The Phaserl


All the Makings for a Major Top

by Doug Noland,

An unfolding EM crisis, higher Treasury yields, a short squeeze and various market mayhem.

The thesis has been that unconstrained global Credit inherently fuels serial boom and bust cycles. In particular, the dramatic policy response to the 2008/09 collapse of the Mortgage Finance Bubble incited unprecedented financial and economic excess in China and throughout the “developing” economies. Double-digit Credit growth has been compounding over recent years in China, Brazil, India, Turkey and, generally, throughout Asia and Latin America. I have referred to such a late-cycle dynamic as the “terminal phase” of Credit Bubble excess.

For going on five years now, unprecedented “hot money” has inundated emerging market (EM) financial systems and economies. And as “money” flooded in, EM central banks “recycled” much of this liquidity right back into U.S. Treasuries, German bunds, and sovereign debt around the world.

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