What’s really happened over the past 10-years is central banks printed lots of lots of money and pumped it into the financial system through QE [Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment.] What happened to that money? Well, most of it stayed in the system, and has been invested in financial assets – NOT the real economy. And that is where the money continues to reside – QE has inflated the value of all financial assets by boosting bond prices via dangerously low rates and converting equity into debt (thus pushing up equity prices through buybacks). And, of course, markets have spotted and coat-tailed the effect… meaning the banks and hedge funds and owners have received lots of dividends and bonuses while workers have seen wages stagnate/fall and workers rights reduced in the new gig economy.
Long-term its unsustainable. But why would the party ever end? Because no one is going to get paid a pension from negative yields to infinity. And politicians and voters notice the rich getting richer while western economies flatline as the financial party goes on and on and on. Resentment is a terrible thing to behold – parliaments and corporate princes’ palaces will burn fiercely.
So, there you are, the stark binary choice. Its your/our choice pick one:
Central Banks take the medicine now and steer the global economy back to normalization, which means a sharply corrective stock market crash followed by recovery, rising rates (and a bond market wobble). 5 more years of pain! Then everything back to normal.
They keep fueling the bubble, till its negative infinity rates and financial inflation means a single Tesla share is worth more than California… And the resentment is such the real world explodes and it all ends very badly.. Loads more pain for longer..