The Global “Bubble Arms Race” Has Ushered In The Age Of Government Strongmen

Authored by Doug Noland via Credit Bubble Bulletin blog,
The week left me with an uneasy feeling. There were a number of articles noting the 30-year anniversary of the 1987 stock market crash. I spent ‘Black Monday’ staring at a Telerate monitor as a treasury analyst at Toyota’s US headquarters in Southern California. If I wasn’t completely in love with the markets and macro analysis by that morning, there was no doubt about it by bedtime. Enthralling.
As writers noted this week, there were post-’87 crash economic depression worries. In hindsight, those fears were misplaced. Excesses had not progressed over years to the point of causing deep financial and economic structural maladjustment. Looking back today, 1987 was much more the beginning of a secular financial boom rather than the end. The crash offered a signal – a warning that went unheeded. Disregarding warnings has been in a stable trend now for three decades.
Alan Greenspan’s assurances of ample liquidity – and the Fed and global central bankers’ crisis-prevention efforts for some time following the crash – ensured fledgling financial excesses bounced right back and various Bubbles hardly missed a beat. Importantly, financial innovation and speculation accelerated momentously. Wall Street had been emboldened – and would be repeatedly.
The crash also marked the genesis of government intervention in the markets that would evolve into the previously unimaginable: negative short-term rates, manipulated bond yields, central bank support throughout the securities markets, Trillions upon Trillions of central bank monetization and the perception of open-ended securities market liquidity backstops around the globe. Greenspan was the forefather of the powerful trifecta: Team Bernanke, Kuroda and Draghi. Ask the bond market back in 1987 to contemplate massive government deficit spending concurrent with near zero global sovereign yields – the response would have been ‘inconceivable.’

This post was published at Zero Hedge on Oct 22, 2017.

 

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