'..the dire consequences of Credit excess and asset Bubbles .. For too long, easy “money” and buoyant asset markets masked deep structural issues in Greece, Portugal, Spain, Italy, France and throughout the Eurozone.'<blockquote>'The following data remain key to Macro Credit Analysis: 1995: $654bn; 1997: $793bn; 1998: $999bn; 1999 $1.012 TN; 2002: $1.429 TN; 2004: $2.096 TN; 2006: $2.388 TN: 2007: $2.552 TN. These were the annual increases in U.S. Non-Financial Credit – the amount of new Credit fuel driving an evolving Bubble Economy Structure. Between 1995 and 2007, Non-Financial Credit inflated from $13.141 TN to $32.621 TN, or 148%. This massive and prolonged Credit inflation remade the global financial landscape, not to mention the structure of the U.S. and global economy.
..
The Fed dug itself a deeper hole this week when it opened up the possibility of actually increasing its $85bn monthly “money” printing. When I argued a few years back that a Federal Reserve “exit strategy” was little more than a myth, never did I imagine the monetary insanity that was about to unfold. But, then again, this is consistent with the nature of inflationism. Once it takes root, monetary expansion enjoys powerful momentum and powerful constituents. The bias is always to get bigger, with system deficiencies amply available for justification and rationalization.
The Fed and global central banks have made an incredible mess of things. Global asset markets today enjoy robust inflationary biases, while stagnant real economies suffer from deep structural deficiencies and maladjustment. Dismal economic performance and related fragilities provoke hyper-aggressive “activist” monetary measures that now work predominantly to feed financial speculation and inflate asset Bubbles. This has nurtured the Great Divergence – a huge and expanding gulf between inflating asset prices and anesthetized real economies. And, importantly, by stoking the Great Divergence, monetary stimulus today exacerbates global fragilities and instabilities.
Dr. Krugman and others argue that the Fed is not doing enough and point to Europe as evidence of the fallacy of so-called “austerity.” When I look at Europe, I see the dire consequences of Credit excess and asset Bubbles on full display. In particular, Spain is locked in depression after housing and mortgage finance Bubbles so badly distorted the Spanish real economy. For too long, easy “money” and buoyant asset markets masked deep structural issues in Greece, Portugal, Spain, Italy, France and throughout the Eurozone.
..
..The Fed believed encouraging risk-taking would be good for economic recovery, somehow ignoring the clear risk of fueling yet another Bubble.
Well, the Fed is now dealing with historic – and, I believe, precarious - securities market Bubbles. And they’re Bubbles that will demand unending QE – or else risk a very problematic Bubble deflation. This is a dysfunctional Bubble that likes good economic news but loves weak data that ensures more monetary inflation for longer. And the greater the Great Divergence – the Greater the Dysfunction – the more the speculator community can leverage and speculate, confident that central banks are trapped by highly speculative markets, weak economies and acute fragilities. I was really, really hoping the Fed, global central banks and international markets wouldn’t drift down this troubling path.'
- Doug Noland,
Too Much Asset Inflation, May 3, 2013</blockquote>
Context<blockquote>
(Haptopraxeology) - '..humanism in economics..''Rudolf von Havenstein and his advisors were all academics that had likewise convinced themselves of the validity of a dangerous inflationary doctrine. They were big fans of
chartalism – which today is known as 'modern monetary theory' (MMT) – the statist monetary crankism thought up by Georg Friedrich Knapp a few years prior to Havenstein's stint as president of the German Reichsbank. Remarkably, this school of thought has recently made quite a comeback under its new, more spiffy sounding name. It's still the same dangerous nonsense though.'
-
'..Monetary Experimentation..', 2011
Nicholas Taleb Against Establishment Economists, 2013
'..BOJ, Fed and ECB put an exclamation mark on .. failed monetary management.'</blockquote>