Submitted by Taps Coogan on the 31st of October 2018 to The Sounding Line.
CNBC’s Rick Santelli recently mused on how markets got where they are today and why they are now running into trouble in one of his trademark ‘rants.’ His conclusion: central banks were too easy for too long.
“Traders are trying to understand why the funk has hit the equity markets and the markets at large… I think the answer is so easy. Many have been thinking it’s going to happen for a long time. Conditions were too easy for too long. It really is that easy… We have the real economy and we have the market economy and all that time from about 2008 to 2015, what happened was the real economy wasn’t really built on a foundation. It was built on straw. The market economy, however, took all the Santa Clause givings of the central banks and monetized it right up. You want to know where all that inflation went? It went into financial assets. Now we’re looking a bit at the other side of the mountain. But how did we get here? Debt. Everybody says it’s debt and they’re probably right. The problem is we had years and years and years of debt where nobody seemed to notice. We had many years: ’09, ’10, ’11 over a trillion dollars. Nobody noticed those budget deficits because rates were so low. And why were the rates so low? Because there was no real fiscal policy to speak of. Fiscal policy was monetary policy. It was the Santa Clause of central banks and all of a sudden now we see that we actually have some decent fiscal policy. You can say a lot of things about this President, but whether it was the rally in 2016, 2017, the beginning of 2018, a lot of positive fiscal activity. Any type of fiscal activity really. Ben Bernanke and Janet Yellen,… behind closed doors, were just begging for some real fiscal policy. So the great divergence occurred. We started pulling away because the alarm clock rang and we actually started doing something to help the economy, the real economy, the GDP type economy. Now, well (its) gains and pains… It was always a matter of time. Many believed that the central banks did what they did to pull the band-aid off slowly, but no matter how you slice it, the growth that we’ve had recently in the US and some parts of the globe is the real deal, but it is built on things that aren’t the real deal and now we are paying the price. Many say ‘Oh my God, Powell it’s your fault, shoot the messenger…’ Nobody argues with central bank Santa Clausing, whether its Janet Yellen, Ben Bernanke, Mario Draghi, Kuroda. But the problem is, after every big parade, there is a guy with a broom and Mr. Powell happened to be the lucky guy with a broom in the hand. What would happen if we had a global recession without a Powell? What would we do? See Mario Draghi puts rates to minus 2%? Yeah that’ll fix everything.”
Enjoy the full video above:
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