Feeding the Bubble: Is the Next Crash Brewing?

[unhappycamper]

http://www.spiegel.de/international/business/cheap-central-bank-money-contributes-to-dangerous-bubbles-a-936823.html



Central banks around the world are pumping trillions into the economy. The goal is to stimulate growth, but their actions are also driving up prices in the real estate and equities markets. The question is no longer whether there will be a crash, but when.

Feeding the Bubble: Is the Next Crash Brewing?
By Martin Hesse and Anne Seith
December 03, 2013 – 06:01 PM

When 42-year-old hedge fund manager Mark Spitznagel wants to forget about his high-stakes business for a while, he heads to the goat farm he and his wife Amy purchased in the bucolic hills of Michigan. There, he produces cheese according to environmentally sustainable methods, because he views modern agriculture, with its large-scale pesticide use and automated factory farms, as degenerate. In fact, he says, factory farming is "an ideal metaphor" for the economy.

In Spitznagel's view, the world's financial and equities markets are also dysfunctional, and what happens there is unhealthy and anything but sustainable. As a money manager, he has also opted for an alternative business model of sorts: He's betting on a crash.

For his customers, Spitznagel's multi-billion-dollar fund acts as an insurance policy against the next meltdown in the financial system. When the market is doing well, they lose modest amounts of money. But they cash in as soon as prices take a nosedive, even when all other investments are going up in smoke.

The hedge fund manager has made a lot of money in the past with his prognoses, and he is convinced that substantial turbulence is on the cards for the near future. "The setup is there for it," says Spitznagel.

[tridim]

1. Hoarding cash creates bubbles, Mr. Hedge fund manager goat farmer. nt

[Demeter]

2. I dare say he's supporting Governor Bankrupt-Detroit

Wish I could afford to make artisan goat cheese in Michigan.

[bemildred]

3. He would say that, wouldn't he? nt

[pscot]

4. His business model is based on it

[bemildred]

5. Yep. nt

[Warpy]

6. Central banks are stupidly pushing money only at the top

and thinking they'll spur investment and create jobs from the top down.

That isn't how it happens.

No rich man, no matter how extraordinarily rich he is, will create a single job unless he knows hundreds of poor men are standing around with cash in their pockets to pay for the goods or services that job will provide.

This is why top down economics will always fail to do anything but concentrate wealth as the economy stalls and then goes completely bust.