The trouble with asset bubbles forming is not so much that they may burst (of course they will; maybe not today, and maybe not tomorrow, but eventually), but...

The trouble with asset bubbles forming is not so much that they may burst (of course they will; maybe not today, and maybe not tomorrow, but eventually), but that we are ill-equipped for their bursting because central bankers have few policy tools left at their disposal. They cannot be the white knights again until they extract themselves from ultra loose policy. That's why the Federal Reserve is so determined to continue tapering and why the ECB will not dare to attempt all out QE. The risk of another crisis may seem distant, but we should remember that policy makers did not foresee what happened in 2007. We should also remember that the financial counterparties who make markets have been decimated in numbers and balance sheet capacity since then. (VIEW LINK)


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