We have seen this movie before. After the roaring 1920's, the stock market melted up to euphoric highs only to crash in stupendous fashion. In the internet boom of the late 1990's the NASDAQ hit likewise euphoric highs only to crash back down to earth. Following extremely lax lending practices coupled with low interest rates the flying real estate boom coupled with mortgage backed securities fueled the 2007/8 great recession taking the entire banking and monetary system to the brink. Massive stimulus injections lifted us out of that great depression.
Economists have long seen repeating economic cycles in history. Booms followed by Bubbles and then Busts with long periods of economic stagnation, only for the cycle to repeat. We have written about this before but want to write about it again because while we have seen this movie before in the US and all around the world, the movie we are seeing unfold the US today is different to one's we have seen in US history.
The convergence of record national debt, stimulus, low interest rates, inflation, a booming stock market in the midst of a global recession have created a mix of ingredients that could fuel one of the great bubbles and busts of the modern era.
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