| | | Crypto-Currency speculation
Asset bubbles are not necessarily damaging. If stocks shoot up and shoot down again, people may have lost money they only ever held on paper. The critical question is the level of debt. If collapsing bubbles inflict losses on indebted investors, or if cheap credit leads to excessive speculation, disaster can result. In 2009, everyone expected a decade of deleveraging. It has not happened. In a number of markets, there are signs of debt-funded speculation, and of over-indebtedness.
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The central concern continues to be interest rates. Exiting the crisis, most expected inflation, with higher interest rates in its wake. Instead, deflationary psychology took hold. There is no speculative excitement over bonds, but many still say that European bonds are in a bubble. As the US subprime crisis gave way to the eurozone crisis, and central banks bought more bonds, yields on the main European economies’ bonds went negative. In effect, investors paid governments to look after their money. |
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