#119 That 2008-like Feeling

This newsletter is really a public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question:&#160;how do I think about a particular public policy problem/solution?<br/><br/>PS: If you enjoy listening instead of reading, we have this edition available as an audio narration on all podcasting platforms courtesy the good folks at&#160;<a href="https://www.ad-auris.com/">Ad-Auris</a>. If you have any feedback, please send it to us.<br/><br/>- RSJ<br/><br/>We have been trying to make sense of the three key trends dominating the global financial markets over the past 12 months - the excess liquidity in the system driven by loose monetary policies and stimulus announced by central banks the world over, the persistence of the central banks to keep interest rates at historic lows without worrying about potential inflation, and the booming equity markets that seem to be completely divorced from the ground economic realities during the pandemic. <br/><br/>You can read some of our previous posts on these <a href="https://publicpolicy.substack.com/p/115-anti-state-anti-government-or">here </a>and <a href="https://publicpolicy.substack.com/p/77-the-inflation-conundrum-">here</a>.<br/><br/>How long can these trends sustain? Who knows? <br/><br/>The perpetual optimism on which the wheels of finance move shows no signs of abating. Now, history has shown these are trends that are neither sustainable nor safe for ordinary investors. But optimism is the opium of the masses. &#8220;This time it is different&#8221; is what you usually hear as a record new stimulus is passed or markets touch new highs. But like Scott Sagan wrote in his book, The Limits of Safety: <br/><br/>&#8220;Things that have never happened before happen all the time.&#8221; <br/><br/>Three Strikes And&#8230;<br/><br/>T