Why Global Central Banks Are Powerless Against The Global, Bubble-Making Asset Shortage

alangreenspan closeup tbi

Let’s touch again on Morgan Stanley’s note from this morning about why the Reserve Bank of Australia and the Norges Bank (Norway) have prematurely stopped tightening.

Yes, part of it is fresh economic jitters in China and Europe, but what these banks realised is that they’re not getting any benefit from higher rates. Inflows aren’t slowing down, and asset values keep going up. If higher rates aren’t cooling off bubbles, then what’s the benefit?

Basically, we’re talking about Greenspan’s infamous “savings glut” all over again, except with the players reversed.

Arguably, our Fed was powerless to prevent the flood of Chinese savings that helped fuel our housing bubble in the late 90s and the last decade (of course this is very controversial, and we’re sure there’s A LOT the government could have done to prevent the crisis).

Now European and US citizens are in savings mode, and there’s a mad rush to find anything that seems to show some performance potential, given demographics and the need to make some serious dough before retirement.

That’s why BlackRock is issuing three (!) new Brazil ETFs just this month.

If you feel like the world is experienceing bubble after bubble after bubble after bubble, you’re not alone.

As soon as a market shows potential, everyone needs to rush in.

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