![\"\"](\"https:\/\/i0.wp.com\/michelsanti.blog\/wp-content\/uploads\/2018\/10\/mort-aux-trousses.jpg?resize=600%2C338&ssl=1\")
<\/p>\n<\/p>\n
Why get worried about exaggerations \u2013 aberrations even \u2013 over current stock market prices when the American index of reference, the S&P 500, is only showing drops in the way of 1%? While US public debt is reaching astronomical heights of nearly 22 trillion dollars and while companies listed on this S&P 500 index have more than doubled their debts that are now mounting to 5 trillion. The black swans are circling and will as per usual don an inoffensive, even banal look such as an interest rate rise or a slowdown in growth. From here, these companies\u2019 financial situation will deteriorate immediately, maybe once their rating is reduced by one of these ratings agencies. Is anyone aware that the US companies listed on the S&P 500 must substantially renew their debts in the way of 1 and 2 trillion per year from next year onwards? And how have they been allowed to use nearly all their liquid reserves to buy back their own shares on the stock market instead of at least partially settling these debts? Do we therefore have to pin our hopes on a new \u2013 yet another \u2013 crisis to teach a good lesson to investors and speculators, whilst also getting rid of a lot of them on the way?<\/p>\n
Didn\u2019t we listen to Keynes who \u2013 now more than half a century ago \u2013 declared \u201cour knowledge of the future is fluctuating, vague and uncertain\u201d! The markets are not right, they are not transcendental and the history that they show us is littered with failures, losses and erratic movements, with all the side-effects on our daily lives that we know all too well. He who had made the famous refrain: \u201cThere is no scientific basis to say that it is possible to calculate any probability\u2026we simply don\u2019t know\u201d \u2013 his famous \u201cwe simply don\u2019t know\u201d was a genuine call for more modesty aimed at the aficionados of \u201cmarket\u201d divinity. Let\u2019s compare these statements with the assertions of an economist like Burton Malkiel, born in 1932 and a graduate of Princeton and Harvard, who said that \u201cthe true value of markets will triumph in the end\u201d because the stock market is, again according to him, \u201ca mechanism of long-term precision\u201d. Must we therefore resign ourselves to suffering from the creation and implosion of bubbles that bring about crises, financial desolation and panic whilst waiting for some sort of holy balancing out of the markets? Because, according to economists like Malkiel, crashes are just blips along the way that gradually shape this stage of final equilibrium. These episodes \u2013 regrettable of course but that are as necessary as infant diseases like measles or mumps \u2013 are epiphenomena since the \u2013 complete and correct \u2013 information available to individuals would allow them to make decisions at any time that are in tune with the harmony of the markets and the smooth operation of the economy.<\/p>\n
It must be understood that a boom or a bubble is in reality a self-perpetuating spiral, a sort of tornado that rips up everything on its path since it\u2019s made of loans drafted and agreed with the sole aim of speculating, made of a soaring rise in leveraging, of non-existent risk management, of a virtual increase in purchasing power and stock market price rises with a euphoric effect on all involved, including financial institutions that lend money intended to swell the bubble more\u2026 It\u2019s simple: every one of these booms has seemed to kick off a new era that was, however, just a mad dash ahead, as the economy becomes \u201cfinancially fragile\u201d, to rehash a phrase from Hayman Minsky. However, one small pebble is coming \u2013 at the fateful moment \u2013 to clog up the machine. A wave of liquidity shortage is appearing because credit no longer agrees with spontaneity, and profits are becoming harder to rack up. As a result, it\u2019s investment that\u2019s tumbling down, income that\u2019s falling behind, companies\u2019 profits that are feeling the burn, stock markets that are becoming unhinged and it\u2019s individual people who are defining this food chain and who have suddenly discovered that their predictions turned out to be too optimistic\u2026and therefore their positions too risky!<\/p>\n
Since stock market values had reached levels totally disconnected with the reality of economic data and companies\u2019 bill of health, forecasts were revised down and often-violent stock market readjustments began. It\u2019s then that banks stopped lending for fear of defaults in payment at a time when interest rates were coming back up and a reverse spiral was starting to feed off of itself with forced liquidations from the very people who were speculating with credit. Sales then shot up under pressure from those who couldn\u2019t hold on anymore after abusing their significant leverage, and markets simply collapsed under the weight of bond securities that were then sold off by those who were sorely lacking cash. The credit crisis was then made official when banks no longer lent at all, not even to each other. At the annual Nobel Prize in Economics, may the judges \u2013 in their infinite wisdom and foresight \u2013 bear in mind that we owe the financial crises and, worse still, our economic instability, entirely to the Friedman school of thought that has built a theory on totally aberrant hypotheses.<\/p>\n","protected":false},"excerpt":{"rendered":"
Why get worried about exaggerations \u2013 aberrations even \u2013 over current stock market prices when the American index of reference, the S&P 500, is only showing drops in the way of 1%? While US public debt is reaching astronomical heights of nearly 22 trillion dollars and while companies listed on this S&P 500 index have…<\/p>\n","protected":false},"author":4,"featured_media":13833,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"give_campaign_id":0,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"mc4wp_mailchimp_campaign":[],"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[648941299,648941319],"tags":[],"class_list":["post-13832","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bubble","category-stock-market-crack"],"yoast_head":"\n