<blockquote>'This is what I mean by Code Red: frantic pounding on the central bank panic button that invites tit-for-tat retaliation around the world and especially by emerging-market central banks, leading to a DOUBLING of the assets shown in the chart below and a race to the bottom, as the “guardians” of the world’s primary currencies become their executioners.'
- John Mauldin,
..The Cost of Code Red, April 26, 2014</blockquote>
<blockquote>'..Throughout EM, I see financial asset prices that in no way reflect the huge risks overhanging vulnerable Credit systems and real economies. I believe China is an unfolding financial disaster with history’s most maladjusted economic structure. Throughout Asia, massive overcapacity portends trouble for financial assets.'
- Doug Noland,
Serial Booms and Busts, May 2, 2014</blockquote>
'..frankly, I think it’s worse than 2007..'<blockquote>'.. It all looks and feels like 2007. And frankly, I think it’s worse than 2007, because then it was a problem of the developed economies. But in the past five years, all the emerging economies have imported our ultra-low policy rates and have seen their debt levels rise. The emerging economies have morphed from being a part of the solution to being a part of the problem.
..
The fact of the matter is that if you have had 25 years of central bank and government bailout whenever there was a problem, and the bankers come to appreciate that fact, then we are back in a world where the banks get all the profits, while the government socializes all the losses. Then it just gets worse and worse. So, in terms of curbing the financial system, my own sense is that all of the stuff that has been done until now, while very useful, Basel III and all that, is not going to be sufficient to deal with the moral hazard problem. I would have liked to see a return to limited banking, a return to private ownership, a return to people going to prison when they do bad things. Moral hazard is a real issue.'
- William R. White (
Chief Economist Of Central Banks' Central Bank: "It's Extremely Dangerous... I See Speculative Bubbles Like In 2007", April 11, 2014)</blockquote>
'..To wait patiently in the expectation of fertile soil and rain is not an act of pessimism, but an act of optimism and informed experience.'<blockquote>'A final note – in my view, it is incorrect to believe that the 2008-2009 market plunge and financial crisis were caused by the housing bubble. The housing bubble was merely the
expression of a very specific underlying dynamic. The true cause of that episode can be found earlier, in Federal Reserve policies that suppressed short-term interest rates following the 2000-2002 recession, and provoked a multi-year speculative “reach for yield” into mortgage securities. Wall Street was quite happy to supply the desired “product” to investors who – observing that the housing market had never experienced major losses – misinvested trillions of dollars of savings, chasing mortgage securities and financing a speculative bubble. Of course, the only way to generate enough “product” was to make mortgage loans of progressively lower quality to anyone with a pulse. To believe that the housing bubble caused the crash is to ignore its
origin in Federal Reserve policies that forced investors to reach for yield.
Tragically, the Federal Reserve has done the same thing again – starving investors of safe returns, and promoting a reach for yield into increasingly elevated and speculative assets. Thinking about the crisis only from the perspective of housing, investors and policy-makers have allowed the same process to play out more broadly in the equity market. On a quantitative basis, the overvaluation of the equity market is greater percentage-wise, and greater dollar-wise, than the overvaluation of housing in 2006-2007. We fully expect that from present valuations, U.S. stocks will produce zero or negative returns on every horizon shorter than 7 years. There is no antidote or alchemy that will allow a buy-and-hold approach to squeeze water from this stone. There is no painless monetary fix that will shift the allocation of capital toward productive investment and away from distortive speculation. Instead, one must wait for the rain. Impatient, crowd-following investors are all too willing to wastefully scatter seeds onto this parched desert, thinking that this is their only chance to sow. To wait patiently in the expectation of fertile soil and rain is not an act of pessimism, but an act of optimism and informed experience.'
- John P. Hussman,
It Is Informed Optimism To Wait For The Rain, March 10 2014</blockquote>
Context (Praxeology) - Review: Money, Bank Credit, and Economic Cycles<blockquote>
(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'Fourteen true stories - 14 – Diaries of the Great War'Entrepreneurship, as decisive action under uncertain conditions, is at the very heart of a market economy.'</blockquote>