Financial Bubbles | timiacono.com

Debt: The First Five Thousand Years

Long-time favorite of this blog former BIS head William White (see William White Channels His Inner-Austrian along with the embedded links) shares some thoughts about central bank policies in a financial world that increasingly looks like it’s about to become unhinged.

At about the 2:20 mark, the discussion turns to a subject that few other economists ever mention in public – that combating economic difficulties that were fueled by a reckless expansion of debt with even more debt might not be a good approach:

As debts become too large to be serviced, then they have to be restructured or forgiven because the alternative … the longer you put this whole thing off, the smaller the proportion of the money you’re going to recover.

So, the question is, do you want 50 cents on the dollar or do you want nothing, because one dollar on the dollar is not on the table.

White has similarly grim news for anyone thinking negative interest rates will save us.

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They’ll Probably Ask About This…

Federal Reserve Chair Janet Yellen just released her semi-annual Monetary Policy Report to Congress and will soon trudge up to Capitol Hill where, based on the chart below, she’ll have some ’splainin’ to do.

Question number one for those elected officials who aren’t otherwise preoccupied with such things as auditing the Fed will likely be, “Do you regret raising interest rates two months ago?”, for which Yellen will surely have an eloquent prepared response.

Echoes of the 2008 Financial Crisis

I’d have titled this “Explaining the 2008 financial crisis in one commercial”, as one individual in this article at CNN/Money characterized the QuickenLoans Super Bowl commercial below that makes us all think of ten years ago, but that title was too long to fit.

I mean … nice commercial and everything, but QuickenLoans was one of the worst offenders during the era of mortgage madness, giving the unwashed masses more than enough rope to hang themselves vis-a-vis tapping their home equity and such.

I’m repeatedly amazed to see that they’re still around, given the role they played.

There were these comments too: “Thanks Rocket Mortgage for thinking the ‘08 housing crisis needed a sequel” and “Correct me if i’m wrong, but the last time mortgages were this easy there was some sort of global meltdown, right?”

Oil Boom-Bust Redux

The image below (via this story from Canada’s Financial Post) is actually from the 1980s (Texas, perhaps, or maybe Canada – that was a long time ago) when a similar energy boom went bust, leaving untold thousands of people out of work and wondering if they should have, maybe, saved a little more money when times were good in case times turned lean.

The subject of the FP story is, like many others these days in the financial media, whether or not the U.S. and/or Canada are headed for another recession and, naturally, economists are reluctant to answer that generally in the affirmative, even though the evidence is mounting that that’s the direction we’re headed with energy markets central to the discussion.

Two-Term Presidents and U.S. Stocks

Another fine infographic over at the Visual Capitalist reminds us of how the last few eight-year stock cycles coinciding with two-term presidents haven’t worked out so well toward the end of those periods, that is, unless you’re a short-seller.

Of course, the main subject for the infographic is gold as an investment and it’s worth pointing out (as many others have already done so far this year) that the yellow metal is doing exactly what it’s supposed to do at times like this.

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