Hence, I ask, “Inflation of what?” From my vantage point, the ‘endogenous liquidity’ discussed in above is yet one more indicator that inflation has shifted from a concern strictly of the markets for goods, services and distribution to both than AND the capital markets. “Asset bubbles” are a form of inflation in an economy that is increasingly like a casino. When people use their home equity, for example, as ATM machines, the asset prices in the capital markets — and the instruments created — become another form of money and a critical aspect of prices.

When we were kids, inflation was restricted to the prices of things folks bought like homes and food and clothes and cars. Today, inflation surely includes those prices. But, in a world of endogenous liquidity and asset bubbles, we should add those capital market assets to the market basket to which we look to monitor inflation. Put differently, if we got beyond the bullshit of ‘core inflation’ and asked about all the prices that matter — especially to the top 20% who run the economy — then I’d argue inflation is much higher than official government statistics tell. (This is yet another example of built in government statistical lies. Like the poverty rate — which, any reasonable and knowledgeable person would say is half of what it should be — hence, whenever you read how many folks live in poverty, you ought to double the number.)

In addition, when El-Erian describes ‘undermine economic growth’, I think we need to peel back the onion. What constitutes ‘economic growth’? In the old, ancient days, it was mostly about fundamentals that had to do with real growth (R&D, new distribution, new markets, jobs and so forth) instead of ‘asset bubble’ growth. Yet, today we know that the quick buck artists of private equity and CEO suites and so forth are far less interested in fundamentals than they are in ‘liquidity events’. Again, a casino.

It’s all a con game. Blackstone uses endogenous liquidity to ensure its partners live like royalty. Then, to insure those same partners make money on the way out as well as the way in, they basically ‘go public’ themselves because they know the public won’t price up the private companies in a market filled with asset prices unsubstantiated by any fundamentals at all. So, they issue Blackstone stock instead of selling the companies in their inventory. And, of course, when the whole thing finally crashes because it’s built on air, Blackstone partners have gotten incredibly rich and the losses have been ’socialized’.

It stinks.