Of Two Minds

Nobody seems to be wondering what happens should the real world no longer respond to the Perpetual Motion Finance Machine.
Scrape away the hand-wringing about interest rates and we find a bedrock of complacency.

The Social Contract is broken not just by wealth inequality per se but by the illegitimate
process of wealth acquisition

Extremes keep getting more extreme, but for those at the top of the heap, it’s all fine. For everyone else slipping down the ladder, all that FINE adds up to Fragile, Insecure, Nonsensical, Expensive.

Together, these factors generate a self-reinforcing cycle of debt saturation, declining collateral and credit contraction.

Who’s left to buy overvalued houses? Too few to prop up bubble valuations. If as many posit the Federal Reserve has an unstated mandate to generate a “wealth effect” by propping up housing, they’ve managed to create a no-win situation.

And what happens next? Bubble symmetry: valuations fall at the same rate as they rose, declining back to the starting point over a roughly equivalent time duration.