Nothing Matters Until It Explodes

The rage is building day by day towards explosion.

I see it in my Twitter feed, mostly political outrage from each side. It's an uneven battle however because Republicans are tasked with keeping the BIG lie that is disintegrating on a daily basis - the American Dream remains intact. Therefore the bar has to be lowered accordingly. There was a time in the U.S. when employers provided full healthcare. Now having a functioning healthcare system is deemed "communist". Pensions are communist as well. The whole mid-term strategy will be about preventing Red Dawn.

Liberals for their part have made no dent in the Trump onslaught. If anything, their outrage gives greater power to Trump because it creates a siege mentality that has brought his camp closer together. It's everyone else against MAGA. The rest of the world is the enemy. Half the country is the enemy. Which means that Trump's dismantling of the country goes totally unchecked. One wonders what it would take for Republicans to actually force Trump to step down. How bad would it have to get for them to admit that this was ALL going in the wrong direction. We are going to find out the hard way.

So there you have it - Democrats will fix all this in November and Republicans assert that nothing has to be fixed. Both sides are totally delusional. Which means that the decay of the American Soviet Union continues unabated. Everyone sees it and ignores it. Which means that we are heading for a mental breakdown of gargantuan proportions when they all discover they are living in a collapsed Disneyland.

What does this all have to do with markets? It's an analogy that things can go wrong for a long time and yet be totally ignored until collapse becomes inevitable. On a daily timescale a collapse is a Black Swan event. On a longer term timescale, collapse is inevitable.

That is the Minsky Hypothesis:

Risk accumulates over time until it reaches a point of no return:

"Whoever's issuing, be it a government or a hyperscaler or a non-hyperscaler credit, is now competing with more borrowers," said Tony Rodriguez, head of fixed-income strategy at Nuveen Asset Management. "And therefore yields have to be higher."

In summary, politics is merely a diversion from the collapse taking place in real-time.