The Greatest Expansion of Speculative Finance Ever

by Doug Noland
Daily Reckoning

With global risk markets staging a significant rally, it’s an appropriate time to update my bursting global Bubble thesis. Three weeks ago I titled a CBB “Crisis Management.” My view was that mounting global market instability had reached the point where concerted policy measures would be employed in an effort to bolster faltering global Bubbles. I do not expect such stimulus to succeed in resuscitating the global Bubble that inflated out of the 2009 crisis response. At the same time, policymakers obviously still retain some power to incite rallies in a grossly speculative marketplace.

Let’s try to put things into context: We’ve witnessed history’s greatest financial Bubble. The Bubble has been fueled by a confluence of extraordinary financial innovation (i.e. securitized finance, leveraged speculation, derivatives, state-directed finance, etc.), unmatched debt growth, unprecedented central bank Credit expansion and market manipulation – and the global adoption of all of the above. Especially since 2009, global central bankers have embraced extreme monetization and rate measures specifically to target rapid Credit expansion and securities market inflation.

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