The Decade of Decadence

Time can be measured many ways but through a pure financial lens, the last ten years have been nothing short of remarkable.

We witnessed technology stocks that rocketed to the moon crash back to earth.

We watched bipolar disorder come full circle in real estate; a manic craze followed by the depression phase.

China seemingly held the key to world prosperity before the devil of deflation brought the other side of globalization to bear.

Crude was viewed as a new paradigm until we discovered the difference between hiding spots and safe-havens.

And credit, the mother of all bubbles with total debt-to-GDP stretched towards 400%, reached the zenith of its elasticity and unwound with furious vengeance until the government saved the day and mortgaged our future.

                                                                            
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It was the best of times and the worst of times, with moments of moderation sprinkled in for good measure. History will describe this decade as a stretch when most folks followed the pied piper of immediate gratification, losing sight of what truly mattered and why.

That’s not to say everyone transgressed but few emerged unscathed once the Age of Austerity arrived.

Sisyphus Now!

While the aforementioned bubbles hit home for many Americans, they’re hardly unprecedented through a historical lens.

There was the tulip mania in 17th century Holland as Dutch collectors hoarded a hierarchy of flowers.

The Mississippi and South Sea bubbles of the 18th century emerged in the wake of Europe’s dire economic condition.

The roaring twenties, fueled by an expansive use of leverage, led to the crash and Great Depression, not necessarily in that order.

And there’s Japan, perhaps the most frequently referenced modern-day parallel of our current course. The land of the rising sun boasted one of the strongest economies on the planet before a prolonged period of deregulation, money supply growth, low interest rates, bad real estate bets, and “zaitech” (financial engineering) created a virtuous cycle of speculative frenzy that collapsed the country under its own weight.

Does any of this strike a chord?

If familiarity breeds contempt, the percolating societal acrimony shouldn’t come as a shocker. Albert Einstein once said the definition of insanity is doing the same thing over and over again and expecting a different result. That most certainly applies to our financial fate but as with most journeys, the destination we arrive at pales in comparison to the path we take to get there. See also What in the World is Going On?