There is absolutely nothing new in the graphic below from this commentary(.pdf) by IceCap Asset Management, but something about the simplicity of the message being conveyed was striking and it seemed worth reproducing here today. Of course, it wasn’t all about interest rates, but you’d think that by now someone at the Fed would acknowledge rates that were too low for too long played some kind of role in the many recent boom-bust cycles.
Picking up the story at the beginning of item 2 above, they note:
Of course 4,000 Dow Jones Industrial and NASDAQ points later, the sheep started to lazily admit that perhaps this new post-Y2K economy wasn’t all that it was cracked up to be. Not to worry, once again the American central bank mounted their ponies and rode the global economy straight into several years of ultra-low interest rates. The hope (there’s that word again) was that really cheap money would encourage people, companies and governments to borrow and spend again.
And borrow and spend they did – right smack into the biggest housing bubble in economic history. Day traders became passé, and the newest game in town was flippin’ houses. Rich people flipped mansions, plumbers and teachers flipped suburban homes and even Vegas strippers got in on the act and flipped condos among other things. By the time it was over, the entire world was flipped upside down – courtesy of the US Federal Reserve and their interest rate machine.
And this brings us to the next global crisis, which we assure you is on its way.