Unbeknownst to the giddy individuals, they’re not simply banking on the omnipotence of the Fed Politburo, they’re likewise making a max-leverage bet that “the insanity of crowds” will never ever end.
Picture an economy so controlled by its central bank that all markets hold on every word of its priesthood as life or death. You understand, like the Federal Reserve and the American economy.
Now picture this central bank issues huge amounts of new cash which turbo charges speculative activity such as hundreds of billions of dollars in stock buybacks, unique function acquisition gambling establishments, oops, I indicate business, and so on. You know, like the Federal Reserve’s trillions in almost totally free cash for investors.
Next, picture that the central bank makes hardly concealed guarantees that need to any huge gambler lose money in the gambling establishment, the bank will flood the financial system with a lot more almost totally free cash for financiers and bail out the loser.
Given that flooding the system with nearly totally free cash for investors keeps the speculative frenzy going, the bank has actually implicitly promised that properties driven greater by speculative craze will never be enabled to drop. This guarantee naturally incentivizes even more speculative loaning, take advantage of and threat, producing a titanic Everything Bubble in which dangerous properties escalate from pennies into dollars and dollars into fortunes.
Now picture that this speculative craze spreads into every nook and cranny of the economy such that everybody is drawn into one gambling establishment or another, and formerly sober, careful individuals are seized by a quasi-religious fervor in which they end up being convinced that their betting chips on NFTs, SPACs, meme-stocks, obscure alt-coins, homes, collectables and basically anything within the manic swirl of speculative frenzy is now a can’t lose path to carefree irreversible wealth because the central bank ensures it and anyone who concerns this remains in league with the Devil (or worse).
Next, picture that as an outcome of this large growth of “wealth” in the Everything Bubble, the entire economy is now dependent on this bubble never ever popping as speculation is driving earnings and a wealth result without precedent as every participant feels freshly empowered to obtain and invest more due to the fact that their bubble-wealth simply keeps rocketing higher.
The problem here is all speculative bubbles pop and so the reserve bank’s inflation of a speculative Everything Bubble has actually backed the entire economy into a corner from which there is no escape: either the bubble should keep inflating to ever dizzier heights of misconception and danger or the bubble pops and desolates all the phantom wealth.
Last but not least, imagine that the enthralled participants in the speculative orgy genuinely believe the central bank has the power to keep the Whatever Bubble broadening forever, or at a minimum, bubbling along at a completely high plateau that assurances everyone’s phantom wealth will be forever readily available for tapping and spending.
This is where we are, and it raises one concern: are we actually insane adequate to believe this is going to work? That the Federal Reserve can keep the Everything Bubble broadening essentially forever, or bubbling along at a completely high plateau!
.?. !? Are we truly crazy enough to think that conjuring trillions of dollars out of thin air and then leveraging this into tens of trillions of dollars and disposing all this cash into assets which do not increase in utility so that their “value” rises 10-fold even as their utility remains the same is sustainable and a solid structure for our economy?
Unbeknownst to the giddy participants, they’re not simply banking on the omnipotence of the Fed Politburo, they’re likewise making a max-leverage bet that the madness of crowds will never end.
Are we really insane sufficient to think this is going to work? The answer seems a definite “yes” since everybody understands the Fed has our backs and so permanently expanding wealth is guaranteed. (And if it isn’t, no problem, I’ll leap off the merry-go-round before the music stops. And naturally, 99.9% of all punters be successful in doing so.)
In this joyous moment of speculative self-confidence in a) the music will never ever stop or b) I’ll jump off right before the music stops, fortune completely undamaged, feast your eyes on these charts of guaranteed permanently high plateaus.
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