The Mother of All Irrational Exuberance

The comments above & below is an edited and abridged synopsis of an article by David Stockman

The great tech bubble and crash of 2000 marked a crucial turning point in modern financial history: It reflected the fact that the normal mechanisms of stock market price discovery had been disabled by central bankers, and that the natural balancing and disciplining mechanisms of two-way markets had been destroyed.

Stockman discusses the stock market in April 2000; the dotcom crash; Greenspan’s call of irrational exuberance; rampant bubbles in the financial market; the Fed’s money pumping; and the success/failure of various companies from 2000 to date.

In short, the promising macro-economic situation at the turn of the century has given way to a world precariously balanced on $225 trillion of debt and the tottering $40 trillion Ponzi scheme of China.

Likewise, the geo-strategic environment of that era has disappeared into the madness of RussiaGate, endless wars in the Middle East and the confrontation between the US and North Korea.

After 30 years of rampant monetary expansion, the central banks of the world have been forced to reverse direction and begin normalizing interest rates and balance sheets, and the experiment in demonetization of public debts is coming at a time when, after 8 years of business cycle expansion, the US, Japan and most of Europe are running huge full-employment budget deficits.

Even then, these reckless fiscal policies are happening in the face of pension, medical and welfare spending.

Relative to today’s casino madness, Alan Greenspan circa April 2000 looks like a model of sobriety by comparison.

So if that was irrational exuberance back in April 2000, what we have now is surely the mother thereof.