“The market” (traders/investors in the aggregate) has seen incoming treasury secretary Janet Yellen’s prepared remarks for today’s presentation to congress, and it’s liking her pleas to use the low interest rate environment to go big on borrowing and spending.

Hmm… Does “the market” know what’s good for it, in the long-run? Well, time will tell, but like any addict (yes it is indeed exhibiting addict-like tendencies) it knows what feels good in the short-run…

Yesterday a client asked me if the amount of newly minted money being thrown at markets is unprecedented. I answered, “well, yes, which was also the case in ’08, and in ’00.” In fact, the process of essentially socializing markets — well, socializing losses (subtly borne by the taxpayer) while privatizing gains, that is — demands that each attempt at saving markets from natural forces demands more intervention than did the last.

As the authors of The Rise of Carry (a must read for anyone willing get into the weeds to understand today’s markets) point out:

“The interventions of central banks, in which the central banks take on the role of giant carry traders themselves, create a carry regime with much larger carry bubbles and carry crashes; during the carry bubbles, risks become seriously mispriced.”

“…as long as the carry bubble goes on, capital flows to the imbalances, so everything appears all right. This ends when the carry crash hits, and liquidity evaporates.”

Or I could simply say that over time it takes more and more of the desired stimulant to keep the addict “satisfied.”