{"id":30507,"date":"2018-02-03T12:28:40","date_gmt":"2018-02-03T17:28:40","guid":{"rendered":"http:\/\/olduvai.ca\/?p=30507"},"modified":"2018-02-03T12:28:40","modified_gmt":"2018-02-03T17:28:40","slug":"weekly-commentary-the-grand-crowded-trade-of-financial-speculation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=30507","title":{"rendered":"Weekly Commentary: The Grand Crowded Trade of Financial Speculation\u00a0"},"content":{"rendered":"

Weekly Commentary: The Grand Crowded Trade of Financial Speculation\u00a0<\/span><\/a><\/h3>\n
Even well into 2017, variations of the \u201csecular stagnation\u201d thesis remained popular within the economics community. Accelerating synchronized global growth notwithstanding, there\u2019s been this enduring notion that economies are burdened by \u201cinsufficient aggregate demand.\u201d The \u201cnatural rate\u201d (R-Star) has sunk to a historical low. Conviction in the central bank community has held firm \u2013 as years have passed – that the only remedy for this backdrop is extraordinarily low rates and aggressive \u201cmoney\u201d printing. Over-liquefied financial markets have enjoyed quite a prolonged celebration.<\/p>\n

Going back to early CBBs, I\u2019ve found it useful to caricature the analysis into two distinctly separate systems, the \u201cReal Economy Sphere\u201d and the \u201cFinancial Sphere.\u201d It\u2019s been my long-held view that financial and monetary policy innovations fueled momentous \u201cFinancial Sphere\u201d inflation. This financial Bubble has created increasingly systemic maladjustment and structural impairment within both the Real Economy and Financial Spheres. I believe finance today is fundamentally unstable, though the associated acute fragility remains suppressed so long as securities prices are inflating.<\/p>\n

The mortgage finance Bubble period engendered major U.S. structural economic impairment. This became immediately apparent with the collapse of the Bubble. As was the case with previous burst Bubble episodes, the solution to systemic problems was only cheaper \u201cmoney\u201d in only great quantities. Moreover, it had become a global phenomenon that demanded a coordinated central bank response.<\/p>\n

Where has all this led us? Global \u201cFinancial Sphere\u201d inflation has been nothing short of spectacular. QE has added an astounding $14 TN to central bank balance sheets globally since the crisis. The Chinese banking system has inflated to an almost unbelievable $38 TN, surging from about $6.0 TN back in 2007. In the U.S., the value of total securities-to-GDP now easily exceeds previous Bubble peaks (1999 and 2007). And since 2008, U.S. non-financial debt has inflated from $35 TN to $49 TN. It has been referred to as a \u201cbeautiful deleveraging.\u201d<\/p><\/div>\n

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…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Weekly Commentary: The Grand Crowded Trade of Financial Speculation\u00a0 Even well into 2017, variations of the \u201csecular stagnation\u201d thesis remained popular within the economics community. Accelerating synchronized global growth notwithstanding, there\u2019s been this enduring notion that economies are burdened by \u201cinsufficient aggregate demand.\u201d The \u201cnatural rate\u201d (R-Star) has sunk to a historical low. Conviction in […]<\/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":[17798,124,7756,195,18339,1357,391,661,662,12325],"class_list":["post-30507","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-bank-balance-sheets","tag-central-banks","tag-credit-bubble-bulletin","tag-debt","tag-financial-speculation","tag-global-growth","tag-growth","tag-qe","tag-quantitative-easing","tag-secular-stagnation"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30507","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=30507"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30507\/revisions"}],"predecessor-version":[{"id":30508,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/30507\/revisions\/30508"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}