Soaring Stock Market - Is This What They Mean By “Crack-Up Boom”?Stock-Markets / Stock Market 2017 Feb 17, 2017 - 10:00 AM GMT
In 1980, the US government – along with pretty much all of its peers – began borrowing at an accelerating rate. Note on the following chart how the trend line steepened in the 2000s and then steepened again in this decade, with a sudden and unexpected pop in 2015 and early 2016, even as the current recovery entered its 8th year.
Also in the past year, stock prices have risen from “near-record, overvalued-by-every-historical-measure” levels, to “new-record, grossly-overvalued” levels – and show no signs of slowing down. Note the massive jump in S&P 500 trading volume that began in January and has persisted throughout the year.
Investors, meanwhile, are borrowing to snag more of those apparently-easy profits, with margin debt — money borrowed against stock portfolios to buy more shares — now above both 1999 and 2007 levels.
And now consumers are joining the party:
This is clearly a credit-driven boom of some sort. But is it the long-awaited Austrian School of Economics “crack-up boom”, the exclamation point at the end of especially-frenzied and broad-based financial bubbles? That may be a question answerable only in retrospect. But when the crack-up boom finally hits, this acceleration across multiple sectors is how it will look and feel.
By John Rubino
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