Via Mark J. Grant, author of Out of the Box,
2013-A Year at the Crossroads
“If you really want something in this life, you have to work for it. Now be quiet, they're about to announce the lottery numbers!”
2012 was an odd year in many senses. The juxtaposition was the speech by Mr. Draghi when he promised to “Save the World,” humanity and the birds and bees on the Continent. Yields fell, have stayed low and no one is arguing with the European Central Bank as small pieces of paper are printed, distributed at all of the usual candy stores and the sweet taste of that sugary substances is all that is imbibed and the manna from heaven flows from Frankfurt.
The Fed and the ECB are both verging on $4 trillion balance sheets, the total for all of the world’s central banks is $14 trillion and these small pieces of paper float around in the breeze and are plucked at will to feed the fires of Wall Street. General Calculus used to be a subject at school and is now thought of as a famous Roman war hero. When all of the central banks on the planet work in concert then, without off-world bourses, there is no place else left to go and the spatial restraints of our planet are the same boundaries for the investment of money. It is then Hobbes Law, the gas inside the container will always expand to fill the container regardless of its dimensions.
Here then we find the explanation of 2012; boatloads of money, a promise to use it or create even more of it if necessary and so, for the first time in history, there was no place else left to go and so the markets went up, bonds contracted, the central banks buy 80% of all new deals, demand exceeds supply and everyone with any sense wanders around and wonders if some political pin-prick or some economic fault will not puncture what may be thought of as the largest bubble ever created on earth.
It is not a dot-com bubble or a real estate bubble or a specific bubble of any type at all or any we have ever seen but the Big Lebowski, the giant squid, the mother of all Blue Whales and the days of living in some place that we have never occupied before. In other times, in other circumstances we would have thought that the bogeyman would be Inflation, massive Inflation, nation destroying Inflation but the central bank created instruments of the concert have controlled the notes along with the tune. Everything is contained by the central banks concerted actions so that the dream state of some economist’s fantasy induced dream has come to pass and it is Aldous Huxley’s “Brave New World” but having entered, and what I am concerned about, is that no one knows the Rules or even where the goal posts might be located.
Spain, Greece, Portugal or the United States; the numbers, the accounting, has become nothing more than a diversion. More and more and more money will fix everything and we can ignore the rest. It is not the Fountain of Youth but the Fountain of Cash and the promise of eternal life hangs in the air but then there were the Sirens and their songs. If nothing matters or is relevant except some notion, first uttered by Frank Herbert, that “The Spice Must Flow” then what fairytale have we entered and how does it end; or does it?
Those that bet with the central banks have prospered, made fortunes, become vastly richer but how long does this game go on and is there a way out that is devoid of the usual pain to be found in contractions. Will it be an engineered affair which is the way we arrived here or will it be some elongated pin made of politics, made of economics; that pricks the biggest bubble ever created by mankind in our mad rush to save the economies of the world by opening the spigot of never ending cash. The bet of last year was to place your money with the bankers-at-large but will that be the correct bet of this year as the plastic is stretched so thin now that a misstep, the politics of nationalism either of the funding or the funded bursts the balloon and sends it cascading around the room in some wildly gyrating manner.
I wait. I watch. Will the lid on Pandora’s Box get opened?