Hyperbole is such a vile term. Defined as “extravagant exaggeration,” we are nothing short of drowning in it. What little is left of journalistic integrity is sacrificed daily at the altar of hyperbole. Politicians have raised their rhetoric to such deafening volumes their speech writers are at the risk of running low on exclamation points. Even the once ensconced billionaires’ boys club members with a yen to pontificate clamor for any available turn at the podium. Along the way, grace and understatement have been condemned as signs of weakness. Go big or go home, baby! Loud and proud! (Can someone please hit mute?)
There are blessedly exceptions. Peggy Noonan personifies refinement in the written word. And then there is Bill Gates, whose dignified actions negate the need to generate noise pollution. At over $35 billion, the vast sums he has donated distinguish him as the world’s most generous philanthropist. It was thus a surprise to hear Gates’ warnings that a pandemic could wipe out 33 million people in six months. As alarming a prospect as it is, Gates was simply pointing out a severe lack of vigilance: “We need to invest in other approaches like antiviral drugs and antibody therapies that can be stockpiled or rapidly manufactured to stop the spread of pandemic diseases or treat people who have been exposed.” As unprepared as the world is, the United States in particular is vulnerable. The Bill & Melinda Gates Foundation pledged $12 million to fund a challenge to devise a universal vaccine.
Given the opportunity, it would be instructive to ask Gates his views on the global economy and financial system’s preparedness for its next outbreak of contagion. His lack of expertise in the field could even work to his advantage. Perhaps he would simply determine that money has been so conspicuous in its abundance, at such ridiculously low prices, and for so very long that this will not end well. Using credit creation leading up to the financial crisis as a yardstick, he might add that this episode will take an even greater toll than the last. No hyperbole. Pure observation. Refreshingly simple and elegant.
Looking back to the last crisis is instructive to understanding what the future holds. The Federal Reserve and other central banks extended overly accommodative monetary policy in the aftermath of the 2001 recession. Politicians, for their part, looked the other way as happy homeowners made for compliant voters. This charade did not end well as documented in the first of this three-part series. I wrote The Great Abdication after being inside the Fed for nearly a decade throughout the financial crisis and the recession that ravaged the country as no other in modern time.
As is always the case when interest rates are suppressed for far too long, nefarious behavior broke out in the credit markets. Asset price bubbles, especially in US residential real estate, formed and swelled to...