Faceless Bubble

It's easy to deceive
It's easy to tease
But hard to get release
--Billy Idol

The root cause of all financial market bubbles is credit money. Unlike commodity money which is grounded in production, credit money is created out of thin air by banks and other institutions. Credit money fuels borrowing and speculation far beyond what is possible with commodity money.

Recent bubbles have been credit money that made its way into  highly visible economic sectors. In the late 90s, it was the 'dot com bubble.' In the mid 2000s, it was the 'housing bubble.'

This time around, however, the bubble has no real economy face. Trillion$ of credit money are not making their way into the economy--at least not yet. Instead, the credit money largely remains in the banking system where institutions are using it to bid stocks and other asset classes higher.

From a PR standpoint, policymakers can't like this. When credit was flowing into internet companies or real estate, officials could point to sectors of the economy where their policies were 'working.' It created a distraction, albeit temporary, from the underlying activity of money printing which, when laid bare, gets people thinking (always a bad thing for government).

There is no distraction this time. The credit money is manifesting purely in higher asset prices. And, as Gekko famously observed, "if you are not inside, then you are outside" when it comes to benefiting from this inflation.

The longer policymakers can't point to 'real world' benefits of their inflationary policies, the greater the likelihood that the public will push back at policies that are benefiting a privileged few.

Of course, if policymakers get their wish and the trillion$ of credit money begin making their way into the broad economy, then we'll witness an explosion in the price of goods and services like few Americans have seen.