In short, the economic model of the second half of the 20th century is over. Increased issuances of debt no longer translate into increased economic growth. Instead, they produce wild asset price swings, casino style speculation, and epic bubbles and busts. Nonetheless, the technocrats continue offering up yesterday’s solutions with unabashed certainty.
According to Jeffrey Miller, "all the conditions for a market crash are in place" but when it happens is anyone's guess and ultimately depends on "how dumb things will get before" central banks finally stop.
As another week comes to a close, we continue to wrestle with a market that remains detached from underlying economic data and clings to recent levels of over overbought, overextended and low reward/risk outcomes. Of course, in the final stages of a bull market, this is what has historically been the case.
Over the last 16 years, it has become routine for “experts” and pundits to miss MAJOR issues by ignoring data points that don’t confirm their own views, only to later proclaim, “no one saw this coming” when a crisis erupts.
According to John Williams, central banks and governments must come up with new monetary and fiscal policies to kickstart a global economy which is barely growing (thanks to 7 years of flawed monetary policy). "We can wait for the next storm and hope for better outcomes or prepare for them now and be ready." As a result, Williams believes that a major fiscal stimulus thrust is now critical to propel the US economy higher. And he is, mostly, right. There is just one problem...