by Egon Von Greyerz, Gold Switzerland:
When it comes to modern markets, risk assets and the now normalized yet twisted tango of fiscal and monetary policy gone wild, it’s safe (rather than sensational) to simply confess that nothing is real.
As I recently watched BTC drop by 16% in one hour from $50K to $43K, only to reach back up to $46K in 20 minutes, my 20+ years of Wall Street experience watched with bemused yet experienced awe at what amounted to just another day of leverage, emotion and institutionalized front-running as the big money whales in crypto pulled off yet another media and SEC-ignored pump-dump-and-pump trade.
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In short, the unreal has simply become business as usual.
Real Education vs. Surreal Facts
By 1997, I had graduated from a steady, iconic and expensive list of higher educational institutions which emphasized critical thinking, objective data, historical context and basic math.
But had I told a single professor back then that one day we’d see the simultaneous occurrence of Treasury Yields at 1.35%, and
….an “official” YoY CPI (inflation) growth rate of 5.4%, and
…an S&P reaching all-time highs above 4000,
…despite negative annual GDP rates, and
… consumer sentiment tanking,
… it’s likely they’d ask me to return my diplomas.
Because everything I (and all the rest of us) had been taught long ago was that rising risk assets reflect healthy economic growth, vigorous natural demand and a robust confidence in continued productivity and hence free-market price discovery.
That, at least, was the “reality” that nine years of secondary (post high-school) education gave me before I began my first toe-dip into the public exchanges (i.e., asset bubbles) of 1999.
Experience vs. Theory
What did I learn after watching the NASDAQ rise to the moon in 2000 before puking by greater than 80% in 2003, and a sub-prime bubble that had investors giddy in 2006 yet on their knees by the autumn of 2008, or far more recently, a decade+ bull market hitting needle-peak highs on the backs $28T in national debt and a Fed balance sheet that had bloated from $800 billion in 2000 to over $7 trillion by 2020?
The answer is simple: Nothing I learned in school was “real” and nothing about our current moment in time has even the slightest resemblance to anything remotely characterized as natural, free-market or fair-price-driven.
Nothing. Not even close.
Instead, we live in a dystopian world of engineered markets, centralized economies and dis-information in which extreme money creation by 5 central banks have increased their balance sheets by 12X like this
…leading to un-natural (i.e., “accommodated”) credit markets in which sovereign bonds offer negative (and technically defaulting) yields like this
…which makes the cost of debt free for a select minority, allowing corporations and their grossly advantaged and over-paid executives to live (and bloat) off their own stock buy-backs at levels this
…which directly results in central-bank-created risk asset bubbles like this
…in which greater than 86% of that market wealth is enjoyed by just the top 10% of the population, leading to wealth disparity at record levels like this