The Cheap Money Hangover — Last week, I cracked open Michael Lewis’s Boomerang to revisit how cheap money nearly crashed the world a decade ago. The big banks aren’t going under today, but government debt is again exploding, a trend that makes the likes of Greece and Iceland shudder.
For those that haven’t read it, the book centers around Lewis’s tour of some of the worst-hit victims of the cheap money bubbles around 2010, including Greece, Iceland, and Ireland.
Each had their own vices that fueled their bank bubbles—the Greeks almost universally cheated on their taxes, while Icelanders thought they could go from fishermen to masters of the universe overnight.
Despite their differences, they shared an addiction to cheap money and disregard for the consequences of debt.
Economists and politicians like to think we’ve learned from that painful period, but both the US and Chinese governments have been printing and spending money like it’s going out of f*cking style.
Now the hangover is starting. It’s much more fun to throw stimmies at sh*tcoins and digital apes than deal with the resulting inflation and painful rising interest rate period.
I’m not gonna pretend like I can predict the future, but human nature is a tough b*tch to change. The fear and greed cycle is part of our DNA, and even the most advanced monetary theory has a hard time coming to grips with that fact.
Currently, it seems like JPow and Joey B are pulling on opposite ends of the inflation rope. The Fed is trying to reduce purchasing power to stem inflation, while the Biden admin spends new federal dough on student loan relief and the IRA.
Who knows what impact these spending packages will have on inflation. Regardless, it brings to light how hard it is to kick cheap money once you’ve tasted the forbidden fruit.
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