'December 27 – Bloomberg (Vince Golle): “The last time Americans’ optimism about the stock market registered such a dramatic one-month surge was during the dot-com boom. As stocks reached a record, the share of households anticipating higher equity prices a year from now surged to 44.7% in December from 30.9% a month earlier, the biggest monthly advance since November 1998…” '<blockquote>'But with global QE in the neighborhood of $2.0 TN annually and hundreds of billions flowing out of China, the vulnerable Periphery enjoyed a liquidity windfall. Global fragilities were in the short-term ameliorated by unprecedented global rate and liquidity dynamics. The year began with the world at the precipice of a bursting Bubble. The bottom line is that the global Bubble persevered and then inflated significantly.
..
I expect future historians will see 2016 chiefly through the geopolitical perspective. How can market happenings compete against Brexit, the Trump phenomenon and Renzi’s failed political reform referendum (to name only the most obvious)? But clearly unstable markets, unsettled societies and simmering geopolitical turmoil are more than coincidental. At their roots, all can be traced to a prolonged period of unchecked finance, central bank activism and the general effects of inflationism.
Consequences were on increasing display throughout 2016. There was the rising tide of anti-establishment populism that seemingly became a global phenomenon. There was the deep discontent that led to Brexit and President-elect Trump. This was part of general instability and uncertainty that afflicted financial markets – in the process ensuring “whatever it takes” went to even crazier extremes. And, almost ironically, this is the type of mercurial social and monetary backdrop conducive to powerful markets reversals and attendant bouts of hope and optimism.
December 27 – Bloomberg (Vince Golle): “The last time Americans’ optimism about the stock market registered such a dramatic one-month surge was during the dot-com boom. As stocks reached a record, the share of households anticipating higher equity prices a year from now surged to 44.7% in December from 30.9% a month earlier, the biggest monthly advance since November 1998…”
As an extraordinary year came to an end, confidence overtook caution. Just kind of pushed it aside. Markets became willing to dismiss myriad risks – all the uncertainties associated with China, Italy, rising populism, terrorism, geopolitical, etc. It was as if everyone just turned tired of worrying. There was as well a willingness to imagine the best of President-elect Trump’s policies, while disregarding all the uncertainty that comes with such a unique personality. It’s going to be an incredibly fascinating 2017.'
- Doug Noland,
2016 Year in Review, December 31, 2016</blockquote>
'..do not let the future disturb you. Meet it with knowledge, courage, and entrepreneurial daring; it is yours to win or to lose.'<blockquote>'Most Americans are at a loss about the mysteries of foreign trade and international relations. Some media celebrities and government officials are quick to point to foreign causes; others may wax eloquent about American affluence and the joy of spending and consuming. Few economists find primary fault with U.S. Government policies, in particular the Federal Reserve policy of easy money and credit. They charge that Federal Reserve governors habitually ignore the market rate of interest at which the demand for loanable funds tends to match the supply. In order to stimulate economic activity, Fed governors like to keep their rates far below market rates which causes the stock of money and credit to expand. Goods prices rise, which induces American businessmen to shop abroad and foreign buyers to reduce their purchases of American goods. Our trade deficits are the inevitable result of Federal Reserve monetary policies.
..
Can you visualize the coming readjustment? How and when should I brace for it?I doubt that we’ll ever see a run-away inflation similar to those we can observe all over the world. In the United States I expect the elaborate house of debt to deteriorate long before the dollar crumbles completely. I fear for the financial institutions that are enjoying the boom, extending their credits and maximizing their profits. As soon as interest rates return to market levels the boom will give way to readjustment, that is, stagflation or recession. Housing prices will decline, which will exert great pressure on the very collateral foundation of the housing boom. Having granted a mortgage loan of 80 to 90 percent of the value of a house, the lender faces substantial losses when its market price falls by 30 or 40 percent. Similarly, as soon as a recession descends on the country and unemployment rises to painful levels, many consumer loans are likely to default inflicting serious losses on lenders. In short, I expect the house which debt built to crumble long before the U.S. dollar goes to its glory. A wise man guards against this scenario by following Thomas Jefferson’s advice: “Never spend your money before you have it.”
Total U.S. debt (government, corporate, and individual) is estimated at some $37 trillion, which is more than three times gross national product. It doubled over the past five years and continues to grow every day. In addition, the U.S. Treasury reminds us of entitlement programs with unfunded liabilities of some $44 trillion. You may say, our children will be able to handle our debt. You may be right! They may follow in our footsteps and load our debt together with their own on their children, in a long sequence of generational debt passage. At the same time they will depreciate the currency and thus reduce the value of the debt. The value may fall at various rates, depending on the choices by the politicians in power. Whatever they may be, do not let the future disturb you. Meet it with knowledge, courage, and entrepreneurial daring; it is yours to win or to lose.
- Hans F. Sennholz,
Deep in Debt, Deep in Danger, 2004</blockquote>
Context<blockquote>
'Planned Chaos - '..interventions into the free market, no matter how large or well meaning, will continue to fail..''..a bastardized form of central planning which in turn is driven by China’s baroque political economy..''..Global policies since the 2008 crisis have spurred the expansion of speculative finance to multiples of pre-crisis levels..''..The same combination prevailed at the 1929, 1972, 1987, 2000, and 2007 market peaks..''Europe’s banks .. a “very fragile situation”..''..Like monetarists, Keynes held no capital theory .. the role time plays..' - Jesús Huerta de Soto</blockquote>