Hello all mavericks,

Those who actually creates value as opposed to chasing yields with virtually free money will actually have some traction once the swamp of excess liquidity drains. What a chance does a saver have in bidding a war for a house or other asset against a financier who can borrow essentially unlimited cash? Answer: NONE.

The timing of collapse. 

The systematic result of excess liquidity or cheap credit is bubbled in all asset classes that yield a low risk return. Buying low yield return is still profitable if you can borrow money from next to nothing. 

Though the timing of the prostration of the excess liquidity is unknown, we can safely predict excess liquidity will collapse because all extremes revert to the means. At some point asset reach such heights that even free money isn't earning a substantial return after adjusted to inflation issues. 

Permanent instability. 

At that point, participants loose faith in the easy money policies that have issued cheap credit as the cure all for stagnation. The excess liquidity is still gushing out from central banks, but even financiers don't want anymore as there's no way left to earn a return even at nearly zero cheap money. This globalization has two consequences: Permanent instability and endless boom and bust cycles. 

The wild swing.

The stock market wild swings of sentiment has started some thinking on a constant supply of the drug. There are multiple interpretations of the role of drugs but for the purposes of the chart, it serves a modest dose of something healthy to keep the ravaged market from crashing. 

After multiple swings between drugs highs brought to earth by downers, the market seems to be tripping on acids again. Though no one can recognize precisely what hallucinations are spinning through the manic depressive sentiment of the market, it seems the market has responded to the withdrawal of its free money addiction.

Supplied of course by the central bankers- by entering a drug induced fantasy that everything been fixed in the global economy.

The unrealistic expectations. 

Europe is growing again. China's housing market crisis has passed. All corporate profits will feed corporate buybacks forever and so all stocks can lift higher again- A Bull Market without end.

As bare as that? I'm guessing, maybe not? 

There are multiple problems.  

Globalization don't have one problem,  they have more than that. Those additional sets of problems those wizards of policy makers described as " solution " only guarantee that the third and final crash of asset bubbles ahead will be far more devastating than the previous two.

The conventional view assumes the global economic system is dealing with one problem. To recover from the 2008-09 great financial meltdown. Stimulating a recovery has been the focus of central banks and States everywhere. Short sighted expediency is the hallmark of the " modern state's" reaction to the crisis. 

But political expediency isn't the only flaw in the central banks obsessive focus on "recovery ", it's not even the primary flaw. The actual flaw is they don't even recognize that the world is facing three interlocking sets of problems, and not one. 

Stagnated wealth and economy. 

As the post industrial funk of the 1970s drag on, the neo-liberal ideology of liberalizing capital/credit markets and eliminating the regulatory walls between investment banking and commercial/mortgage banking was presented as the fundamental fix to the post industrial stagnation: free up credit, leverage and speculation and the result will be an expansion of assets prices and growth. 

The first wave of financialization of the 1980s did indeed boost asset valuation and growth. But it did so by eroding the productive economy and the middle class that arose from gains from productivity. This financialization substitutes finance from productive investment such that financial games like the subprime home mortgages become far more profitable than the other non financial services/capital investment.

Plainly put, it is hollowing all levels of the economy by leveraging, excessive debt, speculation, corruption, financial fraud, collusion and the perfection of crony capitalism IE. Financial Elites ownership of the government regulatory and legislative bodies. 

Extreme credit, risk, leverage and speculation. 

As conventional financialization failed to reflate the asset bubbles of the late 1990s that crashed in 2000, central banks opened the door to extreme credit expansion, leverage and risk. Financial fraud and embezzlement become the models of choice as lenders and borrowers alike engaged in a monstrously profitable churning of securitized mortgages, liar loans, initial public offering of no hope of generating profits and all the other trick of trade in financial services. 

The inevitable of these extremes of supposedly low risk leverage and a sleight of hand was the global financial meltdown in 2008/09, when bubbles in credit, risk, stocks and real estates popped. 

Central Bank's "solution" to the Global Meltdown.

The world's  monetary and fiscal solution, dropping interest rates to zero, printing trillions of dollars, yen, yuan, euros out of thin air and giving banks free access to all this loot, with the implicit promise that any bets that went bad will back -stopped by the taxpayers- have not only done nothing to repair the damage done by the first two problems but unleash another even more destructive dynamics.

Those wizards of the policy makers, solution to all dependency is to increase each new dose of stimulus. Alas, at some point the dose becomes large enough to kill the addicts.

Each band of problems is layered on top of each other nicely. In other words, the entire set of problem is more than one as viewed and will cause the most devastating crash in history.

The basic instinct.

Will the additional sets of problems added as solutions only guarantee that the coming crash of asset bubbles just ahead is far more devastating than the crashes of 2008/09?

The witch policy makers has pushed astonishing policies for six years, now that they owns significant chunks of the Treasury bond and the mortgaged bond market, it's forced to limit those easing programs. Will it slipped into a coma?

Most are growing poorer.

Meanwhile, labor is oversupply almost everywhere, wages is declining when measured against purchasing power. While wages are in deflationary pressure, nearly everything is exposed to inflationary pressure. No wonder we feel poorer. Most of us are poorer.

Invest wisely and cautiously. 

P/s: if possible, avoid those unethical/fraudulent management for unnecessary monetary loss and emotional tension. Return to fundamentals maybe? It seems so. 

# Income is declining rapidly, purchasing power is diminishing, man on the street is feeling it. Growth? Another intervention stimulus?? Good. Enjoy some or otherwise, moment of permanent instability.