Dangerous Bubbles in Plain Sight

by David Stockman

Janet Yellen is oblivious to the dangerous speculation and valuation excesses that her policies have introduced throughout the financial system.

Dangerous Bubbles in Plain SightRelative to disposable income, the value of household financial assets now far exceeds the last two bubble peaks. That has happened in an economic environment that suggests the opposite. Valuation multiples and cap rates should be falling, because the productivity and growth capacity of the US economy has been declining since the turn of the century.

What is even more striking is that, since the eve of the financial crisis in 2007, a rapidly increasing share of disposable personal income has been accounted for by the explosive growth of transfer payments.

Stockman discusses transfer payments; the extent of bubble excesses; GDP growth; the tepid and weakening recovery; the earnings outlook for Q3; interest rates; the unemployment rate; and inflation.

The Fed sees no bubbles in a financial system that is rampant with asset inflation. It sees full employment when the US economy has more labour slack than at any time in modern history. And it keeps the Wall Street gamblers in free carry-trade funding because it wants even more inflation than what is already ravaging the real incomes of Flyover America.

No wonder the Trump voters want to throw the bums out. It is none too soon.

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