Role of Debt and Leverage. What was the fuel that propelled markets into the stratosphere like an Amazon rocket shooting a dildo into space? The Great Lockdown of 2020 could have gone bidless if not for the Fed “Going Direct” blackmailed prompted by BlackRock’s August 2019 white paper predicting imminent failure if they don’t. I submit that market valuations escaped Earth’s orbit in 1994, only briefly glancing off historical fair-values during what most call epic swoons. What also left orbit in 1994? Margin Debt (Figure 1). It is up 15-fold nominally in the last 25 years—11% annualized growth—to “historic extremes.” That’s a pretty cool correlation in Figure 2. Is there no regression to the mean—no correlation with the size of the economy? The 2020 Flash Recession was also the first recession in history that failed to purge non-financial debt (Figure 3), which, according to Albert Edwards, ensures that a more shocking one—a real recession—is queued up. During the Lockdown, pensions were mooching bailout money via pension obligation bonds to top off their pension funds and they are still $5–6 trillion underfunded.ref 2 Meanwhile, day traders went nuts with their bailout checks. (See Broken Markets.) I will repeatedly allude to 1994, the year when the Great Margin Binge initiated by a pesky bond crisis, caused equities to become unmoored. One could argue that the binge really began in 1981. How does the current bubble compare to recent bubbles around the globe? See Figure 4.

https://www.peakprosperity.com/2021-year-in-review-crisis-of-authority-and-the-age-of-narratives-part-1/#valuations