'I strongly believe that unfettered finance has been instrumental in the long period of U.S. deindustrialization – the transformation from a manufacturing powerhouse into an experiment in a consumption and services-based economic structure. Bubbling securities markets and booming Wall Street finance were integral to this fateful structural shift.
..
It’s all been so frustratingly predictable. Certainly not for the first time in history, the scourge of unsound money and inflationism has been so subtle that it goes virtually undetected. Instead of being appreciated as the root cause of economic, social, political and geopolitical trouble, monetary inflation is viewed as integral to the solution. Just a little more – just one more round of monetary inflation will do the trick and we’ll get back to normal. Right… It ensures hopeless addiction – with tremendous collateral damage. It was a troubling week where the absurdity of it all seemed on full display.'<blockquote>'It’s almost unbelievable that the November election offered a choice between about the two most divisive figures in American politics. It’s as if there are two completely divergent and irreconcilable views of how the world works, how the economy should operate and the role of the federal government. Somehow we’ve gotten to the point where there cannot even be a civil discussion – let along a meeting of the minds - on the most basic issues.
As has become a popular (Daniel Moynihan) quote to recite, “Everyone is entitled to their own opinions, but they are not entitled to their own facts.” These days, facts are in dispute and they’re often disputed hatefully. Okay, let’s assume the Administration does see some legislative success. What happens after the mid-terms?
It’s too easy to blame the political class. Yet politicians do what politicians do. There should be little doubt that the boom and bust dynamics experienced over recent decades have taken a toll on our nation’s social and economic fabric. And while many want to blame “globalization,” I believe much that we label “globalization” would be more accurately understood as fallout from years of unfettered global finance. Could NAFTA have been as destabilizing to U.S. manufacturing without endless cheap finance flooding into Mexico (and EM more generally). How dominant would China be today without essentially limitless amounts of virtually free “money” to finance over-investment the likes of which the world has never experienced?
I strongly believe that unfettered finance has been instrumental in the long period of U.S. deindustrialization – the transformation from a manufacturing powerhouse into an experiment in a consumption and services-based economic structure. Bubbling securities markets and booming Wall Street finance were integral to this fateful structural shift.
Millions of skilled jobs have been lost, replaced by millions of service sector positions where workers can toil for years and still possess skills of only marginal value. It’s now been decades of malinvestment and structural impairment. There has been profound overinvest in almost all things consumption related, which impinges both economic productivity and wage growth. Unimaginable monetary stimulus has spurred asset inflation and spending, but we’re now left with a historic Bubble and only deeper structural maladjustment.
Understandably, much of the population feels they’ve been shortchanged or even cheated. The ongoing inequitable redistribution of wealth becomes only more conspicuous as those fortunate enough to participate in the Bubble accumulate incredible wealth. There’s a general sense that the system is unfair and untrustworthy. Too many citizens no longer trust Washington and Wall Street, and they’re as well losing trust in our institutions more generally. There’s tremendous deep-seated anger for large groups of citizens that feel cheated and marginalized. Two-decades of spectacular boom and bust dynamics have left a tremendous amount of damage.
It’s all been so frustratingly predictable. Certainly not for the first time in history, the scourge of unsound money and inflationism has been so subtle that it goes virtually undetected. Instead of being appreciated as the root cause of economic, social, political and geopolitical trouble, monetary inflation is viewed as integral to the solution. Just a little more – just one more round of monetary inflation will do the trick and we’ll get back to normal. Right… It ensures hopeless addiction – with tremendous collateral damage. It was a troubling week where the absurdity of it all seemed on full display.'
- Doug Noland,
Crisis of Confidence, August 19, 2017</blockquote>
Context<blockquote>
'..six structural factors .. to prepare for global deflation.''Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.''..If you can’t see this next crisis coming, you’re not paying the right kind of attention .. Financial politicians..'</blockquote>