Events

Everything Bubble

Everything Bubble

Full Name
Everything Bubble
Event Type

The Everything Bubble is the idea that all assets classes in the United states are in a bubble thanks to the previous decade of Quantitative Easing and Negative Real Interest Rates

  • Term became popular in 2018
    • Central banks propped up the economy after the 2008 crisis by offering historic amounts of liquidity
    • Central banks sovereign bond bubbles by cutting rates to zero (or negative) and engaging in massive QE programs
  • Idea is that all financial assets are in a mega bubble at the same time:
    • Stocks
    • Bonds
    • Real Estate
    • Commodities are the only exception!
  • Caused by the unprecedented money printing after the 2008 Crisis ($3.7 Trillion)
    • Trillions were printed during QE1, QE2, & QE3 in the US alone
      • Balance sheet rose from 900M to 4.5 Trillion
    • Trillions more were printed by Non-US Central Banks
    • the Fed set rates at 0 for years
    • Massive stimulus from the Fed never left Wall Street
      • fueled stock buybacks, M&A deals and increased dividends = higher stock prices
      • however, saddled companies with lots of debt - that eventually has to be repaid
  • Concerns that Fed QT programs and rate increases will pop this bubble


Concerns

  • Rise in stock prices is artificial
  • The real-world "main street" economy did not grow in pace with asset valuations
    • Ex.  NASDAQ up 200% since 2007 previous peak (inflation adjusted)
    • However, only 3% gain in industrial production over that same period
  • Created a large debt time bomb and wealth inequality


People Calling This Bubble (before it pops)

  • David Stockman
  • Donald Trump - called the markets "one, big, fat, ugly bubble" in 2016