The Significance of Bubbles.....
Obviously most people are acutely aware that the markets don't function as free price discovery mechanisms any more. This is no secret. In fact following my blog here has made that quite apparent for a number of years now. As you have long heard me say there is a distinct effort by central banks to stave off deflationary forces that would have otherwise long since ripped through the economy stagnating employment and destroying overvalued pricing which exists in almost ever market at the moment.
However we have to be careful at the same time to recognize what the central bankers are trying to achieve. It is not all bad and it is not necessarily a ploy to enrich the rich. This is a by product of their actions but they would rather see a rising tide if at all possible. The problem they face now is deleveraging a population filled to the brim with debt without imploding the economy at the same time. A deleveraging process so to speak.
The bubbles are designed to hopefully create a sort of wealth that would help governments to pay the enormous amount of obligations that have been promised to the masses over the years like social security to name one which measures in the trillions of dollars.
The idea of inflationary forces in some sectors while stagflation or deflation in other sectors is to try to artificially balance the economy. To prevent disasters or black swan events from taking hold in the future. If one were to believe "Yellen" we might conclude that they have indeed done this to a degree. We see clear bubbles in property and in the stock market. Two areas where people need an increase in price in order to retire and have some disposable capital to keep their standard of living higher. As a result you have house prices on the rise and stocks on the rise. They will likely keep rising for a while. Maybe measured in decades to come.
The ideology of course is to cater to the large baby boom population that is nearing or entering into retirement or old age by the millions each and every day. This would be far too expensive a proposition for the governments of the world to even remotely consider doing on their own and so they create these bubbles to fill the void.
The people most responsible for paying for this are the generations below the boomers and the populace at large. When the boomers die off in another ten to twenty years there will be a large void but until that happens they need to be cared for and sustained.
There is a lot of quackery at the moment around commodities roaring back and making bull market runs. I doubt that this will happen as the boomers need all the money they can get their hands on in retirement and so paying top dollar for goods and services won't likely take place even though in a ten year cyclical swing it would seem that this is due to take place.
As I have mentioned before a stronger dollar would benefit them more than higher commodity prices so look for that to happen first.
In reality central bankers are not a stupid bunch. They get it. However what it all comes down to is being able to sustain bubbles in the areas that the boomers need them to versus areas that they don't need them to blow bubbles. 100 million in North America alone is a LOT of people. Cheers!
However we have to be careful at the same time to recognize what the central bankers are trying to achieve. It is not all bad and it is not necessarily a ploy to enrich the rich. This is a by product of their actions but they would rather see a rising tide if at all possible. The problem they face now is deleveraging a population filled to the brim with debt without imploding the economy at the same time. A deleveraging process so to speak.
The bubbles are designed to hopefully create a sort of wealth that would help governments to pay the enormous amount of obligations that have been promised to the masses over the years like social security to name one which measures in the trillions of dollars.
The idea of inflationary forces in some sectors while stagflation or deflation in other sectors is to try to artificially balance the economy. To prevent disasters or black swan events from taking hold in the future. If one were to believe "Yellen" we might conclude that they have indeed done this to a degree. We see clear bubbles in property and in the stock market. Two areas where people need an increase in price in order to retire and have some disposable capital to keep their standard of living higher. As a result you have house prices on the rise and stocks on the rise. They will likely keep rising for a while. Maybe measured in decades to come.
The ideology of course is to cater to the large baby boom population that is nearing or entering into retirement or old age by the millions each and every day. This would be far too expensive a proposition for the governments of the world to even remotely consider doing on their own and so they create these bubbles to fill the void.
The people most responsible for paying for this are the generations below the boomers and the populace at large. When the boomers die off in another ten to twenty years there will be a large void but until that happens they need to be cared for and sustained.
There is a lot of quackery at the moment around commodities roaring back and making bull market runs. I doubt that this will happen as the boomers need all the money they can get their hands on in retirement and so paying top dollar for goods and services won't likely take place even though in a ten year cyclical swing it would seem that this is due to take place.
As I have mentioned before a stronger dollar would benefit them more than higher commodity prices so look for that to happen first.
In reality central bankers are not a stupid bunch. They get it. However what it all comes down to is being able to sustain bubbles in the areas that the boomers need them to versus areas that they don't need them to blow bubbles. 100 million in North America alone is a LOT of people. Cheers!
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