{"id":10372,"date":"2015-07-25T06:46:49","date_gmt":"2015-07-25T11:46:49","guid":{"rendered":"http:\/\/olduvai.ca\/?p=10372"},"modified":"2015-07-25T06:46:49","modified_gmt":"2015-07-25T11:46:49","slug":"bubble-bubble-toil-and-trouble-when-authorities-buy-assets-to-prop-up-markets","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=10372","title":{"rendered":"Bubble, Bubble, Toil and Trouble: When Authorities Buy Assets to Prop Up Markets"},"content":{"rendered":"<h3><a href=\"http:\/\/www.oftwominds.com\/blogjuly15\/bubble-trouble7-15.html\" target=\"_blank\">Bubble, Bubble, Toil and Trouble: When Authorities Buy Assets to Prop Up Markets<\/a><\/h3>\n<p><i>The Central Planners who thought that buying shares to prop up the stock bubble was an excellent fix are about to find out the true meaning of toil and trouble.<\/i><\/p>\n<p><b>The actual line from Shakespeare&#8217;s\u00a0<i>Macbeth<\/i>\u00a0is\u00a0<i>double, double, toil and trouble, fire burn, and cauldron bubble<\/i><\/b>\u00a0but for the purposes of analyzing what happens when authorities prop up market bubbles by directly buying assets,\u00a0<b>bubble, bubble, toil and trouble<\/b>\u00a0is also appropriate.<\/p>\n<p><b>China&#8217;s authorities seem to have chanted Shakespeare&#8217;s magical incantation nonstop this year, as the Shenzhen and other Chinese stock market indices have more than doubled.<\/b>\u00a0This chart illustrates what the Chinese authorities were aiming for: a bubble that just keeps expanding and never pops:<\/p>\n<p><img decoding=\"async\" src=\"http:\/\/www.oftwominds.com\/photos2015\/Shenzhen5-15.png\" alt=\"\" align=\"center\" border=\"0\" \/><\/p>\n<p><b>But what actually happened was predictable:<\/b>\u00a0China&#8217;s stock bubble burst. In response, Chinese authorities threw everything within reach into the market to stem the decline: criminalizing negative comments about stocks, loosening credit, enabling<i>greater fools<\/i>\u00a0to post their homes as collateral for margin accounts, and the last and chillingly irreversible tool in the Central Planning Bubble Inflation Tool Kit, direct purchases of stocks:\u00a0<a href=\"http:\/\/www.zerohedge.com\/news\/2015-07-23\/china-spends-10-gdp-all-bark-no-bite-stock-bailout\" target=\"resource\">China Spends 10% Of GDP On &#8220;All Bark, No Bite&#8221; Stock Bailout<\/a>:<\/p>\n<p><img decoding=\"async\" src=\"http:\/\/www.oftwominds.com\/photos2015\/shenzhen7-15.png\" alt=\"\" align=\"center\" border=\"0\" \/><\/p>\n<p><b>In gambling parlance, Chinese authorities doubled-down on their bet (there&#8217;s your\u00a0<i>double, double<\/i>) that they could save their\u00a0<i>bubble, bubble<\/i>.<\/b><\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bubble, Bubble, Toil and Trouble: When Authorities Buy Assets to Prop Up Markets The Central Planners who thought that buying shares to prop up the stock bubble was an excellent fix are about to find out the true meaning of toil and trouble. The actual line from Shakespeare&#8217;s\u00a0Macbeth\u00a0is\u00a0double, double, toil and trouble, fire burn, and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[39,124,125,127,130,6941,4924,2443],"class_list":["post-10372","post","type-post","status-publish","format-standard","hentry","category-economics","tag-assets","tag-central-banks","tag-central-planning","tag-charles-hugh-smith","tag-china","tag-chinese-stock-market","tag-oftwominds","tag-stock-markets"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10372","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10372"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10372\/revisions"}],"predecessor-version":[{"id":10373,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10372\/revisions\/10373"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10372"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10372"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10372"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}