Harry Dent is a bearish financial journalist and trends forecaster, who early last year, insisted that there would be an epic crash in June. In a recent interview, Dent seemed almost irate about markets taking so long to crash. Basically Dent said that if the bubble does not burst this year, he will retire from economic forecasting. The question is whether it has just taken longer for the bubble to burst, or have we entered a new paradigm where bubbles never burst and recessions never occur, which seems to be the Fed’s objective.

Bubbles never burst with a soft landing. Either there will be a crash or the bubble will be propped up longer. The Great Depression bubble was only in stocks, then there was the tech bubble, and the 08’ financial crisis which was a real estate bubble. In contrast, today is an everything bubble, including real estate, tech, and stocks.

The bullish case for a soft landing, that inflation and unemployment are simultaneously low, is idiotic. Unemployment is often low before recessions and there is a temporary window where deflationary pressures cool inflation while employers retain workers. Assuming that strong wages plus low inflation can be sustained is delusional.

The soft landing narrative has no response to unprecedented levels of debt, including government, corporate, and private debt. Not to mention the dangers of inflation resurging with the Mideast wars. So the Fed would have to raise or maintain interest rates with high levels of debt. The banking system still has major problems, though consolidation has gone smoother and has been less chaotic than bears anticipated. Regardless, there is a high risk of another banking crash, due to commercial real estate and corporations having to refinance their debt at higher rates.

Ultra bears, like Peter Schiff, see a short-term danger of the US losing its World Reserve Currency status. While the US would enter a Depression if it lost its reserve status, I don’t see that happening anytime soon. There is no clear competitor for the reserve currency, much like how monopolies can get away with ripping off customers and having awful products and services. While I am very skeptical of the proposed BRICS currency, long-term there could be a global digital currency that is not tied to any particular nation, but perhaps backed by some commodity. I could also see different geopolitical blocks with their own reserve currencies. There could be a long-term erosion of the dollar, though the dollar could strengthen in the near future. Basically Schiff is right about the long-term but wrong about the short-term.

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