<blockquote>'Despite their fondness for playing them on Twitter, venture capitalists aren’t macroeconomists. And to those who seem to believe that the current state of affairs is sustainable, I would ask this: When in history has ever-increasing financial complexity, lack of transparency, perverse incentives and new ways to extend credit and increase leverage not eventually led to disaster?'
- Christopher Mims,
The Dangers Ahead if Tech Unicorns Get Gored, October 26, 2015</blockquote>
<blockquote>'As I’ve frequently noted, if one examines the correlation profiles of various economic indicators with subsequent economic activity, there is a clear sequence. The earliest indications of an oncoming economic shift are observable in the financial markets, particularly in changes in the uniformity or divergence of broad market internals, and widening or narrowing of credit spreads between debt securities of varying creditworthiness. The next indication comes from measures of what I’ve called “order surplus”: new orders, plus backlogs, minus inventories. When orders and backlogs are falling while inventories are rising, a slowdown in production typically follows. If an economic downturn is broad, “coincident” measures of supply and demand, such as industrial production and real retail sales, then slow at about the same time. Real income slows shortly thereafter. The last to move are employment indicators — starting with initial claims for unemployment, next payroll job growth, and finally, the duration of unemployment.'
- John P. Hussman,
Dispersion Dynamics, November 23, 2015</blockquote>
'..The notion back in 2006 and 2007 that the world was at the brink of a major crisis was considered absolute wackoism. Incredibly – and well worth contemplating these days - virtually no one saw the deep structural impairment associated with the protracted Bubble in “Wall Street Finance.” '<blockquote>'Somehow history’s greatest period of financial innovation and Credit excess transpired without drawing the attention of conventional thinkers or even policymakers. Especially by 2006 and 2007, it was the “naysayers” that had been completely discredited. The conventional view held that financial innovation and policy enlightenment had fostered extraordinary financial and economic system stability. Analysis that the GSEs, MBS, ABS, speculative leveraging, securities finance and the derivatives marketplace had nurtured acute systemic fragilities was completely pilloried. The notion back in 2006 and 2007 that the world was at the brink of a major crisis was considered absolute wackoism. Incredibly – and well worth contemplating these days - virtually no one saw the deep structural impairment associated with the protracted Bubble in “Wall Street Finance.”
An even more momentous monetary fiasco has been perpetrated since the 2008 crisis, constructed upon a foundation of even more outlandish misperceptions and flawed premises. It was dumbfounding that virtually everyone disregarded the financial, economic and social ramifications associated with a doubling of mortgage Credit in just over six years. Throughout the boom, the issue of a systemic mispricing of mortgage Credit concerned virtually no one – not the marketplace and certainly not financial regulators. These days, analysis of a deeply systemic mispricing of financial assets on a global basis garners a yawn. Ramifications for an unprecedented inflation in central bank Credit and associated market manipulation go largely unappreciated. Somehow, it is accepted as obvious fact that the expansion of central bank Credit entails overwhelming benefits with minimal risk.
..
When reading academic papers on “Monetary Finance” (thanks R.C.), it’s clear that the economics community misses key dynamics of central bank monetary inflation. Simplistically, conventional thinking holds that if the federal government issues debt that is then purchased by the central bank, all is good so long as it’s not done in egregious excess. As long as there’s slack (insufficient demand) in the economy, risk remains minimal. This is consistent with the conventional view that’s taken hold in global markets that enlightened central bankers have mastered the science of non-inflationary stimulus of aggregate demand.'
- Doug Noland,
Monetary Fiasco, November 21, 2015</blockquote>
Context<blockquote>
..The resulting Credit stress only exacerbates disinflationary pricing pressures.''The scope of the down cycle is proportional to the excesses of the preceding Credit boom.''..the phenomenon of wave after wave of economic ups and downs is ideological in character..''..current valuations on similar measures already exceed those of 1929..' (October 26, 2015)'As the bubble collapsed, banks and other financial institutions plunged into insolvency..''..activist Fed policy has promoted repeated valuation bubbles, and inevitable collapses .. we fully expect the S&P 500 to decline by 40-55%..''I recall similar dynamics prior to both the 1998 and 2008 crisis episodes.''..central bankers have blown the biggest equity and junk bond market bubbles in history..'Have Central Banks Lost Their Way?(Teal) - '..the old ways of social organization are proving to be increasingly ineffectual..'</blockquote>