat, and for very specific reasons. And my prediction still stands that no major currency will ever move off fiat in our lifetimes. Would be an incredibly stupid move.

    And this would be my major, fundamental disagreement with the Austrians. I believe you still conflate government and private debt as if they're even remotely the same. As a single currency issuer --- with no debt in a foreign denomination --- you simply cannot run out money. The only real constraint on spending in that regard is inflation. That does not mean you can just spend willy nilly of course. But people have been making the Widowmaker bet on Japanese debt for 3 decades already... and there's a reason why it has not panned out... Many reasons in fact.

  11. #1331
    Senior Member sundancekid's Avatar
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    Quote Originally Posted by LivinLOS View Post
    As to pensions, its all part of the boomer generation.. They had the ride, the resources, they spent them on the now, in fact over spent them on the now incurring mind blowing debt, and have near zero saved for retirement. They somehow believe that the contributions they made, which were consumed and more at the time, on themselves, are going to be there for them.

    Thats going to be a rude awakening.
    That's at least a subset that I would agree with. Forget about government debt for moment, and focus instead on demographics. We've already reached "peak baby" thanks mostly to education and contraceptives in South East Asia. Actually kind of amazing how the education and awareness in countries like Bangladesh have penetrated. Would anyone hazard a guess what the birth rate is in Bangladesh is compared to Europe? As it looks, the main population growth will be in Africa over the next decades.

    So a country like Japan is in a bind right now because of an ageing demographics. Not government debt. Perhaps they should've accepted more immigrants?

    Yes, I do get discouraged when people deny science and the fact that our world is getting warmer by the decade. And ignorance seem to have become a virtue rather than a vice. But I'm actually quite optimistic of what the future holds... Question is how we treat new technological advances, and how people gain access to them.
    Last edited by sundancekid; 30th April 2017 at 23:06.

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