Asset bubbles are brutal.
The most difficult time to remain centered and focused is during their last stages as everyone around you is going nuts. Logic has been tossed out the window, sentiment is manic, and every narrative – the stories we hear and use to make sense of our world – is thoroughly ungrounded.
After a decade of price deformation — such as UBER being valued by the ““markets”” at $45 to $50 billion despite having no viable path for ever making a profit — it seems that practically everyone has lost the ability to perform even basic math or reality checks.
For example, this week — for what must have been the 42nd time — the Trump administration has proclaimed a massive victory in the China Trade Deal.
The narrative being sold to us is that along with the immediate roll-back of tariffs (which is Trump caving, not ‘winning’), China will buy $50 billion of US agricultural products in 2020.
Huge excitement in the global equity markets has greeted this news. Stocks exploded higher and bonds have been sold off. Unleash the hounds of economic growth!!
All this based on the premise that China has (verbally) agreed to buy $50 billion of US agriculture products in 2020.
Now, about that…
What does $50 billion a year in Ag trade look like? Is it even possible?
The all-time record of China buying Ag products happens to have been in 2012 when:
Ag products cost a lot more on a unit basis (this was the food inflation which you may remember kicked off the Arab spring riots in 2011?) and
China hadn’t yet formed solid trade relations with other Ag producers such as Brazil and Russia.
What was that all-time record? It was just $26 billion.
It’s utterly, completely, totally ludicrous to suggest (as Powell did) that the banking system is suffering from a shortage of excess reserves. Puh-leeze!
At $1,388 billion, excess bank reserves are $1,358 billion more than they were before the Great Financial Crisis hit. $30 billion was enough a decade ago, but now 46x more than that is supposed to be insufficient??
So, that ain’t it.
Instead when banks won’t lend to each other overnight it’s because they don’t trust each other enough to do it.
That’s it. Full stop.
Which means the Fed know something we don’t. And it means Powell is a lying sack for suggesting otherwise.
And it means this whole thing could go 2008 nuclear at any time, and the system won’t be able to control the meltdown.
Which is why the Fed is fighting like crazy to prevent that sort of thing from ever getting started.
So here we find ourselves, at the twilight of the Everything Bubble, with asset prices at all-time highs and the mainstream narrative crooning that the future’s so bright we need darker sunglasses.
Yet paradoxically in parallel with that, a cursory peek behind the curtain and a little cocktail-napkin math show us that the entire financial, economic and monetary system is teetering on the brink. In the Fed’s latest half-$trillion liquidity dump, we can see how radically extreme the measures now need to be to keep things from falling apart.
Bottom line: This whole thing is going to blow up at some point. It will be a before-and-after story for the generations that follow, in the same way the Great Depression was.
You’ll either be emotionally, physically and financially ready for it or you’ll become collateral damage along with the rest of the herd.
LOT more,,,,,,,,,,,,,,,,,
http://www.peakprosperity.com/bubbles-are-brutal/
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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