Zerohedge: Will the Next Financial Crash Be Invisible?

Summary

A financial historian believes a major crash is inevitable, but it likely won't resemble historical events like 1929 or 2008. Instead, he predicts one of two outcomes: a soft default through persistent inflation or a hard default via a financial crisis. The author argues that four key factors—stubborn inflation around 3.8%, historically high market valuations, stressed consumers with surging delinquencies on student loans, credit cards, and auto loans, and concerningly high bond yields—have created a precarious economic situation. Policymakers are trapped, facing a choice between letting long-term interest rates rise, risking a debt crisis, or intervening with monetary policy, risking further inflation. The author believes the soft default, characterized by rising nominal asset prices alongside eroding purchasing power, is the more probable scenario, as policymakers will prioritize avoiding immediate collapse by printing money and suppressing yields, effectively sacrificing the currency's value.