‘There is now ample evidence of a marked Chinese Credit slowdown. It may not be a “Lehman Moment,” but it’s definitely an “Evergrande Moment.” And it’s difficult to envisage sufficient Credit growth to sustain China’s historic Credit and apartment Bubbles.’
– Doug Noland (Evergrande Moment – ‘China Evergrande is not ‘too big to fail’, says Global Times editor’, September 17, 2021)
‘The hallmark of an economic Ponzi scheme is that the operation of the economy relies on the constant creation of low-grade debt in order to finance consumption and income shortfalls among some members of the economy, using the massive surpluses earned by other members of the economy. The debt burdens, speculation, and skewed valuations most responsible for today’s lopsided prosperity are exactly the seeds from which the next crisis will spring.’
– John P. Hussman, Ph.D., Hallmark of an Economic Ponzi Scheme, June 4, 2018
‘In any event, the worst possible situation is when market conditions provide neither investment merit nor speculative merit – a combination of hypervaluation, price overextension, and early deterioration in market internals. In my view, investors presently face the worst possible situation.
..
..If a central bank allows base money to persistently expand at a dramatically higher rate than the output of real goods and services, it results in a chain of short- and long-term distortions that can include inflation, asset price bubbles, financial crises, loss of fiscal discipline, or a combination of all of them. The only question is which distortion comes first.
..
Now that we’ve reached the most extreme valuations in the history of the U.S. financial markets, all that needs to happen for Fed policy to become ineffective is for investors to consider the possibility of meaningful losses; to become concerned that others will attempt to take profits before they do, in a market where the bulls are all-in and the only ones out are historically-informed, value-conscious investors like us, whose skin is like the finest Corinthian leather, and who know that run-of-the-mill valuation norms are less than one-third of current levels. Nothing in our discipline relies on ever seeing those norms again, but we certainly expect a far more interesting trip ahead than many investors seem to have in mind.’
– John P. Hussman, Ph.D., (August, 2021) – ‘..we’ve reached the most extreme valuations in the history of the U.S. financial markets..’ August 8, 2021
‘Capitalism is in clear and present danger. This sounds extreme – unless you’ve followed the trajectory of developments over the years. How are capitalistic systems to operate with central banks abrogating adjustments and corrections both for market and economic systems?’
– Doug Noland, ‘We’re witnessing Bubbles and Craziness in historic proportions.’ June 22, 20219
‘Contrast that with the large and persistent activist deviations that Alan Greenspan, Ben Bernanke and Janet Yellen have pursued under their leadership at the Fed. In each case, we observe aggressive departures from the Fed Funds rate that one would have projected based on current and lagged data on output, employment, and inflation .. those three large deviations helped to produce a series of three speculative bubbles in the financial markets; the first that ended with the technology collapse, the second that ended with the global financial crisis, and the third that has now brought reliable measures of valuation to one of the most offensive extremes in U.S. history. The problem is that these speculative consequences only emerge over a period of years..’
– John P. Hussman, Ph.D., ‘..I’ve lost all respect for monetary economists..’ September 5, 2016
‘Inflationism has seen real wages for much of the workforce stagnate or worse over the past decade. Inflationism and his accomplice malinvestment are the culprits behind pathetic productivity trends and declining living standards. Worse yet, Inflationism and his many cohorts are fomenting disturbing social, political and geopolitical turmoil. And reminiscent of the Weimar hyperinflation, central bankers somehow remain oblivious that their operations are of primary responsibility. If people don’t these days trust central bankers, politicians, Wall Street, and governments and institutions more generally, just wait until the Bubble bursts.’
– Doug Noland, ‘..When it comes to understanding the nature and destructive capacities of inflation, the “Austrians” put the “Keynesians” to shame.’ August 13, 2016
‘..In any event, the notion of an “inflation-unemployment tradeoff” rests on a misunderstanding of Phillips’ work, and a disregard for historical evidence.’
– John P. Hussman, Ph.D. ‘..the true “Phillips Curve” .. is actually a scarcity relationship between unemployment and real wages, not general prices.’ September 11, 2017
‘..Policy makers ultimately papered over the problem by changing accounting rule FAS 157 in March 2009, and have since filled the hole in the banking system by depriving savers of interest, while encouraging even greater expansion of leveraged loans and low-grade covenant-lite debt..’
– John P. Hussman, Ph.D. (‘..central bankers are determined to prolong a radical experiment in monetary inflation..’ 2017)
‘..remember that there’s really very little correlation between Federal Reserve policy changes and more general, cyclical economic fluctuations.. ‘
– John P. Hussman, Ph.D. (‘..The crazier things get the more unsustainable Bubble prices become.’ 2019)
‘Hey! How about that? Investors have finally driven the likely 12-year nominal total return for a conventional passive asset mix (60% S&P 500, 30% Treasury bonds, 10% Treasury bills) down to exactly zero. Investors didn’t even do that in 1929.’
– John P. Hussman, Ph.D. ‘..Investors didn’t even do that in 1929.’ 2020
Context
Ethical Affective Ambiance in the Electric Universe – Production of Money, Prices and Market