We are now experiencing a nice, temporary reprieve in our financial markets. The very best that $10 -$20 trillion can buy.
I am actually quite thankful for this lull, as it means we have more time to square things away.
What is catching my eye these days, besides the obvious amount of liquidity sloshing through every capital market and the obscene profits being skimmed off by the Wall Street firms, is that there’s really no exit strategy in place for either the fiscal or monetary authorities. This only grows more glaringly obvious with every passing day.
On the fiscal front, the US government is seemingly committed to running trillion-dollar deficits for at least the next ten years. The prudent thing to do would be to immediately trim that deficit spending back, but the political will to do this is hovering perhaps a single degree above absolute zero.
Any attempt to reel in the fiscal stimulus will result in an immediate economic decline.
On the monetary side the Central Banks of the world, with the US in the lead, have committed themselves to providing everything and anything deemed necessary by the “financial markets” which is code-speak for the banking industry. Here too the monetary authorities are only now able to speak in abstract terms about how they might exit from the extreme stimulus they’ve applied.
All of this adds up, for me, to an inescapable conclusion that we are collectively headed for a very spectacular monetary failure in the not-too-distant future. While I hesitate to give timings, I think this is a near-certainty within the next ten years, entirely probable within the next five years, but cannot rule out next year.
by former_user