Is the world currently levered with hundreds of trillions of dollars worth of toxic OTC derivatives and the underlying is about to fall off a cliff ?
Powell does not see signs of bubbles brewing..WELL OF COURSE HE WOULD SAY THIS
- Thread starter S2007S
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Is the world currently levered with hundreds of trillions of dollars worth of toxic OTC derivatives and the underlying is about to fall off a cliff ?
Maybe that one is all that's needed. Wouldn't make any bets against the bull as long as this remains on the table.
"Market value to GDP" appears to be a nonsense stat made up by bearish people to push their agenda. US stock markets are international in flavor and derive a significant amount of their growth outside of the US. So there is no point to compare a domestic measure to the main US stock markets.
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This is probably the most accurate measure.
I can't make any sense of the measure they are using in a global economy.
The numbers don't support that there are bubbles right now in almost anything. In fact, US markets were likely more "overvalued" at times earlier in this bull market. Using the term "bubble" is highly misleading but it does appeal to the emotions of permabears at all times. We could look at how many "bubbles" have been declared on this site and note how inaccurate they are. For example, it was claimed that Toronto real estate was in a bubble in 2010 and 2011. Not true at all, and the data since confirms this over a reasonably long stretch of 9 years since.
Best you can claim is US markets are somewhat expensive at a forward P/E of 18 which could get as high as 24 if the US economic growth continues to decline as it has this year. If the economic growth goes to 1% or less, stock markets will adjust accordingly.
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Off the top of my head, the last time that any major developed-country government ran into trouble funding itself was the UK in 1976 - 43 years ago. And that wasn't something which suddenly appeared out of the blue, rather it followed a number of years of political-economic turmoil and rising inflation.
You could argue the Eurozone crisis should count (which developed over a period of several years after the GFC), but for the major economies involved (Spain and Italy) the problem wasn't deficits but rather the collapse of their banking systems combined with being stuck in the Euro.
So a US debt crisis definitely won't happen tomorrow, and is virtually certain not to happen in the next 5 years. 10 or 20 years? Maybe, but there's no evidence of it yet.
Current US debt-to-GDP numbers are almost identical to Canada's numbers a few decades ago. Basically. the numbers have flipped since, and the divergence is getting worse short term as we run much smaller deficits ( on a pro rated ) basis then the US does.
My point, one I've made several times on this site, was that we rectified our issues by raising personal tax rates for somewhere between 15-20 years until the government ran a small surplus and our debt number came way down. My guess is with interest rates being so low, the US can delay such action longer then Canada could when mortgage rates were 20%, but I suspect eventually the debt issue ( plus the underfunded status of health care, old age security, etc etc ) will make higher personal tax rates inevitable. That's only a "crisis" if Americans freak out about it and refuse to pay the bill.
I think what happens right now is exactly government debt crisis in US.
Government borrowing is so huge the FED had to launch emergency QE
So they openly monetize debt
Where it leads to be seen