Big Bubbles: Endless Printing and Rate Suppression Have Created The Mother of All Asset Bubbles

Crooner Don Ho almost got it right in his signature song “Tiny Bubbles.” But it is now “BIG BUBBLES in the economy, make me nervous all over, with a feeling that I’m gonna lose it it all.”

Check it out. Home prices are seemingly unstoppable and the S&P500 index is relentless. The unstoppable asset price bubbles started in the mid-1990s when M2 Money Velocity peaked. The housing bubble burst then rallied back it bubble levels again, but the stock market has outpaced its former glory.

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Of course, the M2 Money stock is over 3 times greater than in 1995 (that’s a lot of printing!) and interest rates have been depresssed since December 2008.

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Now, The Federal Reserve is tapping the brakes by ever-so-slowly raising The Fed Funds Target Rate while at the same time slowing M2 Money Supply YoY (we are now at the slowest YoY growth rate of money since early 2011. Next up? Today’s FOMC meeting.

tappingbrakes

Big bubbles thanks to Central Banks.`tinybuubl

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