Financial Engineering

There's a crazy mirror showing us in 5-D
I'm laughing at you, you're laughing at me
There's a room of shadows that gets so dark brother
It's easy for two people to lose each other
--Bruce Springsteen

Periods of easy money invite financial engineering. Financial engineering seeks to increase the value of financial securities without commensurate improvement in productive assets backing the securities.

Examples of financial engineering include issuing debt to fund stock buybacks, leveraged buyouts, off balance sheet debt structures, various swaps and derivative contracts, syndicated loans and buyouts, and borrowing to magnify security returns.

All financial engineering projects have one thing in common: use of debt and leverage to manipulate the relationship between productivity and financial outcomes.

We can confidently propose that the easier the monetary policy, the greater the propensity for financial engineering.

Currently, monetary policy is easier than at any previous point in history. What does this suggest about the extant level of financial engineering?