A fatal bout of runaway instability becomes inevitable when “extraordinary emergency measures” become permanently essential to keep the bubbles from popping.

A funny thing happens as policies intended to fill financial potholes transition from “temporary emergency measures” to “we need to keep doing this to stabilize the status quo”: extremes get more extreme as what were once viewed as extraordinary policy measures required to keep the rickety system from collapsing become the “New Normal.” Street Smarts: Using Q... Koukl, Gregory Best Price: $8.13 Buy New $11.60 (as of 06:16 UTC - Details)

Of course the Federal Reserve continues suppressing interest and mortgage rates even after the financial crisis has passed, because if they stopped, the system would revert to crisis and collapse.

I’ve assembled a few charts of extremes becoming more extreme as a consequence of “emergency policies” becoming not just normalized but the keystone of the entire economy. What were desperate expediencies at first are now the lifeblood of the economy: withdraw them and the economy collapses in a heap.

I discussed these extremes in a podcast with Richard Bonugli (26 minutes), with the following charts providing context.

What’s extraordinary is the systemic nature of the current extremes. New heights of precarity are being reached across the entire spectrum of the economy, not just in stock market bubbles but in the concentration of “wealth” in risk-on speculative assets–the very assets most prone to destabilization and reversion to the mean, the statistical dynamic in which outlier metrics eventually return to their starting point.

The causes of this reversion don’t matter; after the fact, pinpointing the cause becomes a popular parlor game, but the reality is systems revert without any specific cause: suppressing instability with extreme policies creates a temporary illusion of stability, but the extreme policies actually increase instability. Stem Cell Therapy: A R... Riordan, Neil H Best Price: $6.03 Buy New $21.34 (as of 08:01 UTC - Details)

Credit-asset bubbles are a manifestation of extremes generating an illusory euphoria of stability while beneath the surface, these extremes are ramping up instability to the point that sudden breakdown / collapse is the only possible outcome.

When the economy becomes dependent on ever more extreme financial trickery to maintain the illusion of stability, a death loop becomes normalized: as instability leaks through the extreme policies, then even more extreme measures are instituted, generally behind the scenes. Obscure methods of expanding liquidity are normalized, bank credit and other mechanisms (repos, etc.) are jacked up, all of which serve the goal of duct-taping the system to appear stable to unknowing eyes.

The problem with this financial fentanyl is that it’s impossible to detect the lethality of the dose until it’s too late. That’s the current situation in American and global markets.

Let’s go through a few of the many extremes flashing red warning signs of systemic precarity.

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