This post is part of CoinDesk’s 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Michael J. Casey is CoinDesk’s chief content officer. The views expressed here are his own.
Our social media-constrained attention spans make it hard to focus on anything lasting longer than 24 hours, let alone a decade.
So, we risk missing the big, secular trends that lead to the kinds of paradigm shifts Bridgewater Associates founder and co-chairman Ray Dalio speaks of. Once they’ve occurred, and the world you were used to suddenly disappears, it’s too late.
Thankfully, the Roman calendar periodically offers an excuse to sit back and reflect on longer time frames. We have one of those moments right now: the end of the 2010s.
For most capital market investors, the past 10 years are perhaps best described as the “decade of QE.” And they don’t mean a British monarch or an ocean liner.
Through a radical policy of “quantitative easing” introduced to counter the “zero lower bound” problem in interest rates, the central banks of the U.S., the euro zone, and Japan have added almost $10 trillion in assets to their balance sheets since the end of 2009.
Given that massive surfeit, nothing else mattered much to financial markets. Stocks, bonds and commodities moved in ever closer correlation to one another. Mostly they rose, though sometimes they fell, all in lock-step dependence on monetary policymakers administering the drug of QE.
There are many reasons to believe that this massive intervention has created a giant distortion.
One that gets attention is the fact that, at one point, $17 trillion of dollars in bonds traded at negative yields this year, meaning that investors had too much cash and were willing to pay “safe” creditors for the privilege of taking their money.
But there are other warning signs that the QE-fueled market runup is starkly out of line with the realities of the world. As Bank of America…