'To put things into perspective: Average inflation in the world has jumped to 10.2%, the first double-digit increase since statistics began.'
- Holger Zschaepitz (
Source, October 14, 2022)
'Yet there’s an even more historic experiment in Bernanke inflationism that continues to unfold in China..''We’re already seeing evidence of the failure of Bernanke-style central bank inflationism. The Bank of England’s printing press has to somehow perform as buyer of last resort for a collapsing bond market Bubble, while also reining in inflation. Bernanke ridiculed the Bank of Japan until they finally succumbed to egregious money printing. The resulting debacle is at the cusp of being exposed.
Yet there’s an even more historic experiment in Bernanke inflationism that continues to unfold in China. The money and Credit floodgate is propped wide open. And Beijing will surely recapitalize its massively bloated banking system as they see fit. But will ongoing monetary inflation forestall Bubble collapses? Of course not. Will avoiding bank runs prove decisive in sustaining China’s boom cycle? Bank runs or not, China’s Credit system is on an unsustainable course. It’s nothing short of epic “Terminal Phase Excess” – with massive Credit growth of rapidly deteriorating quality feeding exponential growth in systemic risk.
China’s growth in Aggregate Financing jumped to $490 billion during September, up from August’s $340 billion and 22% ahead of September 2021 ($404bn) – to a record $46.9 TN. Year-to-date growth of $3.85 TN is about 12% above comparable 2021 – and only 6.5% below 2020’s historic Credit onslaught. Aggregate Financing posted 10.5% one-year growth, perilously racing ahead as the deeply maladjusted Chinese economy stagnates. Recipe for currency crisis.
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October 12 – Financial Times (Laura Noonan): “The Bank of England has said ‘lessons must be learned’ from the pensions crisis that triggered an unprecedented intervention in the UK gilt markets, and stressed the need for action to mitigate similar risks in other parts of the financial sector. ‘While it might not be reasonable to expect market participants to insure against all extreme market outcomes, it is important that lessons are learned from this episode and appropriate levels of resilience ensured,’ the BoE’s financial policy committee said… The BoE also warned that UK households and companies were under strain as high interest rates, high energy costs and the cost of living crisis combined to make it harder for them to pay bills and loans. Mortgages were a particular concern, with the bank warning that household debt levels could hit historic highs.”The UK is a microcosm..'
- Doug Noland,
New Cycle Realities, October 14, 2022
‘Why did Strong pursue a policy that now can seem only heedless, dangerous, and recklessly extravagant?’‘One point is undisputed: the autocratic ruler of the Federal Reserve System, from its inception in 1914 to his death in 1928, was Benjamin Strong, a New York banker who had been named governor of the Federal Reserve Bank of New York. Strong consistently and repeatedly used his power to force an inflationary increase of money and bank credit in the American economy, thereby driving prices higher than they would have been and stimulating disastrous booms in the stock and real-estate markets. In 1927, Strong gaily told a French central banker that he was going to give “a little coup de whiskey to the stock market.” What was the point? Why did Strong pursue a policy that now can seem only heedless, dangerous, and recklessly extravagant?’
- Murray N. Rothbard,
Reliving the Crash of ’29, November 12, 1979
'..the long boom period saw a proliferation of uneconomic, negative cash-flow businesses and enterprises. In Austrian Economics parlance, it’s been epic malinvestment.''Little did I know at the time that it would be the first of many crises I would witness, analyze and reflect upon. There were the S&L and banking crises in the early nineties; the 1994 bond market and derivatives crisis; the Mexican ‘tequila’ crisis in ’95; the devastating Asian Tiger Bubble collapses in ’97; the LTCM/Russia debacle in ’98; the bursting tech bubble in 2000; 9/11; the 2002 corporate debt crisis; the collapse of the mortgage finance Bubble in 2008; the 2011/2012 European debt crisis; and the 2020 pandemic crisis – just to name the most consequential. But I’ve seen nothing in my career as alarming as today’s environment – and it’s not even close.
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So, I’ve dedicated my Friday nights for the past 24 years to chronicling the evolution of finance and policymaking and the inflation of the greatest Bubble in the history of mankind.
I’m here today with what I believe is a critically important message. The global Bubble – history’s greatest Bubble - is bursting. The previous cycle has ended, and a new cycle has begun to unfold. We are about to commence an adjustment period that I fear will shake us to the core.
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At this point, we’ve become numb to all the excess – excessive debt, speculative excess, reckless monetary inflation and policymaking. My sense is that in the markets, within the business community, throughout the country, we know there are serious issues. Yet, individually we’re all determined to hold our ground.
Right now, I sense a major global earthquake. There are multiple fault lines. The ground is giving way in China. The ground is giving way in Europe. The emerging markets are fragile. Japan is an accident in the making. And these various fault lines are linked
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..I then watched as derivatives were instrumental in market crises in '94, ’95, ’97, ‘98, 2000, 2008, 2011, and 2020. And with each central bank market bailout, the monstrous derivatives Bubble inflated to even more dangerous extremes.
Peter Bernstein’s classic book, “Against the Gods: The Remarkable Story of Risk,” was published in 1996. It’s a masterpiece, though I’ve always had an issue with the notion that we live in an enlightened age where risks are better understood and managed. Over the past cycle, the view took hold that central banks can control market risk, while derivatives offer an inexpensive and reliable mechanism to mitigate risk.
I don’t believe we can overstate the role derivatives have played – within the markets, but also throughout the real economy. They’re ubiquitous – institutions, corporations, investment managers, and even individual investors all fell in love. I’ve already seen ample evidence that derivatives will be at the epicenter of unfolding financial crises. They’re certainly worthy of keen analytical focus.
There are serious fallacies embedded in the derivatives universe that I expect to be revealed with major consequences.
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..the long boom period saw a proliferation of uneconomic, negative cash-flow businesses and enterprises. In Austrian Economics parlance, it’s been epic malinvestment.'
- Doug Noland,
October 7, 2022Context Affectivity, Action, Electricity(Global Stagflation) - 'This situation has essentially morphed into a cost-of-living crisis..' - Dr. Hunt(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'(China) - '..the CCP [is] more of a mafia organization than a political party. The head of the party is the don..' - Cai Xia