Loading ...This Is Not A ‘Correction’……..It’s The Beginning Of The Global Bubble Unwind
by Doug Noland • August 22, 2015
August 17 – Reuters Breakingviews (Edward Chancellor): “Financial markets, like religions, are faith-based networks. The complex structures of assets and liabilities that comprise markets are held together by a set of underlying beliefs. Unlike religions, however, financial dogmas are occasionally shown to be false. We experienced such a moment last week, when the Chinese authorities chose to devalue their currency.”
Contemporary global finance is a complex “system” of interwoven (electronic) “faith-based networks.” As the bursting of the global Bubble unfolds, myriad “financial dogmas” will be exposed as bogus. Too many have been little more than chicanery.
I really fear for the unwind of the “global government finance Bubble” – the grand finale of a multi-decade period of serial Bubbles. It’s history’s first systemic global Bubble, encompassing the world’s Credit systems, securities markets and monetary systems more generally. Excesses have engulfed the heart of “money” and Credit throughout both the “developing” and “developed” world. Central banks (of all stripes) have printed Trillions of “money” and Trillions more have been created in the process of leveraging securities and other assets. This type of monetary inflation invariably incentivizes destabilizing speculation, fraud, malfeasance and wealth redistribution. It’s fomented a geopolitical tinderbox.
I allow my mind to imagine the type and poor quality of assets on (bloated) Chinese, Brazilian, Russian, Asian and EM bank balance sheets – yet it’s surely a lot worse. I ponder how desperate governments will use their state directed lenders to stimulate and obfuscate – and then I contemplate the scope of future government bailouts. On a global basis, I believe there is today more speculative leverage in global currencies and securities markets than ever – and I fear my bearish imagination might only scratch the surface. There have been too many years of financial manipulation, innovation, experimentation and exploitation – on an unprecedented globalized scale.
This Is Not A ‘Correction’……..It’s The Beginning Of The Global Bubble Unwind