If there is a rational explanation for the nutty stock market…

If there is a rational explanation for the nutty stock market, it is that Fed Chairman Powell’s serious mistakes in raising interest rates have drawn attention to some also serious problems below the surface. While the whipsaw actions of the NYSE, etc., seem to be emotional, the Fed’s actions draw attention to some very real potential problems.

For example in overleveraged China, total debt to GDP has almost doubled in the last decade, and family debt to GDP has almost tripled in the last decade. This is happening in a country where a marginal dollar or yuan investment produces a much lower incremental ROI than a decade or two ago, since all the huge productivity investments to bring China into the modern world are old news.

Thus there needs to be a two step plan: (a) the Fed stops raising rates; (b) the administration, along with others in the West, need to start calling out this overleverage and insisting on China’s producing realistic plans to right the ship – otherwise much bigger troubles lie ahead.

One Response to “If there is a rational explanation for the nutty stock market…”

  1. feeblemind Says:

    Lots of good stuff to look at. I will catch up when I get home.

    Wanted to wish the Dinocrat and readers a Merry Christmas with the best instrumental version of Silent Night ever.

    https://www.youtube.com/watch?v=hTSkS0Abas4

    and Linus telling Charlie Brown what Chriustmas is all about:

    https://www.youtube.com/watch?v=eff0cqYefYY

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