It’s only when the tide goes out that you learn who’s been swimming naked. - Warren Buffett
The concerns I have since 2006 have changed over the years, but the underlying root cause is the same. The US Financial system morphed into a 'report card' on the economic health and corporate prosperity to a 'thing' that must be managed. In effect, the underlying health of our society isn't the goal, getting grade A is everything.
This started back under Reagan, with choosing China over democratic values and the US middle class. The greed is good era. President Clinton in his final year signed into law the safeguards in our financial system that would lead to our 2008 crash. President George W Bush de-funded the FBI when it started to look at subprime fraudulent loans all the way back into 2003. The Fed in 2009 decided it was OK to start buying 'stressed' assets. Since then the Fed has gone from zero to owning 4.5 trillion in assets, effectively erasing those assets as a negative on anyone's balance sheets.
The corporate debt monster has never been bigger. Quality of loans are back to 2007 standards. Pension funds for baby boomers that have ZERO chance of paying what they are promised are poised for failure.
The US Government has decided that debt has no consequence and is offering to spend and not collect taxes. The Federal Reserve bank may increase spending on buying assets another 2, 5, or 20 trillion dollars, and lower cost to borrow to zero, or even negative.
Do you notice a pattern? US has structural financial issues and the solution is the same, easier credit, bury bad loans, transfer risk from private to the public debt, repeat.
I think it will take years, but the debt machine is starting to show strains, each time kicking the can. I question how effective the can kicking will be once the zombie companies kept alive on low cost debt fail.
As Warren Buffett says, as the tide goes out, we will see who is swimming naked.
I really hope I am dead wrong for the next 40 years.
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