Austrian Hangover Theory: It’s Time for the Economy, Markets to Sober Up

October 23, 2014 – Our economy and markets are alcoholics, chronically drunk on easy money enabled by the Fed. In this article I explain why it’s time for them to go to rehab.

From the article:

Having drunk from the Fed’s spiked punch bowl, people become intoxicated. It affects their vision and their judgment. The party gets lively and businesses start wearing lampshades on their heads. In the raucous environment, homebuilders, high on cheap money, are likely to start building homes in the suburbs of desert cities like Las Vegas and Phoenix, far beyond the sustainable growth of the market or the means of people to pay for them all.

And that is exactly what happened.

If businesses, intoxicated by low rates, start wearing lampshades, markets can be described as swinging from the chandeliers. In the general inebriation the markets race higher, setting new records. But then the punch runs out and the hangover starts with the inevitable correction in prices.


View the article