Rabobank: You Only See How Stable A System Really Is By Pushing It To Its Limits
“Stonks” and “Burneds”
We are, it is now being widely decried, in the middle of a “stonk” bubble. The Financial Times(!) is carrying an article calling on the Federal Reserve to stop its easy money; and Bloomberg(!) has strategy advice that: “…your best bet has been to buy the biggest pile of steaming rubbish you can find on an income statement,” which overlaps with the pattern of behavior 18 months before the bursting of the 1999 tech bubble…before then concluding this is nonetheless the only thing fund managers can ‘rationally’ do.
Against that backdrop, regulators in D.C. are looking at the ‘Reddolution’ of earlier this month, where “stonks” of firms were being manipulated by the public to try to teach hedgefunds a lesson. They will no doubt harrumph on cue with all due seriousness –like those surrounding Governor Lepetomane in ‘Blazing Saddles’– without asking awkward questions about the roots of our stonking great problem that end up being redirected towards the Fed. This only underlines that they are far behind whatever remains of a curve.
There is recognition even in financial media that central banks are institutional “stonk”-bubble blowers. There is matching recognition that the solution for reflation lies with fiscal, not monetary policy (though many of the recent converts to this view apparently couldn’t see it as true until it was already happening – “Harrumph for the governor!”). Yes, we *are* likely to see a *major* short-term fiscal boost –in the US alone– with suggestions the White House’s stimulus package could be worth many thousands of dollars for the average US family – for a year. Then the old crunch comes back again unless US labor has magically gained power over global capital. How, exactly?
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