Remember what I earlier wrote?
The point is the IMF, like many other global political or mainstream institutions or establishments, CANNOT deny the existence of bubbles anymore. So their recourse has been to either downplay on the risks or put an escape clause to exonerate them when risks transforms into reality which is the IMF position.
Well, US President Obama seems to have joined the bandwagon of political agents decrying “excessive risk taking” (euphemism for bubbles)
From the Wall Street Journal: (bold mine)
President Barack Obama on Monday urged U.S. financial regulators to keep looking for new ways to rein in excessive risk-taking in the financial sector, possibly through compensation and additional capital rules for the biggest financial firms, a White House spokesman said.In a meeting Monday morning at the White House, Mr. Obama urged regulators “to consider additional ways to prevent excessive risk-taking across the financial system, including as they continue to work on compensation rules and capital standards,” White House press secretary Josh Earnest said during a press briefing Monday.No new initiatives in these areas were considered Monday; rather Mr. Obama and participants discussed the need to finish outstanding compensation rules required by the 2010 Dodd-Frank law and reviewed the current state of capital rules, according to people familiar with the meeting.
In the case of the POTUS, the admonition doesn’t seem to be about “escape valves” but about the opportunity to expand government control on the financial markets. This resonates with the call of his former chief of staff, Emanuel Rahm (now Chicago Mayor) who in 2008 said, "You never want a serious crisis to go to waste. Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before."
President Obama doesn’t say that such “excessive risk taking” have been products of financial repression policies that has largely benefited the US government in two ways: subsidies on public debt and government spending through suppressed interest rates and from the inflation of tax revenues that has cosmetically improved US fiscal standings.
Nonetheless for the POTUS to implicitly raise the risk of bubbles means that politically influential elites, as I have previously discussed, appear to be apprehensive of the current developments for them to have these politicians express (on proxy) their sentiments.
Again this shows that bubbles have natural limits. And the natural limits are working their way to the mindsets of even the major beneficiaries the political agents. Changes occur at the margins.
Again as the great Austrian economist Ludwig von Mises warned: (bold mine)
But the boom cannot continue indefinitely. There are two alternatives. Either the banks continue the credit expansion without restriction and thus cause constantly mounting price increases and an ever-growing orgy of speculation, which, as in all other cases of unlimited inflation, ends in a “crack-up boom” and in a collapse of the money and credit system. Or the banks stop before this point is reached, voluntarily renounce further credit expansion and thus bring about the crisis. The depression follows in both instances.
If they mean what they say these barrage of warnings will translate to policies.
I don’t know if current global stock market developments signify a head fake or heralds the advent of the real thing…
US stocks have converged to the downside…
And so as with global stocks: MSCI World $MSWORLD, Asia ex-Japan AAXJ, Europe Stoxx600 and iShares Emerging Markets (EEM)
Is this the start of the breakdown? We’ll see.
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