Ouch. Noland is going the dollar crisis way.
prudentbear.com
"Today, the markets are infatuated with risk assets. From the
perspective of Bubble analysis, this is not all too difficult
to explain. The first week of the year saw about $45 billion
of corporate debt issues. Despite enormous new supply,
investment grade debt spreads are at pre-Lehman crisis
levels. The same can be said for junk bond and emerging debt
spreads. Credit conditions are loose for most creditworthy
borrowers, which feeds market demand for these debt
instruments - which translates into even greater Credit
Availability. In such an environment, even commercial real
estate doesn’t look so bad. But is such an accommodating
financial landscape sustainable?
It is always impossible to know what developments will surface
to upset the applecart: there are any number of festering
financial, economic, political, and geopolitical issues that
might impede the unfolding Bubble. At the same time, it is
not unreasonable to suspect that policymakers might tend to
delay dealing with tough issues. The federal deficit is out
of control, and monetary policy is outrageously loose. There
is an “exit strategy” with assorted doors. There is the
looming issue of Fannie and Freddie. The FHA and Ginnie need
to be reigned in.
Looking back, policymakers of all stripes missed their
opportunities to make tough but necessary decisions in 2009.
And now 2010 just doesn’t have the feel of a year that will
witness a lot of decisive policymaking. In Washington, the
focus will turn to the 2010 elections. The Fed will worry
about its reputation and independence. Fearing for their jobs
and fearful of mistakes, timid will win over bold. Bubbles
treasure timid.
Until proven otherwise, I’ll project 2010 as a year of
escalating Monetary Disorder – disorder globally across a
broad spectrum of markets. A global Bubble would seem to
ensure unsettled currency markets. Dollar optimism runs
surprisingly high to begin the New Year. Yet the scenario of
a dollar problem leading to a jump in U.S. borrowing costs
still doesn’t seem all that nutty to me. Another spike in
energy and commodities wouldn’t surprise me, but the best bet
is numbing volatility. The emerging markets are poised for a
wild year. And, of course, all eyes on interest rates.
As I mentioned above, a Bubble Year suggests the likelihood of
bipolar outcomes. I’ll conclude by admitting that I get that
uneasy feeling that our central bank is quite determined to
avoid learning lessons. " |
