The liquidity game continues to roll on. I think the reality is that since banks took advantage of the free-market capitalist society and almost blew up the entire system in 2008, the government has taken over, and governments do not want a recession. Recessions do not keep people who are in elected positions in those positions. With the Government in charge, it is pretty easy to avoid the classical recession, all they have to do is keep creating money. Of course, we know the ultimate consequence of this is inflation, but since inflation is now measured by not including things like food, energy, and housing, its relatively easy to hide most of the inflation that is going on, at least through the measures that are in fact produced by the government themselves. Economics tells us very clearly that the balancing side to creating excess money in order to avoid recession is inflation. But by trying to fight this money creation, we are essentially fighting city hall. Sure, eventually the can will not be able to be kicked down the road anymore, but that “eventually” can clearly be much longer than anyone could expect, given the unlimited resources governments have to throw at it i.e., the money printing press. I think it is very important to understand and keep an eye out for what is happening here with the excess money creation, but it is equally important to understand the possibility that this could go on for a very long time. As long as this goes on, the high probability is that asset prices will continue to increase, be that commodities, equities, housing, or anything else with a price tag. Throw these facts along with the belief that we are in a new age thanks to Artificial Intelligence (AI) that will be the greatest productivity gain in history, and you have an environment that makes it very difficult to try and short anything, in particular equity markets.
In my career I have worked with three people who I thought to be complete frauds and law breakers. In each case I distanced myself from them, which caused me short term financial pain. I was told I was crazy to do this. The first one was banned from the securities industry and turned informer in order to keep him out of jail. This was seven years after I ran from him. The second one is currently sitting in a Newark, New Jersey jail awaiting trial with no bail. This was about twenty-five years after I ran from him. I watched from a distance as he seemingly got away with fraud after fraud and made millions. The third one is currently going through the court system with his career over, and his future freedom unknown. This is eleven years after I got away from him.
My point here is that even when we see things correctly, and the perpetrators come to justice, it can be a very long time before this happens. It is the same here with the government Ponzi scheme. Does the evidence indicate it should happen? Absolutely. Does this say anything about the timing? Not at all.
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Thanks,
Jason Shapiro & The CMR Team
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Thank you for sharing the story of the 3 fraudsters, law breakers. Bill Fleckenstein and Jim Grant note that Greenspan and Bernanke (Person of the Year on cover of Time) were consdered heroes yet marshalled in policies that led to the destruction of the housing market and later, the destructive, easy money policy of QE that eventually led to inflation and excessive leverage by America.
New to Jason’s substack but man he is a breath of fresh air. No BS.