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2017-12-23 — blogspot.com

Between tax legislation and cryptocurrencies, there's been little interest in much else. As for tax cuts, it's an inopportune juncture in the cycle for aggressive fiscal stimulus. And for major corporate tax reduction more specifically, with boom-time earnings and the loosest Credit conditions imaginable, it's Epic Stimulus Overload. History will look back at this week - ebullient Republicans sharing the podium and cryptocurrency/blockchain trading madness - and ponder how things got so crazy.

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U.S. and global growth surprised on the upside in 2017, explained by monetary conditions that somehow became only more extraordinarily loose. The Fed, with its dovish approach to three baby-step hikes, failed to tighten conditions. Led by the Bank of Japan and the European Central Bank, it was another year of massive global QE. Meanwhile, Chinese "tightening" measures couldn't restrain record Credit growth. At the "periphery," EM were the recipients of huge financial flows, spurring domestic Credit systems and economies around the globe. It's been a huge year for Credit on a global scale.

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President Trump is now wedded to the U.S. Bubble. President Xi Jinping is wedded to the Chinese Bubble. I've posited a global "Arms Race in Bubbles." With Trump in charge and the Republicans now pushing through aggressive stimulus, perhaps Chinese officials are rethinking the geopolitical risks associated with efforts to rein in their Bubble excess.

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