Migrating Bubbles
The “credit crisis” caused banks to write down about $1.5 trillion, but that is the tip of the proverbial iceberg. The real consequence of the post-bubble deleveraging is the vaporizing of about $26 trillion in stock-market value worldwide, or about half of the valuation at the 2007 peak. The rally in global equities from the 2002 low obviously relied on an artificial abundance of liquidity.
In this case, liquidity meant easy credit, so easy in fact, that layer upon layer of leverage was added to the edifice without objection from any regulators, underwriters, or other risk cops.
Although the credit bubbles have popped in the private sector, the governments who turned the other way during the Kool Aid party are now being forced to dramatically inflate public credit. In the U.S the Treasury and the Fed have pledged almost $13 trillion to cushion the shock of systemic deleveraging.
- Ashraf Laidi Interview Outtake - FOMC & Obama's State of the Union
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- 12/07/09 S&P Emini & Futures Recommendations
- AfraidToTrade.com's Corey Rosenbloom Webcast: Inter-Market Relationships - Stocks, Bonds, Rates, Currency, Commodities
- 09/25/09 S&P Emini & Futures Recommendations
