[solatic]

It doesn't matter if the banks crash again if the Fed will just bail everybody out again and push stock market inflation even higher than it is now. It's clearly unsustainable, but the question is, how and why will the bubble burst?

The author posits one option, of political intervention precluding another bailout. But the Federal Reserve is non-political precisely to shield it from attempted short-term political machinations. Congress will complain to the cameras and the Fed will go right back to "rescuing" the market.

No, the bottom will only well and truly drop out when there's significant capital flight - when the dearth of real investment opportunities relative to currency glut becomes so acute that capital leaves American borders in search of real return. But to where? And under which circumstances?

[mdorazio]

Think you nailed it. The thing is, in order for capital flight to be a risk there needs to be somewhere else of comparable size and upside opportunity to the US that doesn't rhyme with "China" and it sure as hell isn't Europe. So we're back to square one in which absolutely massive sums of money are chasing returns with nowhere else to put money than the same places it already is. It's madness on a global scale.

[burlesona]

This is the insanity of zero interest rate policy. It’s so hard for me to understand why the economists and fed officials don’t see this.

[QuesnayJr]

It's not that we don't see it, but we don't agree. I honestly don't have the energy to try to explain it here anymore -- the conversation always turns unpleasant, and I need a place on the Internet where I can avoid thinking about economics for a while.

[cryptica]

>> the conversation always turns unpleasant

Rationalizing the irrational tends to be unpleasant.

I think it's a complete fabrication that people are dependent on the financial system and that we need economic stability. People enjoy drama and they are able to recover from any economic failure. Even total failure.

Too big to fail is total BS. If a solar storm wiped out all records of bank accounts and all records of all financial holdings, the economy would quickly recover. The number of new opportunities that this would create would be unprecedented.

From the perspective of most people, the best feature of capitalism is not its ability to provide sustenance (even communism can do that), it's its ability to provide hope for something better... Unfortunately these days our modern version is not true capitalism, it's crony-capitalism and it doesn't yield much hope - You are given a place in society and the only way you can get something better is by doing something deeply unethical and then earning hush money from your corporate masters.

We are heading towards a dystopian surveillance capitalist future. Even if the economy crashes permanently and never recovers, that future doesn't look so bad compared to what would happen if we stay on course with current monetary policies.

[QuesnayJr]

Oh look, the conversation has turned unpleasant again. How unpredictable.

[cryptica]

Well I find it pleasant.

[clairity]

i mean, globalism was always about helping capital find returms while hedging risk, under the guise of international trade being better for all than isolationism (but much better for capital than labor).

the core problem of hoarding wealth, as exhibited by the flight of capital to the US, is the inability of small groups of people to efficiently allocate capital, to have enough imagination and ingenuity to centrally-plan their allocations. it's literally anti-capitalist.

[Answerawake]

> But to where? And under which circumstances?

Can you give some guesses? I don't see any other place that would seem more attractive than the US. Every other place has its own problems whether it be lack of developed human capital, unstable government systems, etc. Maybe in the distant future if Mars transportation takes off that can be the next big thing?

[devalgo]

Short of saying that a hyper inflation event in the US would probably break civilization and so allocating capital is irrelevant at that point, isn't the obvious answer Bitcoin or other crypto assets?

[throwaway1777]

Yeah, until there’s a better market to invest in than the US or an attempt to dethrone the dollar as the reserve currency I don’t see anything changing no matter what the fed does with QE and bailouts.

[devalgo]

> but the question is, how and why will the bubble burst?

I'd take the Black Swan approach. There are probably a dozen each unlikely events that could cause the bubble to pop but you're unlikely to actually predict which one will do it and when it will happen. Your optimal move is to assume something is going to happen at some point and just hedge yourself against that rather than try to predict. Taleb gets called an oracle but his entire philosophy is not to predict rare events that destabilize a system but just accept they will eventually happen and prepare accordingly

In this case having some portion of your net worth in BTC/Crypto seems like an obvious hedge