The Markets Are Overdue For A Gigantic Bust
PeakProsperity, June 10, 2017
Printing money out of thin air can engineer lots of things, including asset price bubbles and the redistribution of wealth from the masses to the elites. But it cannot print up real prosperity.
The 2000 bubble was bad, the next one was worse, but this current one may well prove fatal.
At least to entire financial markets, large institutions, and a few sovereigns.
As the central banks have printed with abandon over the past decade, they’ve created the most extreme gap between real things (GDP) and the claims on those same things (Net Worth) in all of history.
Following the Great Recession, the ‘plan’ of the central banks, such as it was, seems to have been to jam up people’s paper wealth, under the theory that people who feel wealthier are more likely to spend more and hopefully borrow more, too.
That plan has worked rather well, at least from the standpoint of creating vastly larger amounts of new borrowing (debt and credit). But how much GDP growth has resulted? Not that much.
Either GDP growth recovers to its highest rate in all of history and then stays there for many years (a complete fantasy), or the global debt pile starts getting defaulted on (which will have very ugly repercussions).
The damage down by the bursting of each previous market bubble has been worse than the ones that preceded it. This time will not be the exception. This third bubble, the largest and most ill-considered of them all will be enormously destructive.
Most people take their cues from the price level of the stock market. Once upon a time, equities were a useful barometer. But that was before the central banks began intervening heavily in them.
If you listen to the words in the public statement of the central banks, you’ll hear a lot about ‘improving conditions’ and ‘nearly full employment’ and ‘strengthening growth prospects’. However, if you then look at their actions, you’ll see they’re in complete opposition to these statements.
The central banks began dumping far more money in the equity and bond markets, in an attempt to save everything from the inevitable downturn that threatened to result from the prior central bank printing spree.
Now, here in June of 2017, the Big 5 central banks have poured a whopping $1.5 trillion dollars(!) of newly created, thin-air money into the markets since the beginning of the year. So, while the words of the central bankers may be soothing, their actions are panicky.
Global economic growth is weak, has been weak, and will continue to be weak for many reasons. Not least of which is the massive overhanging piles of accumulated debt across the global economy, which are very growth unfriendly.
Eventually, reality always catches up. And there are plenty of signs indicating that reality is now arriving. And it doesn’t look happy.
Здешние политиканы, «эксперты», подконтрольные ЦРУ СМИ продолжают нахваливать псевдодемократическую Америку.
Те, кто любит «наших американских партнеров», «забывают» о грязных, злых уродах США.
О таких монстрах, как коварный и крайне опасный мошенник, расист, лжец, и убийца Дональд Трамп. И о таких, как порочный Конгресс США, фашистские ФБР и ЦРУ, лживые американские СМИ…
Арнольд Локшин, политэмигрант из США