2012-10-21prudentbear.com

I've often contemplated where I might "officially" pinpoint a starting point for the prolonged U.S. and global Credit Bubble.  There is strong justification for choosing the early eighties, on the back of that period's explosions in U.S. federal debt, non-bank Credit creation, and destabilizing Current Account Deficits.  I'll instead propose October 20, 2012 as the 25 Year Anniversary of the Great Credit Bubble.   It was, after all, 25 years ago, on the Tuesday following "Black Monday," that a statement changed history:  "The Federal Reserve, consistent with its responsibilities as the Nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system."

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And the way I see it, the Fed, ECB and global central bankers today fight a losing battle. The mountain of global debt, securities, and derivatives, along with this destabilizing global pool of speculative finance, just inflate larger by the year -- and after each policy response. And the more outrageous the policies implemented to try to resolve each crisis, the more these desperate measures further inflate the global Bubble. Ironically, the ongoing assurances of central bank liquidity seem to ensure an eventual crisis beyond the liquidity capacity of central banks. Happy 25th Anniversary, you aged and ornery Credit Bubble. They'll be reading, writing about and studying you for at least the next century.


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