Extremes Become More Extreme, Then Revert to the Mean

A fatal bout of runaway instability becomes inevitable when "extraordinary emergency measures" become permanently essential to keep the bubbles from popping.

A funny thing happens as policies intended to fill financial potholes transition from "temporary emergency measures" to "we need to keep doing this to stabilize the status quo": extremes get more extreme as what were once viewed as extraordinary policy measures required to keep the rickety system from collapsing become the "New Normal."

Of course the Fed…