You Tell Me If We Are In a Bubble

Posted by Patrick Ceresna on May 4, 2016 8:38:58 PM

Is history just going to repeat itself?

Back in 1978, Director Richard Condie and The National Film Board of Canada put together a great 10-minute cartoon discussing one of the greatest bubbles of all time – The Mississippi Bubble. I ask the question if Mr. Condie had any premonition that 38 years later, this cartoon would have so much context to today’s financial situation.

I want to preface the video with this:

While you are watching the video, in your mind replace the following characters:

“Regent” with “Government”
“John Law” with “Central Bankers”
“Mississippi Company” with “Stocks/Real Estate”
“Royal Edicts” – “Government and Central Bank Policies”

I ask you a simple question -  In today’s world, why do we see such things as:

  • Massive corporate share buy backs implemented with money borrowed almost for free
  • Massive central bank money printing through quantitative easing in almost all countries
  • Using printed money, why did the Bank of Japan buy close to 50% of all outstanding Japanese government bonds, stock ETFs and real estate investment trusts (REITS) in their country?
  • Why is there an active currency war amongst countries for competitive devaluation? Why did Japan actively destroy close to 40% of the purchasing value of its currency from 2013-2015? 
  • Why do negative interest rates exist? Why is there close to $10 trillion of global bonds yielding negative interest rates?
  • In a Deutsche Bank report, why is Dominic Konstam talking about penalizing savings with negative retail deposit rates and wealth taxes? Why does he feel negative mortgage rates for new buyers is a necessary incentive?
  • Why are governments and central banks trying to eliminate high denominations of currencies? ($500 Euro bill being the most recent)

You can decide for yourself.

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