Authored by Sean Corrigan, originally posted at TrueSinews.com,
That usually perceptive and always interesting observer of the financial Zeitgeist, Bloomberg’s estimable Mark Gilbert, recently penned an article entitled: “Milton Friedman’s ‘Helicopter Money’ Is Looking Less Crazy.” In response, I mailed him the comments which follow (with light editing) here.
Over the past several months, we’ve kept a close eye on post-crisis CLOs or, CLO 2.0s, as they’re affectionately known. In the interest of not recounting the story in its entirety here (i.e. for the sake of brevity), here's a list of posts those interested should review:
While this all started with a currency "war," it seems - according to a stunningly candid transcript of Japan's finance minister's conversation with none other than Paul Krugman - that the real endgame here is actual war. Aso remarked that "a similar [deflationary mindset] had occurred in the US in the 1930s. What solved the question? War! Because World War II had occurred during the 1940s and that became the solution for the United States. [We] have to switch [the Japanese] mindset... we are looking for the trigger."
It appears the complete decoupling from economic reality of the so-called US equity 'market', combined with the collapse in a data-dependent Fed's credibility - topics we have extensively covered - has reached the mainstream. Barron's always-insightful Randy Forsyth exposes the ugly reality that this is a "Bullard" market and we are just living in it as the flip-flopping Fed head is "the most visible telltale of the shifting winds of Fed expectations.
Back in October when we first looked at ground zero of the commodity price collapse, we found something striking: as of the end of 2014, one half of China's commodity companies with corporate debt were totally insolvent - based on Macquarie data they were unable to cover even one interest payment (let along debt maturity) with existing cash creation.