"Madness In Great Ones Must Not Unwatch'd Go." (Hamlet, act III, scene I)
When old grandpa Demographus entered the room and started speaking of the changing trends in business, with a growing number of workers retiring and his best clients spending less, attention was dispersed. Distraction and entertainment were provided by granny Janet. The white-haired and mild-mannered lady galvanized all the attention with her prodigal fairy tales. The stories took place in a land once outlined by mountains and valleys, until two mighty wizards exercised their magic powers on it. One was trusted to watch over the east and the rising sun, while the other watched over the west and the setting sun. Together, BOJ and FED used their magic to fill up the valleys that supported their kingdoms. By doing so, they had lifted those lowlands onto an enchanted plateau! When some skeptics questioned what lies in wait at the end of the plateau, the wizards and followers replied in a rehearsed chorus that another rising slope should eventually lead to higher and more fertile grounds. And many were mystically appeased by that seductive idea.
But, amidst those marveled ones and a crowd chronically distracted by ignorance or indifference, a preposterously stubborn bunch insisted on some petulant incredulity: "Yet, at the end of such higher fields, wouldn't there be any precipice? Aren't the valleys a real and necessary part of the landscape? Don't lowlands become more fertile too, since precipitation gathers nutrients that allow for more robust growth and better harvests in the future? Or would the sky be the ultimate boundary from now on? With ever higher altitudes, at what level would the sunshine provide no further warmth or nourishment to villagers?"
Many seemed to ignore the increasingly fragile state of the vegetation, with fewer and shorter roots in the higher and drier soil. The thinning air of such heights had already affected whatever judgment and ability to reason was left in the kingdom of Dowjonesy...
The original scenery of my parable could have looked like this:
(the relationship exposed in the chart above was brought to our attention by Harry S. Dent Jr.)
But, while the monetary magic involved in vanishing costs of credit and money being pulled out of hats may continue to entertain the economy, any due valleys and troughs will be postponed in favor of ever frothier altitudes... The green line in the chart below shows all assets accumulated by the FED through quantitative easing. The blue line shows the S&P500 following the abundantly printed money in a very similar trajectory.
"And that I see, in passages of proof, (...) a kind of wick or snuff that will abate it; (...) for goodness, growing to a plurisy, dies in his own too much." (Hamlet, act IV, scene VII)
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