<blockquote>'Despite extreme valuations, investors’ fear of missing out is looking increasingly desperate. In market cycles across history, that has been an unfortunate impulse..'
- John P. Hussman, Ph.D.,
Exhaustion Gaps and the Fear of Missing Out, May 1, 2017</blockquote>
'There remains this dangerous misperception that economies can simply grow/inflate their way out of debt problems. This is at odds with reality..'<blockquote>'It’s not all that astounding that markets disregard troubling issues unfolding in Chinese finance. The bullish narrative is focused on Trump administration tax cuts, deregulation and infrastructure spending. Throw in a European recovery and hope for EM. Talk is clearly not of a historic global Bubble vulnerable to a massive and fragile Credit Bubble in China. That is an analytical perspective markets avoid like the plague.
..
The problem confronting Beijing – and global policymakers more generally – relates to the old “Austrian” analysis that Bubbles are sustained only by ever-increasing quantities of Credit creation. Inflate a Credit Bubble – with resulting elevated price structures throughout the real economy, asset markets and the financial sphere – and these various inflated price levels become progressively vulnerable to any meaningful and sustained slowdown in Credit creation.
There remains this dangerous misperception that economies can simply grow/inflate their way out of debt problems. This is at odds with reality. Especially late in the cycle, liquidity is funneled into inflating asset markets rather than to the real economy (suffering from overcapacity and waning profit opportunities). It becomes easier to make returns in finance than in goods and services. Meanwhile, policy measures to sustain the unstable boom further incentivize leveraging and speculating.
To this point, Chinese officials have “succeeded” in ensuring ever-increasing amounts of Credit. The upshot has been only more outrageous real estate (largely apartment) Bubbles, rapid Credit deterioration and deeper structural maladjustment.'
- Doug Noland,
Belly of the Beast, May 6. 2017</blockquote>
Context<blockquote>
'..When it comes to understanding the nature and destructive capacities of inflation, the “Austrians” put the “Keynesians” to shame.''Unsound Finance gets to the heart of the issue.''..China's Credit growth is on track to surpass $3.5 Trillion in 2017.''..the amount of leverage and excess that has accumulated in bond and Credit markets..'(Banking Reform - Monetary Reform) - '..debt is our biggest security threat..'</blockquote>