Secondly, the worldwide central bank financial repression led by the Fed resulted in massive over-investment in fixed productive assets on a global basis, but especially in China and the EM. The impact was a one-time acceleration of global economic activity that temporarily inflated current income and further goosed the value of financial assets.
This central bank fueled boom will ultimately be paid for in the form of a prolonged deflationary contraction. Then, trillions of uneconomic assets will be written off, industrial sector profits will collapse and the great inflation of financial assets over the last 27 years will meet its day of reckoning.
On the morning after, of course, it will be asked why the central banks were permitted to engineer this fantastic financial and economic bubble. The short answer is that it was done so that monetary central planners could smooth and optimize the business cycle and save world capitalism from its purported tendency toward instability, underperformance and depressionary collapse.
As will be shown in Part 2, the whole case for this sweeping and unprecedented Keynesian demand management by the monetary authorities was a crock. Accordingly, the days of the Warren Buffet economy are indeed numbered.
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