In October 1925, Walter W. Stewart, the Director of Research at the Federal Reserve Board, proposed reducing speculation by member banks pressuring credit to banks lending to brokerage firms. Benjamin Strong, the President of the NY Fed, opposed the idea.

Several years later (1928), Adolph Miller, then the Fed Board’s economist, suggested a meeting of NY Banks, for the purpose of commanding an end to their financing of speculation. Ben Strong’s successor at the NY Fed, George Harrison, also told the Board in February 1929 that growth of credit in the banking system was far too great relative to total business activity.

The NY Fed opposed any action. As described in The Great Contraction (1929-1933), they enlisted Treasury Secretary Andrew Mellon to help make its case. The NY Bank was successful, and there was no intervention to reduce excess speculation. We obviously don’t know how successful these efforts might have been otherwise, but we do know what happened: The 1929 crash, and the Great Depression.

Fast forward 70 years: Alan Greenspan complained that it is too difficult to identify bubbles in real time, and the Fed does not have the ability to safely pop them regardless. He famously stated that it would be easier to clean-up the mess after an asset bubble pops than to try and deflate the bubble on the way up.

As we saw in several articles last week, the Fed is rethinking its stance on popping bubbles. It is significant that the Fed at least be aware of their own behavior, and how it contributes to bubble formation and growth. At the very least, they need to understand how Fed policy can lead to the inflation of bubbles in the first place.

Despite Greenspan’s defenses, there are quite a few signs the Fed should look for when attempting to identify asset bubbles, in order to reduce the risk of implosion. Consider these 10 elements to identifying bubbles in real time that the Fed, or anyone else for that matter, can use:

1. Standard Deviations of Valuation: Look for traditional metrics –  valuations, P/E, price to sales, etc. — to rise two, then three standard deviations away from the historical mean.

2. Significantly elevated returns:  The S&P500 returns in the 1990s were far beyond what one could reasonably expect. Consider the years around Greenspan’s "Irrational Exuberance" speech:

1995    37.58
1996    22.96
1997    33.36
1998    28.58
1999    21.04

And the Nasdaq numbers were even better.

3. Excess leverage: Every great financial crisis has at its root easy money and rampant speculation. Find the leverage, and speculation wont be too far behind.

4. New financial products: This is not a sufficient condition for bubble, but it seems that every major bubble has somewhere in the mix, new products. It may be Index funds, derivatives, tulips, 2/28 Arms.

5. Expansion of Credit:  With lots of money floating around, we eventually get around to funding the public. From Credit cards to HELOCs, the 20th century was when the public was invited to leverage up also.

6. Trading Volumes Spike: We saw it in equities, we saw it in derivatives, and we’ve seen it in houses: The transaction volumes in every major boom and bust, by definition, rise dramatically.

7. Perverse Incentives: Where you have unaligned incentives between corporate employees and shareholders, you get perverse results — like 300 mortgage companies blowing themselves up.

8. Tortured rationalizations: Look for absurd explanations for the new paradigm: Price to Clicks ratio, aggregating eyeballs, Dow 36,000.

9. Unintended Consequences: All legislation has unexpected and unwanted side effects. What recent (or not so recent) laws may have created an unexpected and bizarre result?

10. Employment trends:  A big increase in a given field — real estate brokers, day traders, etc. — may be a clue as to a developing bubble.

While we can debate whether or not the Fed should intervene by popping
bubbles, we can all agree that, at the very least, they should not
contribute to bubble inflation . . .

Update: October 22, 2008 5:02pm

Jack McHugh adds the following points

–Low credit spreads (indicative of fixed income risk appetites running
too high)

–Low and falling lending standards (forward indicator of credit trouble
–Very low default rates on corporate and high yield bonds (indicates the
ease with which even poorly run companies can refinance and creates false sense
of security)
–Low equity volatility readings over an extended period (indicates
equity investor complacency)


Fed Rethinks Stance on Popping Bubbles
WSJ, OCTOBER 17, 2008

Central Banks Reconsider Doctrine of Preemption
Caroline Baum
Bloomberg, Oct. 15 2008

Category: Bailouts, Economy, Markets, Really, really bad calls, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

51 Responses to “Can the Fed Pop Bubbles (And If So, How)?”

  1. Mr. Beach says:

    Barry and others:

    Is the USD in a bubble?

    Are Treasuries in a bubble?

    Check out the overnight action in the currency markets.

  2. we an all agree that, at the very least, they should not contribute to bubble inflation . . .

    ya know, the only way they could, in reality, do that, is to pack up their Notes and go Home IOW: Put themselves OOB.

  3. mark mchugh says:

    Maybe they can practice on their own balance sheet.

  4. DANM says:

    In 1929, there were specific issues that nobody really talks about.

    1. America had been the supplier to the world since WW1. By the late 20s, Europe was making a comeback. It had rebuilt itself and was starting to make a huge dent in American agriculture. There was huge oversupply and the government resorted to dumping to keep prices up.

    2. Workers’ peak productive years are in their 40s. If you looked at the population pyramid in the 1920s and 1930s you would see that the largest group in the 1920s was in its prime years. In the 1930s, the peak earners was a very small group because many of those men were shipped off to fight WW1 and never came back. So just by thinking that the loss of men would hit the economy in a generation’s time and that Europe would become self-sufficient at some point in the future would have convinced you that there would be large dislocations in the 1930s.

    Yet nobody seemed to look at these facts. Everybody kept on forecasting growing earnings in the future.

    I don’t see anything different today. Since 1945, we’ve known about our Baby Boom generation. They built many schools but how many hospitals are going up? They keep on building luxury retirement homes when two 2/3 of Boomers have less than 200K saved up. I can already tell you what’s goint to happen, these will tank and a batch of undersavers will get luxury condos for cheap.

    Our whole system is based on a Ponzi scheme. It is based on growth and the generation under needs to be bigger than the older one. Because of the Boomer bulge we are in the same situation as in the 30s. We are currently at 5 workers per retiree going to 2/1. Households have maxed out their debt so where is this future growth? Go look at your population pyramdid, the retiree group will be growing will the working group will be staying flat.

    We need to wrap our minds around the big issues. Unfortunately less than 5% of people can see the big picture and I’m willing to bet that those people rarely make it to leading positions because realists don’t go up the ladder as easily as optimists in our current system.

    I like your rules but in the final analysis, they are just a form of tinkering. I hate rules for the sake of rules, they’re dangerous. We created rules and they were taken away. Why? Because the big picture was lost.

  5. JustinTheSkeptic says:

    I say there is never going to come a time when Bubbles (extreme upward movement in price appreciation), can be easily dignosed, so what is really needed, is for the FED and others to let the exuberant behavior pop naturally and then have enough fuel in the tank (with the FED this means higher interest rates relative to ZERO. And with Congress this means narrower budget defits if not surpluses), to come and pick up the pieces, by injecting wholesome economic stimulus through lower rates, and long-run socially efficency gaining stimulus projects, (light-rail train systems, more efficent bicycles, etc. In the end it will be shown that this whole mess would have been avoid if artificial market stimilants would have been avoided – i.e. credit on top of credit, on top of credit.

  6. John Borchers says:

    The Fed can not do anything about the system. I’ve always believed the Fed interest cuts work because people believe they work.

    Once people don’t believe they work (like this time) it’ll be a much different story.

    And the markets always show a pattern before they crash. Volatility.

  7. Dan says:

    “Can the Fed Pop Bubbles (And If So, How)?”

    Obviously, not keeping interest rates too low, for too long.

    And regulation is needed for some of Wall Street’s (previously) most profitable vehicles — e.g., swaps. Over three years ago the Fed was moaning about how the “back office” of swaps deals was in disarray, but took no enforcement action. Now, you have Timothy F. Geithner of the N.Y. Fed running around near frantically trying to put together a swaps clearinghouse; why did he wait for an overwhelming crisis to develop to do so? I think the clear answer is the Fed didn’t want to impinge on the tremendous profitability of swaps for Wall Street; Greenspan also strenuously resisted regulating swaps. Opaqueness made the swaps much more profitable for Wall Street; the clarity a clearinghouse provides reduces that profitability.

    That opaqueness is bringing down the system. So that was a Wall Street profit bubble that could have been prevented, via proper regulation; only now, when it’s clear we’re in a tremendous mess with respect to swaps, does the Fed finally scramble to set up a clearinghouse.

    Meanwhile, Lehman’s cds may have settled up o.k., we’re not out of the woods with swaps yet, by a long shot:

    (From today’s Bloomberg):

    – Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.

    The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.

    “We’ll see the same problems we’ve seen in subprime,” said Alistair Milne, a professor in banking and finance at Cass Business School in London and a former U.K. Treasury economist. “Banks will take substantial markdowns.”

  8. grumpyoldvet says:

    CNBS is absolutely hilarious this AM. Kernan and Quintinella are apoplectic as to why their guest host Jack Rifkin is not buying stocks right now since after all Buffet says “Buy”. Then on comes Nouriel Roubini and he also feels it’s too early. Kernan’s head will soon explode if this keeps on going.

  9. wally says:

    This is an excellent post, Barry.
    What we are going through now will force a lot of economists to really look at the state of their ‘science’. It is clear there is a primitive understanding, at best, of the mechanisms at work.
    An addition to your list, I think, should be consideration of where money is being invested. When the Fed creates liquidity or prints money, it has no way to control where that money goes, and it is becoming quite obvious that the destination of the money may be more important than the quantity. If so, Paulson, and the US in turn, may be heading for a disastrous failure.

  10. Philippe says:

    Brief thoughts

    The Fed or ECB may not tailor their monetary policies in accordance with a particular bubble
    But several institutions may prevent the bulb:
    BIS with the prudential risk ratios and risk weighting on derivatives
    Market watchdogs may sometimes avoid falling asleep when they see a beautiful hyperbole curve, and have a close up on the initiatives and associates Inc.
    It is a mystery as to why the EEC commission has made prices collusion a daily page of its agenda and give penitence when there is a price association in the real economy (tires, cement, chemical, Microsoft) and show no interest in the upstream price formation (commodities…)
    The VAR has proved to be a great farce ever (Gaussian by nature and out of place in markets where risk concentration and abnormal distribution are the norm)
    A close up on securitisation where the banks so keen to deal among themselves on a pari passu basis were happy to let the end user on…a pari passu basis.
    A scrutinity on the risk concentration of the banks all their profits were directly related to the real estates for many of them their exposures were in multiple of their capital.

  11. cynicalgirlc says:

    A few years ago Robert Schiller said something about when the cab driver tells you to buy real estate, you know it’s a bubble. It’s similar to #10, employment trends, everybody’s doin’ it.

  12. DANM says:

    addition to your list, I think, should be consideration of where money is being invested. When the Fed creates liquidity or prints money, it has no way to control where that money goes, and it is becoming quite obvious that the destination of the money may be more important than the quantity. If so, Paulson, and the US in turn, may be heading for a disastrous failure
    Good point. Although I’m willing to bet that a lot of money is still going to support the same way of life that brought us here.

  13. Jonathryn says:

    These appear to be good identifiers for asset bubbles, but what mechanisms would/could the Fed use to pop the bubbles? It would seem that the only way to do that would be a coordinated effort by various regulatory agencies–Comptroller of the Currency, Securities and Exchange Commission, Federal Deposit Insurance Corporation.

    But imagine how the little piggies would squeal if you popped their ascendant bubble: What’s wrong with making too much money? Is this a bubble anyhow? Interfering in the markets will not change a commodity’s scarcity or intrinsic value.

  14. rickrude says:

    fed can help prevent bubbles by not
    inflating the money supply.
    The question is somewhat misleading as
    the fed was first a culprit in the creation of
    recent bubbles

  15. Mark says:

    By far, the most cogent thinking and analysis…and synthesis…that I’m finding out there comes from Robert Prechter.

    IMHO, throw away all the Elliott Wave stuff vis-a-vis trading…and I mean all of it…and you’ll find a very brilliant mind that is fully aware of what’s happening. He has nailed this to a “T.”

    If you have any basic trading skills, strap those to Prechter’s calls on the market and you’ll do just fine. But do not hesitate.

  16. dead hobo says:

    Good ideas, but without the will to do it, the Fed will do nothing until the next financial collapse occurs in a few years. Quantifying the symptoms should be pretty easy. Fixing the cause shouldn’t be too hard if you control the money supply and the rules on how to use it. They won’t do crap.

    BTW, did you know that Firefox spellcheck has Ayres as a suggested correction. I misspelled ‘years’. McCain has immortalized him.

  17. CNBC Sucks says:

    Just because the Fed provided the rope for the US economy does not mean the Fed can unhang it. Only the real economy can do that. I never thought I would see the day so many so-called capitalists would rely on central bank and US government maneuvers to solve the problems of natural business cycles. Everybody wants a quick fix.

    Just because you pop a pimple doesn’t mean you have clear complexion, especially if it was a big pimple.

  18. further, one always hears about Mr. X ‘talkin’ his book’. or Mr.y, or Sr. Z, the same. But, we never hear that re: the FedRes, ‘talking its/their book’.

    All one heard re: Greenspan= “he was unintelligible, etc.”. Personally, through the lens of understanding that He was talking the FedRes’ book, I thought he was amazingly forthright.

    All as groundwork for this Q: What makes us think that the FedRes is on ‘our’ side? That the FedRes’ first obligation is to the betterment of the U.S.? Just a reminder, the Parasite/Host relationship is not always Symbiotic..

  19. harold hecuba says:

    as MISH states . the problems result from the federal reserve, fractional reserve lending and gov spending that is out of control. how can a group of (is it 9) jamokes that are appointed not elected by the people be responsible for knowing the right interest rate for a 12 trillion dollar or whatever economy. this is absolutely insane.

  20. super-anon says:

    Maybe it’s more appropriate to ask if the Fed should refrain from causing bubbles.

    From “Only Yesterday” published in 1931:

    The speculative fever had been intensified by the action of the Federal Reserve System in lowering the rediscount rate from 4 per cent to 3 1/2 per cent in August, 1927, and purchasing Government securities in the open market. This action had been taken from the most laudable motives: several of the European nations were having difficulty in stabilizing their currencies, European exchanges were weak, and it seemed to the Reserve authorities that the easing of American money rates might prevent the further accumulation of gold in the United States and thus aid in the recovery of Europe and benefit foreign trade. Furthermore, American business was beginning to lose headway; the lowering of money rates might stimulate it. But the lowering of money rates also stimulated the stock market.

  21. leftback says:

    We are seeing the $ rally again big time v sterling and the Euro and it has triggered the melt in oil I talked about on Monday – crude oil broke below $69/barrel this morning for a while.

    There is very strong support in the $60 area, and I think we may go there as early as next week. That would serve as a floor for oil and when we reach that level it should also mark the top of this amazing $ rally. The D-train™ is rolling again.

  22. Donkei says:

    Maybe the government can outlaw human emotions. Ban euphoria and its corollary, panic. Or, just get the fed out of feeding the twin towers of irrationality and instead have them focus on providing a stable medium of exchange, such that irrational emotions are neither assuaged nor promoted.

    Good luck with that. It would require a humility that virtually no US government since the Great Contraction has exhibited.

  23. Concerned American says:

    Danm and Wally…

    You are right on. Unless that money is used to create jobs, we can’t recover.

    Lack of good jobs, with good pay, benefits, retirement packages are the root of this issue. Very very few seem to get that.

    Until the worker has money to spend the nearly all business will continue to decline.

    Kill the worker = Kill the country.

    I can’t believe how many smart people are missing that. No American Company (if there is such a thing) wants to employ one more American worker and pay well, with benefits and retirement. That isn’t a goal on anyone’s business plan.

    No worker = no spend = further declining economy.

    See you at the bottom. There may be a book title there.

  24. Bubbles pop more frequently from over-inflation than from intentional means because the original intention of inflating something is not to pop it — the intention is to inflate it to maximum capacity; therefore the most common cause of popping a bubble would be a result of underestimating the capacity of the bubble itself…

  25. John Borchers says:

    This time the results will be terrible because we had 3 bubbles at the same time:

    1) housing
    2) commodities
    3) stocks

  26. leftback says:

    @ JB: Add one more bubble: Treasuries.

  27. John Borchers says:

    Barry I’m ready for a trading job if you are looking.

  28. lb,

    how does one get a bubble in the USTreas complex, without a concomitant bubble in the U$D?

  29. just doug says:

    if there is fractional reserve banking there is a bubble, the only question is how big it is and the existence of a central bank ensures it can be very large.

  30. Bruce in Tennessee says:


    I agree we are going to have higher treasury rates in one year than we do matter what the economy does.

    I have finished my 3 burgers…and am getting hungry…what is the economic wager this week?

  31. Dr. Kenneth Noisewater says:

    So, in other words, for the US economy to come back, we need to bomb China and India flat. Sort of a problem, as they both have nukes, so it’d have to be a preemptive strike…

    (If 1920s was a combo of ‘world supplier’ and ‘tech bubble’ (radio), and 1950s was a result of having the world market to ourselves since Europe and Japan were all bombed flat, how else will we become ‘world supplier’ again, and be able to afford acquiescing to every labor union demand?)

  32. IAmEric says:

    This is a question that Bernanke and his crew debated hotly with Anna Schwartz and her crew (at BIS) going back for nearly a decade. Bernanke argued vehemently that the Fed should only address asset prices to the extent they directly impacted core inflation. Schwartz argued that targeting asset prices should be a priority of the Fed.

    Asset Price Inflation and Monetary Policy
    by Anna J. Schwartz

    By the way, Anna Schwartz rocks.

  33. Estragon says:

    In order to identify bubbles, I humbly suggest you first need to define the term “bubble” and any related identity metrics. For example, simply saying “excess” leverage is an identity factor is insufficient without defining “excess”.

    IMHO, a bubble should be defined as a condition in which the expected response in supply and demand to price signals is reversed. With an increase in price, we would ordinarily expect supply to increase and demand to decrease. The result is a self-limiting change leading to a new equilibrium. In my definition of a bubble, an increase in price leads instead to a decrease in supply (eg. hoarding) and an increase in demand (speculation).

    By this definition, there are likely to be individual price bubbles forming and popping regularly, and the fed probably can’t and shouldn’t do anything to interfere. If we were to create a weighted index of asset supply/demand responses and find an aggregate bubble forming, then we should expect the fed to act.

  34. IANAE but I would say that it’s near-impossible to identify bubbles in advance. For instance, are commodities in a bubble right now? Can oil be considered a bubble? It’s up 500%+ from its bottom, has much higher volatility compared to its historical average, and so forth. Yet, one can’t say it is in a bubble. There could be real fundamentals driving it.

    Similarly, the 90′s saw the birth of new industries in the technology sector. The tech sector kept expanding for many years yet it wasn’t a bubble until, say, 1999. If you attacked the “bubble” in 1996 or 1997, you may have simply crushed the birth of new industries (such as internet or telecommunications industries.)

    On another note, contrary to what many hard-currency advocates seem to think, you can get bubbles with gold-backed currencies and without central banks as well. One just needs to look in the 1700′s and 1800′s to see bubbles that are no different than the present. People blaming FedRes actions obviously haven’t looked at history before the FedRes even existed.

  35. One just needs to look in the 1700′s and 1800′s to see bubbles that are no different than the present. People blaming FedRes actions obviously haven’t looked at history before the FedRes even existed.

    Posted by: Sivaram Velauthapillai | Oct 22, 2008 11:00:19 AM


    please give examples of what you’re referring to re: 17th y 18thC ‘bubbles’

    briefly, “New World” Au & Ag Exports to Spain are one thing, Assignats, and the ‘South Seas’ bubbles, are another..

  36. mickslam says:

    It is very easy to tell a bubble. Look at #10 on barrys list and add this small question to the person that is telling you about the great investment.

    “What happens if the {insert asset name here} goes down?”

    If there is anything but a reasonable discussion of downside risks, its a bubble.

  37. Robert says:

    Very nice post.

  38. joeblo says:

    I expect it’s particularly difficult to recognize housing bubbles, when your dissertation was written about them, and you’re blowing the biggest one ever… oh and you’re paid very well to do it.

    Cover your eyes with million $ bills, and appoint a successor who’s disseration covers the 1930s depression. Oh, yeah… that just happened by accident too.

    Oh, and become Treasury Sec so you can save $150M in taxes and then dole out big bucks to your friends as they kiss your ring.

    Just ‘cuz bloggers could see the market peak doesn’t mean the experts had any idea what was happening.

    The saving grace… I made money. I’m sure someone sold CDS on Rome as it burned too.

  39. DL says:

    The Sunday Washington Post (10/19/08) had a graphic of quarterly changes in GDP going back about 90 years (or so). What was striking was how the “volatility” in quarterly GDP has subsided dramatically over that period. So it does appear that fiscal and monetary policy has been used over the years to dampen the ups and downs in economic activity. (Whether that has resulted in a reduction in long term economic growth, however, is another question).

  40. bumble says:

    I doubt that bubbles can be prevented. What can be controlled is how big they get.

    As Galbraith amply demonstarted in his “1929″ tome, all financial innovation involves the creation of debt leveraged against more limited assets.

    Limit leverage. We are doing it for stocks, and used to do it for homes (20% DP).

    33x leverage? How wonderful. My losses limited to a pittance and my returns are 33 times.

    Limiting leverage will not prevent bubbles, but it will limit the size of the bubble. First the losses are not so negligible anymore, which puts a damper on speculation. Second even if I want to speculate, I can only borrow less.

    Both these effects will serve to limit the size of the bubble, and the damage that results when a bubble bursts.

  41. mark mchugh says:

    In my opinion, it is the expansion of credit that delineates “overvalued” from “bubble”. A little irrational exuberance here and there keeps things interesting (and capitalist). When everyone starts playing with monopoly money, that’s when it get dangerous.

  42. bart says:

    Bunch of spin and horse puckey on the Fed and bubbles:

    “So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System.”
    – Alan Greenspan, Chairman of the Federal Reserve

    Source: Federal Open Market Committee (FOMC) meeting minutes from March 22, 1994

  43. winslow says:

    Back when buyers were standing in line in hopes of getting a lottery number to purchase a house, I penned an article stating the obvious bubble forming. I still find it amazing that leaders and government officials (highly educated I was told) had no idea what was going on or what measures should have been taken. I can only cringe at where our society is headed.

  44. Winston Munn says:

    @John Borchers

    There has only been one bubble: credit.

  45. debreuil says:

    In general, the health care industry is in a bubble, and it is next. It is the telecom other shoe, as related to dot com.

  46. Odysseus says:

    “be able to afford acquiescing to every labor union demand?”

    Unions only have one demand. A fair day’s pay for a fair day’s work. If you are making big profits, you can afford to pay your workers.

    Pretty scary when that’s considered an impossible “demand”.

  47. Vic says:

    Ugh. These discussions are so superficial and pointless. Why not ask the REAL question: why do we even need a Fed? It was created to reduce the occurrence of bubbles, but it has CLEARLY failed on that account. In fact, it has overseen the creation of two of the biggest bubbles in history: Great Depression 1, and now Great Depression 2.

    I find it so incredible that folks like you are willing to mouth off about deregulation, but you never, EVER consider whether having the basic unit of exchange (money) socialized by a central planning organization that lenin would be proud of, is a good idea.

    I mean c’mon!

  48. fresno dan says:

    Maybe first of all, they shouldn’t keep interest rates absurdly low for years, and should have allowed equilibrium to be re-established after the last (internet) bubble.

  49. Greg0658 says:

    to low interest rate push stocks for a return
    to low interest rate push easy money into existance

    I would think that there is almost an auto pilot rate? No?

    A correct rate encourages saving without the guarantee dismissed

  50. Greg0658 says:

    ps -
    to high a rate stifles borrowing for needs
    to high a rate is unfundable from a bankers point of view

    counter point:
    in a country with 18% credit card interest?

  51. Richard Kline says:

    So Barry, that is an outstanding list. I’ll add two overal observations regarding the Fourteen Quanta. First, these are all readily available data series; nothing arcane about them, widely published, basic data. Thus, there is no excuse for not knowing what time it is. Second, they can be used collectively to improvise a ‘Speculation Space.’ Some of these quanta may be high, some low at a given time. If many or all of them are trending higher concurrently that’s a screaming klaxon. Also, it has to be recognized that some of these quanta feedforward others, that is, they are more likely to be mutually reinforcing _as a group_ than to buffer each other in any way. So again, increases across the board in those indicators should be extremely worrisome.

    Every public financial regulator should have that list stenciled on the wall opposite their desk. These are not their only problems, but if these are not contained no other problems are worse trouble.