'Long ago it was well understood that central banks should not be in the Credit allocation business. There needed to be an intense debate when the Greenspan Fed bailed out the stock market in 1987, slashed rates and manipulated the yield curve in the early-nineties, and then became intensely involved in various bailouts throughout the nineties. There needed to be an intense debate about the role of the GSEs. There needed to be an intense debate about the radical notions of Dr. Bernanke. There needed to be an intense debate about the Fed’s ploy to use mortgage Credit to reflate. There needed to be an intense debate about the Fed targeting securities market inflation and all the QEs. Policies were accepted without serious discussion in 1987 because of the fear of another Great Depression; in the early-nineties because of fear of deflation, ditto the nineties as well as the new Millennium.'<blockquote>'Securities leveraging had surreptitiously evolved into the prevailing source of system Credit and leveraging that was fueling a highly imbalanced “Bubble Economy.” By the late-twenties, “Wall Street” had essentially become a massive financial scheme, reliant on ever increasing amounts of securities Credit and speculative excess. Intense speculation, liquidity abundance and booming securities markets had financed scores of enterprises that were viable only so long as the Bubble continued to inflate. The financial scheme collapsed with the 1929 stock market crash, ushering in a period of acute instability for both the financial system and real economy. The Great Depression was fundamentally the system’s response to the deep systemic structural impairment that had compounded throughout the Bubble period.
Long ago it was well understood that central banks should not be in the Credit allocation business. There needed to be an intense debate when the Greenspan Fed bailed out the stock market in 1987, slashed rates and manipulated the yield curve in the early-nineties, and then became intensely involved in various bailouts throughout the nineties. There needed to be an intense debate about the role of the GSEs. There needed to be an intense debate about the radical notions of Dr. Bernanke. There needed to be an intense debate about the Fed’s ploy to use mortgage Credit to reflate. There needed to be an intense debate about the Fed targeting securities market inflation and all the QEs. Policies were accepted without serious discussion in 1987 because of the fear of another Great Depression; in the early-nineties because of fear of deflation, ditto the nineties as well as the new Millennium.
..
March 21 – Financial Times (Ed Crooks): “About 600 people packed on to the Machinery Auctioneers lot on the outskirts of San Antonio, Texas, last week to pick up some of the pieces shaken loose by the oil crash. Trucks, trailers, earth movers and other machines used in the nearby Eagle Ford shale formation were sold at rock-bottom prices. One lucky bargain hunter was able to pick up a flatbed truck for moving drilling rigs — worth about $400,000 new — for just $65,000… The fire sale in Texas is just a small part of the worldwide value destruction caused by the oil decline. From Calgary to Queensland, oil and gas businesses are scrambling to sell assets, often at greatly reduced prices, to pay back the debts incurred to buy them… It is a reflection, some say, of worries about the destabilising effects of the industry’s mountain of debt. From 2006 to 2014, the global oil and gas industry’s debts almost tripled, from about $1.1tn to $3tn…"
The inflationists will surely continue to lament insufficient “aggregate demand,” while espousing the virtues of Trillions more of “money”. But let’s not lose sight of the fact that “From 2006 to 2014, the global oil and gas industry’s debts almost tripled, from about $1.1tn to $3tn.” The problem was clearly too much “money” and Credit stoking boom-time excess. Aggressive rate and QE policy measures played an integral roll in the funding free-for-all that has come home to roost for the global oil patch.
And, today, monetary accommodation will do little to ameliorate the energy bust, not with liquidity and speculation preferring ongoing Bubble Dynamics throughout “Silicon Valley”, commercial (and residential) real estate and anything providing a yield. Our central bankers, by fixating on fragility while ignoring segments of intense excess, are ensuring even more precarious Monetary Disorder.'
- Doug Noland,
Another Coin in the Fuse Box, April 2, 2016</blockquote>
Context<blockquote>
'..the world acquiesced to Bubble Dynamics..'From $10 Billion to Worthless in 8 Months, April 1, 2016