OK, that isn’t what Wolfgang Munchau said in his Financial Times article today. His piece, “The princess’s cake gets an added crunch,” starts with the theory that inflation and our asset bubbles were ultimately monetary phenomena.
While the rest of Munchau’s piece, which focuses on why we should be worried about inflation, is useful, I wish he had spent more time on the discussion of its roots. Perhaps I am being a bit of a stickler, but my understanding is inflation in goods, which is a monetary phenomenon, has a different transmission mechanism than asset inflation, which is most often the result of an expansion in credit beyond the level needed for productive investments (however one might define that). While that level could conceivably be very large in an emerging economy, one should look at increases in systemic leverage (simple measures like debt/GDP) with considerable concern, particularly in a country like the US, which has not had a very high savings rate to begin with.
That is one reason I am a bit perplexed by the discussion to extend the Fed’s mandate to managing asset bubbles. As Australiia’s former Reserve Bank governor Ian Macfarlane pointed out, it’s hard for a central banker to know when an asset bubble has started, and even if he is correct, he will be unable to prove he was right:
There was a time when we felt that monetary policy, by returning the economy to low inflation, would have a stabilising effect on asset markets…. But the broader evidence does not support the view that low inflation will prevent booms and busts developing in asset markets….Some have even gone as far as to suggest that low inflation may encourage the build-up in asset prices.
So, if low inflation does not provide any insurance, what should a central bank do if it suspects that a potentially unsustainable asset price boom is forming, particularly when the boom is being financed by debt?…
Many people have pointed out that it is difficult to identify a bubble in its early stages, and this is true. But even if we can identify an emerging bubble, it may still be extremely difficult for a central bank to act against it for two reasons.
First, monetary policy is a very blunt instrument. When interest rates are raised to address an asset price boom in one sector, such as house prices, the whole economy is affected…..
Second…[e]ven if the central bank was confident that a destabilising bubble was forming, and that its bursting would be extremely damaging, the community would not necessarily know that this was in prospect, and could not know until the whole episode had been allowed to play itself out. If the central bank went ahead and raised interest rates, it would be accused of risking a recession to avoid something that it was worried about, but the community was not. If in the most favourable case, the central bank raised interest rates by a modest amount and prevented the bubble from expanding to a dangerous level, and it did so at a relatively small cost in terms of income and employment growth forgone, would it get any thanks? Almost certainly not…In all probability, the episode would be regarded by the public as an error of monetary policy because what might have happened could never be observed….
That suggests that a potentially less controversial way to deal with this problem is more regulatory than monetary: to gain a better understanding of how much variance in leverage is healthy over an economic cycle, and what increases look likely to produce bubbles. This would also provide a better basis for communicating with the public. Saying “housing/stocks/wampum prices increased 18% last year, we think that’s too much” is a hard position to defend. Saying “leverage [however defined] increased x%, that puts the institutions and economy at risk” is far less controversial. But my impression is that regulators only have a partial picture of the sources and extent of borrowings.
Which gets back to the carry trade, What complicates the problem of understanding leverage is international capital flows. As the thorough analyses of Brad Setser show, we can track foreign flows into US assets with to a reasonable degree. But I wonder if we understand the mechanisms and operation of the carry trade as well. I am not certain that we fully capture the degree to which US domiciled entities (read certain hedge funds) fund in Japan. Similarly, a fair amount of private purchases out of London, the Caymans, and other hedgie ports of call benefit from low yen-based interest rates.
Back to Munchau. From the Financial Times:
“I remembered the way out suggested by a great princess when told that the peasants had no bread: ‘Well, let them eat cake.’”
Jean-Jacques Rousseau, Confessions
When I saw reports of food riots, I was reminded of these immortal words, often attributed to Marie Antoinette, although there is no evidence that she used them. The modern equivalent to “let them eat cake” is: “Core inflation is well contained.” Core inflation is a measure that excludes goods whose prices are currently rising the most – food and oil. It is a popular concept among some central bankers and academics, and an insult to consumers: let them eat refrigerators.
The global rate of headline inflation is 4.5 per cent and rising. Some economists had us believe a year ago that the rise in inflation was just a blip. But it kept on blipping. They predicted it would fall back in 2008. Now, they say it will fall next year.
We can waste a lot of time talking about the mechanics of the oil market or about speculators. Persistent inflation is not caused by oil sheikhs, ethanol producers or retailers, but by monetary authorities. A point Milton Friedman once made, and accepted even by many of his detractors, is that “inflation is always and everywhere a monetary phenomenon”. The rise in commodity prices is the consequence of a credit-financed economic expansion that has hit natural supply constraints. It is a very familiar story, except for geography. This time it is truly global.
In a recent empirical study using data from the Organisation for Economic Co-operation and Development, the economists Ansgar Belke, Walter Orth and Ralph Setser* claim to have found a statistical link between the global liquidity glut, the real estate boom and inflation. The emphasis here is on global. The key result is that both house and consumer prices are determined by global monetary conditions – but at different speeds: the housing market reacts first, with consumer prices following after some delay. Too much money is still chasing too few goods – except that it creates an asset price bubble on the way.
Unsurprisingly, not everybody agrees. There are four common, and not very convincing, arguments. First, core inflation is under control. Yes, incredibly, people are actually making that argument. There is an economic theory that says core inflation is leading headline inflation. If the two diverge, headline should adjust to core. Unfortunately, the opposite is happening now. Higher oil prices are pushing up prices of final goods, and workers are demanding higher wages, as they sensibly ignore core inflation.
Second, financial market indicators do not show any strong evidence of a rise in long-term inflationary expectations. These indicators include the yield difference between Treasury inflation-protected securities and ordinary Treasuries and their respective European equivalents. In fact, some of these indicators have actually gone up a little. But more importantly, they are not really forward-looking. The yield difference tells us more about liquidity conditions in those markets than about future inflation.
Third, the expected slowdown of US and global economic growth will take care of the inflation problem. A devastating global depression would probably have that effect. But fortunately, the world economy will be spared this calamity. There is no reason to suspect that Asia will suffer a recession, rather than a moderate slowdown. As I explained last week, the eurozone may also be a little stronger than the consensus forecasts suggest. The US recession will put a temporary lid on US inflation but, once the recession is over, prices will go up.
Finally, there is an argument I have been hearing a lot more recently: why bother? Let inflation go up a little. It oils the wheels of the adjustment, in particular for house owners.
Unfortunately, this may work for people with high levels of mortgage debt, but not for the poor and those on fixed incomes. In Europe, and especially in the south, there are people who have difficulty paying the vastly increased prices for bread and grains. Since poorer people spend a higher proportion of income on food and petrol than middle-class people, the inflation rise hits them hard. Higher inflation is the transfer of wealth from the poor to the middle classes. You might as well say: if you cannot afford the bread, let me eat the cake.
What about the fact that the US has a negative savings rate? Surely the country would be better off with higher inflation, as this transfers wealth from foreign creditors to US debtors? My guess would be that under such a scenario the US bond market would implode, the current account deficit would become impossible to finance, the dollar would collapse, inflation would rise even more and the Federal Reserve would have to raise interest rates to high single digits or higher. In that scenario, nobody eats cake anywhere.
I expect that the biggest danger to global economic stability will be not the credit crisis, but the way we are overreacting to it. Both in the US, and increasingly in Europe as well, monetary policies are no longer consistent with price stability. Since a pre-revolutionary contempt for the poor is a side effect of this policy, I suspect Rousseau’s unnamed princess would have found our early 21st century most congenial.
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“If in the most favourable case, the central bank raised interest rates by a modest amount and prevented the bubble from expanding to a dangerous level, and it did so at a relatively small cost in terms of income and employment growth forgone, would it get any thanks?”
Although I agree with this – you can’t argue by using a counterfactual in a system as complex as the national or world economy – , I think it’s missing an important point.
There is no popular support for the financial sector – none, zippo, nada – and there has been none for some time. Given a chance, the populace would prefer to draw and quarter and then impale every investment banker. Yet the Fed has ridden to the rescue of the financial sector in 1987, 1998, and 2007-8. So pretending that CBs would have lacked popular support for being tough is misleading. CBs could very well have been tough with the financial sector and would have still, I think, received a lot of popular support, even at the risk or cost of a recession. They have chosen not to, not because they were worried about recession or losing popular support, but for entirely different reasons, mostly ideological, that is, the idea that they could encourage financial stability in the short-term without encouraging financial instability in the long-. And that, I would claim, is a big mistake.
Even with super-low interest rates, does anyone really think that IBs would have been as stupid as they were in 2003 through 2007 if, to pick a name at random, Goldman Sachs had been allowed to go bankrupt in 1998 as it so richly deserved? If LTCM and GS had been allowed to go bust, my own firm would have lost a certain amount of money, which surely would have led us to close down or drastically cut back on risk-taking activities for many, many years if not forever.
So it’s not the pitchfork-holding mob which made CBs do it, against their better judgement. CBs did it themselves, because they were vain and lacking in modesty. CBs need to turn the spotlight on their own shortcomings, not blame others.
“my understanding is inflation in goods, which is a monetary phenomenon, has a different transmission mechanism than asset inflation, which is most often the result of an expansion in credit beyond the level needed for productive investments (however one might define that)”
Reasonable, but this is pretty loose stuff in general. The “inflation is a monetary phenomenon” mantra is somewhat vacuous these days, given the complexity of the financial system. Did Milton Friedman really consider the connection between goods inflation and asset inflation? Soros completely rejects this monetary phenomenon stuff by the way. We need a better theory that links asset and goods inflation.
“What about the fact that the US has a negative savings rate? Surely the country would be better off with higher inflation, as this transfers wealth from foreign creditors to US debtors?”
The US does not have a negative savings rate. The household sector does. As far as the foreign sector is concerned, the US still has a surplus on investment income. Some accuracy of proportion would add credibility to his doomsday analysis.
To a: I concur with every syllable of your post.
From a different perspective, I conclude that Macfarlane is simply wrong in opining that central bankers, golly gee gosh, just couldn’t tell an asset bubble is under way. Take the recent example of US home asset appreciation. The values, as has been well stated, long since diverged from the historical trend appreciation of the previous 60 years. Now, not saying whether the previous trend was wholly accurate, the divergence was easy to spot, and obvious for what it was. Was there any relevant countervailing explanation for this severe above-trend divergence? Did 40 M folks suddenly move to the US, driving up demand? No?? Please, Mr. Macfarlane: you can count. There is, furthermore, some good historical research that tends to indicate that near-term growth rates in mature economies can be sustained stably in the 3% range, but _cannot_ be sustained stably above that; ergo, sharp spikes are overt and screaming warnings. This was one of the very few substantive bodies of research I ever heard St. Alan Greenspan refer to directly in print, btw.
Further, most asset bubbles are either very severe manias, multi-year events, or both. The former are readily identifiable, while the latter give ample time to weigh current projections against historical trends. Bubbles are obvious. Consider again: ALL RECENT MAJOR BUBBLES HAVE BEEN CALLED AT THE TIME. The S & L; SE Asia; dot.bomb; the housing flubber.
We haven’t lacked for accurate observation, we’ve lacked for feasant regulators. Why? ” . . . [T]hey wouldn’t be believed,” quoth I. Macfarlane. By whom? The public beleives what ‘experts’ and their TV sets tell them. It’s the investment bankers who wouldn’t believe it was time to lock up the booze, _and they would be SERIOUSLY pissed_ if, when, and as any central banker tried to do so before the bubble burst. . . . And central bankers work for the investment banking community as should by now be obvious: This is what Mr. Macfarlane daren’t say: “I dasn’t tell the master he’s in his cups until he pukes on his person. Please don’t blame me that you’ve lost your homes and your jobs, I’m only doing what I can.” Not.
Yves: “That suggests that a potentially less controversial way to deal with this problem is more regulatory than monetary.” This is the real conclusion that I would draw, too. Central bankers _want you to believe_ that interest rates are their only tool; some of them say this so often that they even believe it. Having their hands effectively tied most of the time by a supposed inability to intervene in ‘market processes’ is mighty convenient for their worldview and larger purposes. In fact, regulatory intervention to massage capital requirements, to restrict or facilitate leverage, and international coordination are very powerful tools, but they work mostly to ‘prevent’ rather than to ‘procure.’ We could, in fact, give central bankers other tools regarding capital flows if we wanted. Sure, nothing is perfect. However, the ‘shadow economy’ operates in the shadows largely because the G7 central bankers and a few others tolerate these kind of capital flows. We could make it a great deal harder for these shops to operate. I’m not even saying that, necessarily this should be attempted, but the point is our ‘weakness to act’ is largely self-imposed. Because the ibankers don’t want central bankers to act and the public doesn’t know enough or, really, care to demand better financial governance.
On ‘it’s always monetary,” oh no it’s not. Nor does Macfarlane in this piece even believe so either, for after quoting St. Milton on how “inflation is invariably a monetary phenomenon,” he immediately refers to _credit_ expansion, which is not directly a monetary process at all. I have never understood how a blatant ideologue like Friedman acquired any credibility whatsoever. Yes, he did a lot of empirical research, which made splendid window dressing for the pre-formed fantasies he had from the first set out to argue for. His ‘work’ has been disproven, and one would suppose that he would be ‘discredited’ accordingly, no? Alas, no.
The trouble is asset markets or the “market portfolio” represent the sum of individual assets (held either through individual accounts or institutions) and since every portfolio has a time weighted liability/consumption profile the “market portfolio” represents the sum of consumption, saving and investment and production decisions within an economy.
As such, there is a natural feedback from asset prices into demand for goods and services and factors of production.
As long as the broad money supply supporting the assets remains asset focussed, there is no immediate inflation risk in the economy. As soon as money supply starts to marginally shift from assets to transactions, then you get the CPI risk.
The trouble is at the moment that much of the excess broad money supply has been focussed on debt based securities. If the collatoral under pinning the debt collapses and the debtor does not have the income stream to support the debt then the debt liability may need to be written off and if this is reproduced nation wide broad money supply risks contraction/stagnation. No more inflationary risk from that money supply component.
At the moment this is coming through the banking system, so the central banks need to reflate asset prices to protect the banking system, therefore keeping alive the ultimate CPI risk.
Andrew Teasdale
The TAMRIS Consultancy
What if the current inflation is Malthusian rather than monetary, driven by the greatly increased world-wide demand for oil? We don’t have to be at peak oil for this to be true, merely close to it. If this is so, then economists might have to cease maligning David Hackett Fisher. However, a silver lining of sorts is that reducing global warming becomes not just ecologically imperative, but economically so as well.
The idea that central banks should not react to rising asset prices because they cannot verify bubbles is a red herring. Assets should be included in the targeted measure of inflation. The same types of money are used for transactions in both the goods and services (that are included in official measures of inflation) and assets, and there is no sharp distinction between their economic properties (eg a car is more durable than most consumer loans and intertemporal preferences are relevant in both cases). And monetary policy does not normally react differently according to whether price changes in, say, the price of bread are believed to reflect fundamentals or speculative buying of wheat. Of course including asset price changes in the targeted inflation measure would not preclude relative asset price rises so it would not be a panacea, but it would mean that monetary policy would automatically react to rising asset prices to some degree.
Has anyone ever made a correlation study between (a) spread between core and non-core inflation and (b) % of working population that are members of a labor union? I can theoretically imagine a decrease in the negociation strength of organized labor leading to a wider gap between commodity/non-core inflation and wage inflation, but I’m curious if the extent of union influence is statistically significant.
@Finance Monk
Not exactly a correlation of inflation and labour unions, but J. Nitzan (York University, Canada) has a nice speech with plenty of empirical data to back up his theory that inflation is a political mechanism, used to transfer money from the poor to the rich. I think his theory has a lot in general to say about this.
http://bnarchives.yorku.ca/250/
yves — for a host of reasons, it is very hard to use the US data to track carry trade related flows. there are next to no japanese purchases of us assets showing up in the us data, so the japanese housewives to the us flow isn’t there. and hedge funds that fund in yen would do so offshore — there is some data showing that non-japanese banks have borrowed heavily from the japanese banks through the tokyo interbank market and onlent the proceeds to london. what happens from then on is anyone’s guess (p.s. the last i looked at this data is about a year ago). and then a lot of the carry trade is done via forwards and the “physical flow” that is observed comes largely from bank flows offsetting their positions, and that stuff is hard to follow. central banks are easier.
bsetser
Before there was Milton, central banks didn’t have a “monetary policy”, they had a “credit policy” and it was generally recognized that their job was to regulate the state of the credit markets — to put a stop to overexuberance and keep them from collapsing in a panic. One of our problems (in part due to the Depression where the old methods stopped working — probably due to the reserve currency transition) is that central bankers completely discarded the old knowledge. (For example financial and asset backed commercial paper aren’t even tracked in the FRED database, because they are “non-monetary”. Apparently it never occurred to anyone at the modern Fed that massive growth in such commercial paper is one of the clearest indicators of growing financial instability. An early 20th c. central banker would never have made this error.)
Brad,
Thanks for the comment. It confirms what I suspected.
Anon of 2:31 PM,
Good point, and one not made often enough.
a,
Totally agree with you re ibanker – a true tennis court rebellion. The level of contempt you hear from corp. executives (and those who have had to deal with them intimately, perhaps even moonlighted) is something to behold. Good thing the public is still largely in the day – ignorance is bliss.
Mish made this credit money argument yesterday last week on his post using monetary base vs. M’ (real money) etc. argument. Difficult to swallow. Credit is a merely a lagged margin call on future money – either it goes bust or you create money?
As for inflation and housing I remain at a loss to understand the nexus? The argument belies all your earlier posts on the affordability ratios. So unless I am missing something you are saying let inflation ride up asset prices but that doesn’t include a wages clearly. So how exactly does that have any impact other than deleterious on affordability ratios? Bottom line: Unless there is a wage spiral, there appears to be zero benefit. Could you clear this up as it is constantly repeatedly and is simply counterfactual?
Richard Kline,
I have to differ with you on this one.
First, Macfarlane has cred on this issue. He, unlike just about any central banker I can think of, did intervene in an asset bubble, in this case Australian housing, roughly in 2004. I omitted the section where he talks about central bankers’ other tool, jawboning and public exhortation.
Macfarlane quite often in 2003 (if I recall right, Aussies welcome to correct) talked about how housing was overheated and posed a danger to the economy. That was a prelude to a couple of rate increases (I think a quarter point each, but remember pre Bernanke making 75 the new 25, as Barry Ritholtz so aptly put it, that sort of move would be taken pretty seriously).
It led to a sharp pullback in the most speculative sector, units, and cooled off the frenzy for a quarter or two. But then Macfarlane retired. I have no idea whether his successor kept the faith, but I do know the bubble continued.
You also dismiss the issue of damage to innocent parties and the difficulty of recognizing a bubble. Consider the dot-com boom. I was one of the minority who thought it was completely bonkers (and paid a price for that view), yet companies were turning over their entire business models to compete. McKinsey, for instance, took on a lot of dot com work in return for equity (which turned out to be worthless) so it could offer a dot com equity participation to staffers who otherwise would bolt to startups. Its annual turnover got to be 30% due to brain drain to dot coms. That’s a hugely disruptive level.
And worse, plenty of places like McKinsey were justifying the “this time it’s different” phenomenon. So if you are a central banker, and supposed experts like McKinsey (and non-experts like Business Week and of course CNBC) are defending the phenomenon, you are really sticking your neck out if you try to attack as asset bubble in the absence of other macroeconomic symptoms. And further recall the Fed is not as independent a central bank as the ECB or Bank of England is.
Moreover, the dot-com case, unlike housing, was not obviously related to gearing. Even at market peaks, margin debt is typically a pretty small % of total market cap. So you can’t attack it through regulatory channels. Your only means is the blunt instrument of monetary policy, which means you take down the auto industry, airlines, and housing, just to name a few. This isn’t as easy live as it looks in hindsight.
And most important, Macfarlane points out at some length that central banker lack a mandate to attack asset bubbles (in fact, per the auto/airlines/housing discussion, you could correctly argue that addressing them would run counter to the Fed’s mandate to create full employment). That obviously is changing as we speak.
What are Central Banks doing setting interest rates anyway. There is no evidence they have the faintest idea where to set them in the first place and the process of setting them is only achieved at a (substantial) cost to the CB against the market in any event. As well, when they adjust their rates it is a manipulation of the market that will cost investors who have been trying to follow something like “real” fundamentals.
Next, WTF are they doing interfering in the market and propping up and subsidizing failed business models and ailing banks??? Let them fall. Nothing inspires prudence like fear.
The Fed has been propping up Banks since the Saving and loans debacle (and probably before that as well). Where we are now is a direct result of that policy direction by the Fed, through their interference in one “crises after another, and one asset bubble after another. They saved people and organisations that shouldn’t have been and continued to finance them through easy credit.
The Regulatory Authorities are the largest part of the problem in the first place. Giving them more powers is heroin to a junkie. Their only answer to the collapse of one bubble is to blow up the next one.
Now that they are struggling to achieve that, they want even more control of our financial system. All hail the command economy.
So Yves re: Macfarlane: I’ll confess to an excess of spleen in using his name in my post. I am aware that he _did_ actually make serious efforts to intervene against speculative excesses in Oz; credit should be given for that, in this case in the coin of temperance.
You make implicitly a key point regarding bubbles which also bears upon his rather pessimistic surmise regarding the efficacy of interventions against them, that bubbles in different kinds of assets require different _kinds_ of intervention; that being so, central bankers may be, and in fact are, ill-equipped to act against some kinds of bubbles. For example, it is quite awkward for CBers to act against equities bubbles, just as you point out. They really fall more to the lot of equities regulators. Another point you make here with which I concur, and it is perhaps the key underlying issue underlying Macfarlane’s remarks as I read them, is that as presently constituted central banks are not charged with _preventing_ asset bubbles, either explicitly or implicitly. I’ve stated before that I very much believe that this should become a central part of their policy mission—but to this point, it isn’t. Politically therefore, it is a hard go for a central banker to contract credit or the money supply to snuff out a bubble. At the least, said CBer would make tentative movements, which by definition are of limited effect; Macfarlane’s own actions which you cite are perhaps direct evidence of this.
The easiest and most direct way to slow down and eventually reign in bubbles is to require that cold hard money in escalating amounts be put up for purchase of assets trading into bubble ranges. Yes, some folks will throw away every dollar they have, but the point is to keep them from borrowing money they don’t have to throw it away, too. Call this the disc break approach. Many other tools could be defined, but again in fairness to Macfarlane the armory of the central banker is meagerly stocked for this mission at present.
On the other hand, I continue to hold that bubbles are easy _to identify, the central issue of my beef with Macfarlane’s statements. During the 80s for entirely different reasons, I read most of the historical material on major speculative bubbles; some economic evals, and most all of the history. These processes just are very evident; nearly everyone was FULLY evident to some commentators at the time. One has to go back to the early 18th century when capital liquidity on a mass scale was a fairly new phenomenon for bubbles to have been not well understood as such by participants. Since then, the historical evidence for comparison is simply too blatant to miss. Personally, I was convinced that dot.bomb was a bubble by 1995, because it look exactly like every other mania. A key issue is the one CANNOT rely upon current assessments by interested parties: they always drink the kool-aid and see pretty colors. One has to do historical comparisons, and trend comparisons; if this is done, wide divergences just scream, and you can tell that, on any historical measure of comparison, a trajectory is a bubble trajectory. I might say that for timeframes of less than a year, it may be hard to get a good read, which is why I mentioned that side issue in my post above. Identifying that a bubble is happening is the easy part if one wants to understand the process. It’s the wanting that’s the hard part. For the record, I profited not a farthing from dot.bomb. Perhaps that makes me a certain kind of fool, but then money isn’t my drug of choice.
Despite all that, I’m not going to claim some special expertise; I have an informed opinion, no more. I thought that property in the US and some markets was patently in bubble mode. I am not convinced, by contrast, that commodities are presently in a full-on bubble. There clearly seems to be speculative flows, but the issue is greatly complicated by currency malalignments, concurrent deflation of other assets, and supply constraints over against demand: this situation is not clear cut. I definitely expect that many commodities will remain well-above past trend trajectories, and that we won’t get a good picture on ‘real’ values until we get a new global currency regime stabilized—which may be some time a-comin’. I don’t have all the material handy and I’m not current on it either, but historically commodities typically went vroom following the distortion of currency-driven price spikes. From that perspective, our present commodity price spikes would look like _the historical norm_ given our immediate past; these spikes just don’t look like our immediate past, is all.
To Anon of 2:31, you are soo right on central/money center bankers and their perspective at the turn of the 20th century. The 19th century was a graveyard of credit-fueled speculative sprees, in many countries and most especially in the old US of A. Loose credit, often provided by fly-by-night, minimally capitalized ‘wildcat’ banks and bank-like institutions made fools’-gold fortunes and hellzapoppin’ bubbles time and again, so big bankers had a tight-credit macro-policy by experience. Real estate was the speculative medium of choice, though not the only one. Now, with the financial de-reg of the 1990s, we have cast ourselves perfectly back to 19th century credit sprees, only on the steriods of the reserve currency and the amphetamines of global capital inflows. *yeeesshh* I know, I know, we don’t study history in this country; we’re too innovative for that, I’m told. “Everything old is new again,” is my response to that.