The investment world has an embarrassingly short attention span. But frankly, it is a necessity. If daytraders, hedge funds and other horses in the carousel actually had to look beyond the next week of market activity or study back on market history in comparison to today, then they would not be able to retain their blind optimism, which is exactly what is necessary for them to continue functioning. If they were all to examine the global financial situation with any honesty, the entire facade would collapse tomorrow.
At bottom, it is not central bank stimulus and intervention alone that drives equities and bond markets; it is the naive faith and willful ignorance of average market participants. There is a problem with this kind of economic model, however. Reality is never kept in check indefinitely. Fiscal truths will be exposed, one way or another.
How does one know when this full spectrum shift in awareness will occur? Well, there’s no science that can help us with that. While basic economics is subject to the forces of supply, demand and mathematical inevitability, it is also subject to human psychology, which is another matter entirely.
In the past I have made a point to outline similarities in responses to various economic crises. For example, the media response and public perception at the onset of the Great Depression was a highly unfortunate exercise in false optimism. The response just before the credit crash of 2008 by the media and the masses was much the same. It is interesting to note in particular that the mainstream media tends to become more over-the-top in its certainty of economic stability the closer the system comes to collapse. That is to say, the nearer we edge towards financial calamity, the more violently the mainstream media attacks people who suggest that danger is on the horizon.
First, take a look at the following attempts by the media to embarrass or silence analysts like Peter Schiff just before the crash of 2007/2008: