America is behaving like a doomed and desperate convicted felon, holed up smoking as much crack as possible before we have to report to jail. Tons of post-recession free money from central banks, eight years of steadily rising asset prices, the eerie absence of volatility, and the post-election conviction that Donald Trump’s band of goons would—if nothing else—cut taxes on corporations have all combined to fuel a manic investment wave that have made stocks and bonds and real estate and every other asset everywhere expensive as hell. Bitcoin is a classic bubble. Housing prices are insane. And Republicans, who have proven too incompetent to accomplish almost anything, look like they will be able to successfully pass a tax bill that funnels more money to corporations and their investors, who decidedly do not need it. But who will be happy to take it, even if they know that exploding the deficit to give already rich people more money, during a time of essentially full employment, is the opposite of long-term financial probity. They also know that our president is a dumb, incompetent loon. (Wall Street, though it may be evil, benefits by seeing political situations with a ruthless clarity.) It is this situation of clear short term opportunity combined with infinite geopolitical and economic dark clouds looming that has fueled our manic economic boom. Get it while the getting is good, for tomorrow you may be dead!
When the price of everything is high, and you are still taking desperate measures to fuel those prices higher, the world is a very risky place. Our leaders are doing everything they can to make inequality worse, which is the social equivalent of throwing propane canisters into your fireplace because you felt a chill. The cushion that normally exists has grown very thin. Everything is priced as if if everything will go perfectly; when it doesn’t, there is nowhere to go but down. Even as investors have grown rich, they have grown increasingly on edge. Everyone is nervous as hell. They know that these bull markets don’t last forever. Yet we’re not quite in bubble territory, and since everything is expensive, you just have to close your eyes and buy something.
So prices climb, and so does risk. The central banks, which shot their wads after the Great Recession, have few means to help now if something goes catastrophically wrong. Here we are: all nervous, greedy, and on edge, collectively wondering what the tipping point will be.
