The End Game Of Bubble Finance – Political Revolt
By Tyler Durden
Submitted by David Stockman via Contra Corner blog,
During Friday’s bloodbath I heard a CNBC anchor lady assuring her (scant) remaining audience that Brexit wasn’t a big sweat. That’s because it is purportedly a political crisis, not a financial one.
Presumably in the rarified canyons of Wall Street, politics doesn’t matter much. After all, when things get desperate enough, Washington caves and does “whatever it takes” to get the stock averages moving upward again.
Here’s a news flash. That’s all about to change.
The era of Bubble Finance was enabled by a political abdication nearly 50 years ago. But as Donald Trump rightly observed in the wake of Brexit, the voters are about to take back their governments, meaning that the financial elites of the world are in for a rude awakening.
To be sure, the apparent lesson of the first TARP vote when the bailout was rejected by the House in September 2008 was that politics didn’t matter so much.
Wall Street’s 800 point hissy fit was all it took to prostrate the politicians. Indeed, the presumptive free market party then domiciled in the White House quickly shed its Adam Smith neckties and forced the congressional rubes from the red states to walk the plank a second time in order to reverse the decision.
There was a crucial predicate for this classic crony capitalist capture of the authority and purse of the state, however, that should not be overlooked. Namely, that in the mid-cycle period of the world’s 20-year experiment in central bank driven Bubble Finance the rubes had not yet come to fully appreciate that they were getting the short end of the stick.
Indeed, the earlier phases of the bubble era witnessed an enormous inflation of residential housing prices. For instance, between Greenspan’s arrival at the Fed in August 1987 and the housing bubble peak in 2007, the value of residential housing rose from $5.5 trillion to $22.5 trillion or by 4X.
The greatest extent of the housing bubble occurred in the bicoastal precincts, of course. But it did lift handsomely the value of 50 million owner occupied homes in the flyover zone, as well.
Accordingly, the latter did not yet see that the new regime was stacked in favor of the top 10% of the economic and wealth ladder, which owns 85% of the non-housing financial assets. Nor was it yet evident as to the degree to which massive money printing under conditions of Peak Debt almost exclusively stimulates Wall Street speculation, not main street production, jobs, incomes and spending.
In any event, by the eve of the great financial crisis, the GOP was actually controlled by the racketeers of the Beltway and the Wall Street gamblers, not the red state voters who had elected it.
In fact, Goldman’s Sach’s plenipotentiary to Washington, Hank Paulson, was in complete command of the elected side of government. At the same time, the Bush White House had populated the central banking branch of the state with proponents of monetary activism, who were more than ready to authorize “heroic” measures …read more
Source: The End Game Of Bubble Finance – Political Revolt
