The 15 Year Easy Money Fever Dream Is Ending Violently
Submitted by QTR's Fringe Finance
For the better part of the last couple years, I have wondered whether financial markets are permanently broken. Not simply overvalued or temporarily irrational, but actually broken at the mechanical level and permanently distorted. I’ve written about it.
The basic process that is supposed to make capitalism work goes like this. Capital flows toward good ole’ fashioned productive uses (like the George Foreman Grill™) and away from flashy hot-shit stupid ones (like the Apple Vision Pro). Good businesses eventually outperform bad ones. Fraud eventually gets exposed. Making money is the point of a business. Price is a rationing mechanism and is determined by free markets. This system appears to have been dead for the last 10 years, at least.
Nowadays, we function under a derivative of capitalism (hereinafter referred to as “crony capitalism snorting bath salts, operating under policies so disorganized they’d make a Jackson Pollock painting look like the blueprints for a nuclear reactor”) where trillions of dollars can be created overnight, governments and central banks focus obsessively on a handful of key numbers, and preserving the nominal value of stocks and other financial assets has become the priority.
Everything else in the economy is then forced to adjust accordingly, and if you don’t like it, or it causes the price of your Whopper Jr.™ to go to $57, fuck you…that’s just how money works nowadays.
We’ve spent most of the last 20 years systematically removing consequences from the financial system. Rates went to zero and stayed there for years. The Fed expanded its balance sheet by trillions. Every major crisis was met with an intervention, liquidity facility, bailout or assurance that policymakers stood ready to keep the machine running. Capital was forced to become extraordinarily cheap, and investors eventually became conditioned to believe it would remain that way. We laughed off our country’s credit downgrades. Economists and analysts turned into total pussies and cowards, crumbling into bits every time the market sold off 5%. Financial projections have turned into Hunter Thompson-esque 3AM drug induced astral projections.
And we turned into the real life version of Idiocracy for markets. When money costs almost nothing, the hurdle rate for stupidity also approaches nothing. Businesses that never should have existed could raise billions of dollars. Venture capitalists could fund companies whose...(READ THIS FULL COLUMN 100% FREE HERE).