Greenspan War Crimes
Here's an intriguing question: Could Greenspan (and the BoJ) be at least partially responsible for the commodity boom as well as the liquidity bubble? Could the commodity boom (or bubble if you like) be a direct function of the liquidity bubble? Here’s what I’m thinking:
Oil at $70, $3 copper, and sky-high base metals are a function of massive developing world demand at the margins.
Developing world demand for crude at the margins has also stimulated geopolitical tensions by putting pricing power in the hands of bad guys (Iran, Venezuela, etc.).
Developing world demand was artificially juiced by the Bretton Woods II arrangement, i.e., China et. al would not have ramped up capex investment in factories, roads, machinery, plants etc. nearly as quickly if not for the gaping maw of the American consumer willing to consume all the “stuff” China produced.
The housing bubble was essentially a giant ponzi scheme that masked the true role of foreign creditors. Consumers, feeling richer and fatter on real estate, bought more stuff with their inflated gains, not realizing they were actually spending borrowed money. In turn, stocks gained on fat corporate profits, ostensibly traced back to a flush consumer, but actually are traceable further back to borrowed money.
So, look what happens when you remove the initial Greenspan/BoJ stimulus from the equation: No willy-nilly consumer spending ramp up; no mercantilist debt ramp-up masked by ponzi housing profits; no massive capex build-up in Asia and elsewhere to respond to artificial demand; no $75 oil; no copper at $3 a pound; no raging commodities boom.
This is not an anti-commodities thesis so much as a question (or questions):
What if developing world demand had ramped up more slowly and naturally in the absence of massive liquidity stimulus? Could all (or most) of these painfully sharp imbalances have been avoided, including $3 copper and $75 oil?
If China's growth in recent years has been drastically above trend due to the mercantilist-driven, liquidity-fueled Bretton Woods II arrangement, would that explain Asia's perplexing disconnect between thriving export economies and struggling domestic economies? What happens, then, in the aftermath of liquidity withdrawal? Does China go back to trend with a thud, with ugly nationalist antics (saber rattling at Taiwan etc) to follow?
And last but not least, if Iran Kicks off World War III, and Iran's clout is a product of $75 oil, and $75 oil is Easy Al's indirect doing, does that mean we can prosecute Greenspan for war crimes?