The Three Bears Economy has seen us move through the doctom bubble of corporate debt, the real estate bubble of consumer debt and now we are deep into the government bubble of debt. Previously people got rich oftentimes only on paper from dotcom stocks before they fell and then many saw their wealth on paper rise and fall with their home values. Now we are well into the era of people making money from government, including paper millionaires—retirees with million plus dollar government retirement plans. Pension millionaires include the ex-police chief of Stockton California, who after two years as chief, retired with an annual pension of over $200,000. Add in benefits and on paper you get to over a million dollars in payouts pretty quickly. But the government largesse the ex-chief and many Americans to a lesser extent are growing accustomed to will turn out to be as solid as pets.com stock or sky high real estate values, because it is built on unsustainable debt. In the case of Stockton the city is already in bankruptcy, and in the case of the global economy the clock is ticking on how much longer government spending will prop up living standards.
For the current secular bear market asset inflation trouble comes in threes. Too much liquidity in the global economy in the late 90’s fueled the Internet bubble of bad corporate investments that popped in 2000. To avoid the necessary restructuring pain around a recession, more liquidity was injected into the global economy leading to unsustainable growth around the residential real estate bubble that popped along with related credit markets in 2007. In another attempt to avoid restructuring pain and alleviate the following recession more liquidity is being injected into the global economy notably by the U.S. and Chinese governments. Today that capital is fueling more unsustainable price appreciation or levels in bonds, emerging markets and commodities.