Bernanke seemed shocked at how easily Greenspan admitted Wall Street’s rampant fraud. Illegal and criminal activities played a major role in the GFC for which no bankers were jailed and no banks closed down. They paid tax-deductible fines that were insignificant relative to the gains made.
$6 Trillion ‘rescue package,’ unaffordable bailouts and buybacks: Bend over, here it comes again!
The same players who were bailed out then went back to what they do best. Too big to fail is now bigger, but with one crucial difference – the concentration of toxic risk remains in fewer hands and is enabled by Washington’s pay-to-play swamp. As corporate debt hits new all-time highs, balance sheets remain riddled with accounting fraud and enforcement hits all-time lows; we will soon see who is naked and it won’t be pretty.
Last autumn Germany’s economy was falling off a cliff and was either in a recession or would be very soon. Italy’s debt is a huge problem and other member states and the rest of the world are not far behind Germany. Now in March, you can expect and will need to prepare for a full-blown economic depression.
Banks, politicians and governments will scapegoat Covid-19 to shift the blame for over 30 years of fiscal profligacy, loose monetary policies, fraud, and the lack of any proper regulatory enforcement away from themselves and onto anything or anyone else. Eventually, taxes will skyrocket to pay for these opaque bailouts, reckless spending policies, and record low interest rates during the past three decades.
Covid-19 presents an easy way to assign blame while forcing through “emergency legislation” allowing big government to implement 1984-style draconian social controls that will impinge and dismantle personal freedoms, liberties and democratic principles as they fleece taxpayers – again. If you think the 2008 recession and bailouts were bad, wait until you see how the greatest economic depression in history plays out.
This bubble has only begun to pop, and there are many more shoes to drop from this centipede before prices hit bottom. The downside will be significantly worse than the upside. Until leverage, valuations and corporate debt return to reasonable levels, stay clear. When these events do happen, we will see once-in-a-lifetime opportunities to create wealth.
The two most important lessons learned from last 40 years in international financial markets are lessons that can also be applied to politics and to life in general, are to never make any decision based on emotion or ideology and to never, ever trust the news. Today’s media are exponentially worse than they were in the 1980s and 1990s. They no longer provide news. What they provide are stories that are around 80 percent ideology and opinion,10 percent lies and spin, and 10 percent fact.
You need to divorce yourself from emotion and ideology. You need to base decision-making on statistical probability utilizing raw economic data, rational reason, logic and facts. Fasten your seat belts tightly; severe turbulence is coming, and the ride will be bumpy.
