12/12/2014 - Financial Repression Has Caused Drastic Mispricing of Financial Assets
“There are financial time bombs planted everywhere in the world economy because central bank financial repression has caused drastic mispricing of nearly every class of financial asset, which is to say, every layer of collateral which has ratcheted-up the entire edifice .. This drastic central bank driven financial repression has unleashed a mindless pursuit of ‘yield’ or short-term trading gains that give the concept of ‘irrational exuberance’ an entirely new definition .. What is happening now is that risk is coming out of hiding; the collateral chains are buckling; the financial time bombs are beginning to explode. There is nothing especially new about this development—its the third occurrence this century. But there is possibly something different this time around the block. This time the carnage could be much worse because the most recent tsunami of central bank credit was orders of magnitude larger and more virulent than during the run-up to the Lehman event or the dotcom implosion. Moreover, the central banks are now out of dry powder—– impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to ‘stimulate’ the macro-economy by temporarily driving interest rates to ‘extraordinarily’ low levels. They are already there. So duck and cover. This storm could be a monster.”
– David Stockman
