Wednesday, December 30, 2015

Big Short "Market Genius" - We're Heading Toward Another Crisis

Starting young / Source: _Dinkel_, CC BY 2.0 

New York magazine recently posted an interesting interview with Michael Burry, the "market genius" depicted in The Big Short.  For folks concerned about the current state of our economy, it's a quick read and well worth it.

I don't agree with some of Burry's comments, but it's all worth considering.  What I *do* share is a concern that we in industrialized nations cannot seem to get away from our drive to produce "economic growth" at any price.  This usually results in the accumulation of obscene amounts of debt - in the public AND private sectors - until the whole system becomes completely unsustainable.  The related belief that large profits are the birthright of everyone with "enough smarts" to identify and exploit economic opportunities results in the bidding up of residential properties sales and/or rental prices until prices are beyond reach of the vast majority even WITH the aid of consumer debt (at which point, the bubble pops), downward pressure on wages and benefits paid to workers (and eroding wages/hours) coupled with increased workloads ...

Our system really, really needs some fundamental overhaul, but I'm not sure how we *actually* get there ... even after several years of grappling with the question.

EXCERPT (emphasis added):

Q: Where do we stand now, economically?

A: Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook.

Read more here.

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