Siegel: A Bond Bubble Amidst a Great Global Prosperity

Momma don't let your babies grow up to be witless empiricists

Let my beloved come to his garden
And eat its pleasant fruits.
—Song of Solomon

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Professor Jeremy Siegel says bonds are rallying out of fear a repeat of the Great Depression is occurring. Since this fear is unjustified, he says, the bond market simply is experiencing irrational demand that, soon enough out of necessity will reverse.




Reading "The Great American Bond Bubble" in today's Wall Street Journal, it's clear Professor Siegel assumes the mountain of debt built up over the past 30 years is entirely sustainable. There is no hint suggesting understanding that, the crisis begun in 2007 is intimately related to a credit bubble whose popping is running its course to this very day.

Trouble is, if Siegel is correct about the threat of a Great Depression redux (he says there's no way), then we are instead surely looking at a Weimar Germany, hyperinflationary blowout, because either the mountain of bad securities still clogging the global financial system are written off, or they are hyperinflated out of existence. There simply is no middle ground our current, rundown condition will easily facilitate, particularly now that the fraud of securitization and its "risk mitigation" has been exposed.

Apparently, the prospect of hyperinflation is the sort of thing at an expensive business school like Wharton leading its minions to claim, "U.S. economic growth is likely to accelerate." Get ready for the ride of your life, buddy.

—Tom Chechatka