Blowing Bubbles: The New World Economic Order

The comments above & below is an edited and abridged synopsis of an article by Ian Verrender

Last year, Chinese property tycoon Wang Jianlin reckoned the thing that had elevated him into the nose-bleed section of wealth rankings, Chinese real estate, had become ‘the biggest bubble in history.’

He’s in good company. Bill Gross, once the king of American bond trading, has been calling a bubble in bonds and US Treasuries for years, while Bernard Arnault, of luxury goods outfit LVMH, reckoned asset prices were at “scary levels” and another financial crisis may be just around the corner.

Now, even those responsible for the bubble roiling through the financial world are having second thoughts.

There was the US Federal Reserve’s Stanley Fischer expressing concerns about debt and risks in the system before his boss, Janet Yellen, said this during a keynote speech in London: “Asset valuations are somewhat rich if you use some traditional metrics, like price earnings ratios.”

The problem for Ms. Yellen, as it is for other central bankers, is that the bubbles they have formed—in property, stock and bond markets—are entirely of their own making.

The stock market may still be well below its 2007 peak. But, like most global markets, it remains expensive by historical standards.

Verrender discusses how we arrived here; what’s next; what this means for the stock market; and China as the key to the problem.