<blockquote>'We’re now into the third decade of what has been a period of monumental financial innovation. It’s worth noting some key sector metrics from the now multi-decade financial inflation. When President Reagan came into office, the Fed’s balance sheet (from Z.1) was at $174 billion – compared to Q2 2016’s $4.524 TN. Money Market fund assets were only $76 billion (vs. $2.703 TN); Mutual Funds $656 billion (vs. $13.209 TN); Closed-End & Exchange-Trade Funds $7 billion (vs. $2.491 TN); GSE’s assets $175 billion (vs. $6.568 TN); Agency- & GSE-Backed Mortgage Pools $100 billion (vs. $1.844 TN); Asset-backed Securities $0 (vs. $1.285 TN); REITs $3 billion (vs. $1.021 TN); Security Brokers/Dealers $78 billion (vs. $3.117 TN); Funding Corps $3 billion (vs. $1.618 TN); Fed Funds & Security Repos $152 billion (vs. $3.769 TN).
Even more amazingly, Total Debt Securities have inflated from $2.0 TN to $40.581 TN. Outstanding Treasury Securities have grown from $736 billion to $15.385 TN. Agency- and GSE-Backed Securities from $191 billion to $8.324 TN. Total Mortgages have increased from $1.458 TN to $13.974 TN. Corporate & Foreign Bonds have expanded from $511 billion to $12.030 TN, with Corporate Equities ballooning from $1.495 TN to $36.112 TN.
Notably, Household Net Worth stood at $8.9 TN, or about 300% of GDP, to end 1980. By the end of Q2 2016, Household Net Worth had inflated to $85.3 TN, or near a record 463% of GDP. While continued craziness can be expected to dominate the prolonged Terminal Phase of this multi-decade Bubble, I highly doubt we’re at the cusp of some deregulation-induced financial resurgence. Been there; done that.
When analyzing today’s markets, we need to keep some things in perspective. One, global central bankers continue to provide market liquidity (QE) to the tune of about $2.0 TN annualized. Second, Chinese Credit is expanding at a record pace of about $3.0 TN annualized, with significant ongoing “capital” flight. Years of this unprecedented liquidity backdrop have fundamentally altered the way markets function (as we’ve again been reminded).'
- Doug Noland,
As Exciting as the 1930s, November 19, 2016</blockquote>
<blockquote>'Herbert Hoover. I develop a theory of labor market failure for the Depression based on Hoover's industrial labor program that provided industry with protection from unions in return for keeping nominal wages fixed. I find that the theory accounts for much of the depth of the Depression and for the asymmetry of the depression across sectors. The theory also can reconcile why deflation/low nominal spending apparently had such large real effects during the 1930s, but not during other periods of significant deflation.'
- Lee Ohanian (Context:
Mandating Higher Wages Won't Fix Japan's Economy, November 17, 2016)</blockquote>
<Blockquote>'As we've covered
here and
here at mises.org, the only way to sustainably increase the wages of workers is to increase their productivity. If a worker's wages are to go up, there must either be an increase in the demand for that worker's services, or the worker must be able to produce more in less time.'
- Ryan McMaken,
Four States Vote to Punish Low-Skilled Workers With Minimum Wage Hikes, November 18, 2016</blockquote>
Context<blockquote>
(America’s Great Depression) 'The Great Depression was a failure .. of the hyperactive state.' - Paul Johnson'..economic growth cannot be conjured into being by top-down interventionism in the form of monetary pumping and deficit spending..'</blockquote>