It is an old adage that history repeats itself. I much prefer Mark Twain’s variation that “History does not repeat itself, but it does rhyme.” Many individuals pay exceeding heed to the particulars of a specific development and are obstinately oblivious to parallel dynamics in other similar events.
But when is history is history? Technically, it is the nanosecond following the event itself. However, there is a more realistic if subjective opinion that if events occur in one’s ancestors’ time, it is history. If it occurs while within conscious memory of one’s own duration on the earth, it is current events. It is still immediately real and likely retains a direct impact on one’s psyche and thought to varying degrees.
With this in mind, I proceed.
While Greenspan was declaiming the irrational exuberance in 1996, his monetary policies were affording its opportunity. And waves of asset bubbles and bursts ensured throughout his Fed reign.
With the Fed-induced current monetarist environment of low interest rates and attempts to spur the economy through encouragement of further indebtedness; and in the light of continued organic restraints on wage labour to prevent wage and price inflation that is normally associated with loose monetary policy; the hot air of extremely cheap money must find some outlet, some weak lining to bulge. It is not rocket science to predict more asset bursts on the way. The trick is to determine which asset class will be the instrument of the next financial tsunami.
In other news, the Obama administration is engaged in a broad push to make more home loans available1 to people with weaker credit.
Yet in other news, Wall Street is resurrecting many of the same financial instruments2 that were catalyst to the market crash of 2008. The banks are churning out some of these structured products at rates greater than the peak in early 2005.
It seems that in these days of folly, it is not history that repeats itself, but current events.
1Conor Friedersdorf, “Team Obama to Banks: Issue Home Loans to Riskier Borrowers”, The Atlantic Monthly, April 4, 2013, http://www.theatlantic.com/politics/archive/2013/04/team-obama-to-banks-issue-home-loans-to-riskier-borrowers/274647/
2Nathaniel Popper, Alchemists of Wall Street at it again: Arcane-sounding names hide big risks, The New York Times, April 19, 2013, http://business.financialpost.com/2013/04/19/alchemists-of-wall-street-at-it-again-arcane-sounding-names-hide-big-risks/