Re:Wall Street Banks Warn Downturn Is Coming
by unknown_apostle on Wednesday August 23, 2017 @10:55AM
(#15081944)
A sidenote to ABC-like theories: entrepreneurs always end up with clusters of malinvestments, even without interest rate manipulation. Simply because humans always exaggerate.
The difference is that without e.g. interest rate manipulation, we'd probably have a lot of "rolling waves" of small recessions. These small recessions would be frequent but also limited in duration, scale and scope.
With suppression of interest rates, the malinvestment becomes bigger and broader. Meaning their unraveling is much more traumatic.
9 years into the latest boom, with ZIRP and NIRP and QE and mark to unicorn accounting and all the other oxycodon shots necessary to abort and forget the 2008 run on the system, we can only wonder what has been built up in terms of malinvestment and what the unraveling will be like. Not just in the world of finance and credit, but also in the real economy, where much of the recent competition and "disruption" is really based on venture capital backed companies not worrying about profitability for years on end.
The difference is that without e.g. interest rate manipulation, we'd probably have a lot of "rolling waves" of small recessions. These small recessions would be frequent but also limited in duration, scale and scope.
With suppression of interest rates, the malinvestment becomes bigger and broader. Meaning their unraveling is much more traumatic.
9 years into the latest boom, with ZIRP and NIRP and QE and mark to unicorn accounting and all the other oxycodon shots necessary to abort and forget the 2008 run on the system, we can only wonder what has been built up in terms of malinvestment and what the unraveling will be like. Not just in the world of finance and credit, but also in the real economy, where much of the recent competition and "disruption" is really based on venture capital backed companies not worrying about profitability for years on end.