by Charles Hugh Smith
Of Two Minds
All bubbles pop, period.
The financial elites are pushing a narrative that asset prices, sales and profits will all return to January 2020 levels as soon as the Covid-19 pandemic fades. Get real, baby. Nothing is going back to January 2020 levels. Rather than the “V-shaped recovery” expected by Goldman Sachs et al., the crash in asset prices will eventually gather momentum.
Why? It’s simple: for 20 years we’ve over-invested in speculative bubbles and squandered borrowed money on consumption and under-invested in productivity-increasing assets. To understand why the market value of assets will relentlessly reprice lower–a process sure to be interrupted with manic rallies and false dawns of hope that a return to speculative good times is just around the corner–let’s start with the basics: the only sustainable way to increase broad-based wealth is to boost productivity across the entire economy.
That means producing more goods and services with less capital, less labor and fewer inputs such as energy.