Hans F. Sennholz’s “Boom Without End” is a short, single-author economic commentary from December 1997. Its scope is the late-1990s American expansion, read against earlier asset booms in the United States, Japan, and Asia. Sennholz’s thesis is that the celebrated “new era” economy is not a durable prosperity but a credit-driven bubble, masked by stable consumer prices and by monetary statistics that fail to register newer channels of liquidity.
Most economists are searching for superlatives when they are describing the performance of the American economy.
The essay opens by presenting the dominant optimism: output rising, unemployment and inflation falling, stock prices soaring, and politicians claiming credit. Sennholz’s central move is to separate visible macroeconomic success from hidden financial fragility. He invokes the 1920s and Japan’s 1980s boom to argue that stable consumer prices do not preclude dangerous asset inflation.
All financial bubbles are liquidity-driven; but the present case differs from all others in the past – it is not clearly visible in conventional monetary statistics.
The structure then turns diagnostic. Sennholz moves from money aggregates to credit practices, arguing that the bubble’s fuel lies less in M1 or M2 than in bank credit, securitization, derivatives, offshore finance, and foreign central-bank support for the dollar. Loan securitization is treated as a mechanism by which banks recycle loans into securities, remove them from their balance sheets, and lend again.
They lend, securitize, sell, and lend, in a continuing process of credit expansion, standing ever ready to provide ample funds to eager investors and speculators.
Derivatives occupy a similar place in his argument. They are not merely financial instruments but institutions that encourage the belief that risk can be transferred or neutralized. In Sennholz’s interpretation, this belief helps create the “intellectual climate and psychological disposition” for speculation. Offshore banking and the yen carry trade then extend the argument globally, showing how low-cost borrowing abroad supports U.S. bonds, the dollar, and equities.
Offshore banking adds more liquidity that is driving the bond and stock markets.
Sennholz also stresses the current-account deficit as a hidden support for the boom. Foreign central banks buy dollars to stabilize their exchange rates, then reinvest those dollars in U.S. Treasuries. This makes the American bubble not merely domestic but dependent on an international monetary arrangement that channels foreign savings and official reserves into U.S. financial markets.
The essay’s final movement challenges the language of a “new era.” Rising equity values are not, for Sennholz, proof of real capital formation. Corporate borrowing funds mergers, acquisitions, stock repurchases, and leveraged buyouts rather than productive expansion. His contrast is between financial wealth and genuine economic growth.
All these symptoms do not make a “new era economy” but rather a highly vulnerable “bubble economy.”
The relevance of the piece lies in its anticipation of later debates over asset inflation, securitization, derivatives, global imbalances, and central-bank responsibility. Its conceptual core is Austrian in spirit: credit expansion distorts markets, officials deny the bubble while it lasts, and the eventual collapse is blamed on speculators or foreigners rather than on the monetary order itself.
A monetary order created and managed by politicians and officials is bound to disappoint.
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