Phoenix Capital Research's blog
Put simply: the market is quickly running out of props. Eventually we’re going to get a correction. But with so little buying power in the markets that could correction would very easily become a Crash.
The global Central Banks, driven by their Keynesian lunacy, have induced the single largest misallocation of capital in history.
Nothing exposes the fallacies of the Fed’s policies of the last five years like its horror at the prospect of raising rates even a little bit.
You’re talking about a joint economy of $16 trillion in which 30%-56% of the population is employed b the Government and the Government is shredding democracy and the legal system. The cultural reactions will have financial repercussions for years to come.
This is jut one small part of the massive $9 trillion in US Dollars that has been borrowed and invested elsewhere. To put this number into perspective, it’s larger than the economies of Germany and Japan combined.
As far as the Central Banks are concerned, this is a good thing because if investors/depositors were ever to try and convert even a small portion of this “wealth” into actual physical bills, the system would implode (there simply is not enough actual cash).
The Greek mess has lit a fire under Gold again, which appears to have bottomed in both the Euro (blue) and the Japanese Yen (red). The one exception is Gold priced in US Dollars mainly because the US Dollar has been so strong for much of the last 9 months.
It would be easy to scoff at these proposals as completely insane if the Fed hadn’t published a paper back in 1999 suggesting the implementation of a “carry tax” or taxing actual physical cash using an expiration date if depositors aren’t willing to spend the money.
Fraud is endemic in the financial system today. We know that the currency, stock, bond, and even commodity markets have ALL been manipulated by Investment Banks or Central Banks.
The fact is that much of the globe, particularly the developed west, is up to its eyeballs in debt. Mind, you, this is based solely on official public debt numbers. If you include unfunded liabilities, then the US, most of Europe, Japan, and even China are sporting Debt to GDP ratios well over 300%.
Traders have been trying repeatedly to force an upwards breakout in the S&P 500. Thus far they have failed. And now the market is coming up on support.
Put another way, the amount of high quality collateral backstopping this mess has shrunken dramatically. On top of this, traders have been piling into sovereign bonds in anticipation of various QE programs, forcing yields to multi-decade if not multi-century lows.
The next time something breaks in the financial system… it won’t be just individual banks going belly up. It will be entire countries. What’s happened in Cyprus and Greece is coming to your neighborhood… wherever you are.
For over 30 years, sovereign nations, particularly in the West have been buying votes by offering social payments in the form of welfare, Medicare, social security, and the like.
The bigger issue concerns the fact that bond yields are rising across the board. The UK’s Gilts, US Treasuries, and German Bunds have all dropped sharply in the last month, pushing their yields higher.