So… we’ve now got both the ECB AND the US Federal Reserve promising to do “open ended” purchases of various bonds. If this doesn’t make it clear, point blank that the Central Banks don’t have a CLUE how to solve the Financial Crisis this is it.
Forget math, forget fancy economic terms. Let’s just look at this situation using common sense. The ECB, combined with the IMF, couldn’t fix GREECE. They’ve been trying for over two years and they’ve failed miserably (Greece now needs a third bailout).
And somehow they’re going to solve Spain and Italy… economies that are THREE times the size of Greece’s?
What about the US Fed? It owns all but $650 billion worth of Treasuries on the long-end of the curve. It’s ballooned its balance sheet to nearly $3 trillion in size. And it’s managed to create an environment in which the economy is total and complete crap at the same time that the cost of living has soared (sorry Bailout Ben, inflation is NOT Transitory for those of us on planet earth).
Is anyone else getting sick of this stuff? Isn’t about time someone stood up to these clowns and asked them to their face “you really don’t have a clue what do to, do you?”
But no, we live in a world of half measures and untruths. No one wants the truth because it means that we’d all have to admit that at least 30% of the “growth” we’ve experienced in the last 30 years was illusory in nature. No one wants to admit the big lie, that the big banks are all insolvent and that the Central Banks are screwing the middle class to prop up those who made moronic decisions out of unadulterated greed.
It makes me sick to my stomach. These people have ruined the capital markets, enslaved generations to come with mountains of debt, all just to benefit those who, if we did indeed live in a capitalist society where failure occurs based on bad decisions, would be bankrupt.
But in the end, no matter what gimmicks or market props these guys put into place, some day this whole mess will come crashing down. They’ve managed to put it off for a few years since 2008, but the day when we face systemic failure is not that far off anymore.
The reason? You cannot solve a debt problem with more debt! You cannot move toxic debt from one balance sheet to another and claim it’s gone away! A child could tell you this, but somehow 99% of the investment community won’t admit it.
The reality is that we’re now facing a Crisis that will make 2008 look like a picnic. That Crisis will come when sovereign nations begin defaulting. The most likely candidate is Spain who refuses to ask for a bailout because it doesn’t want anyone looking too closely at its books because the entire Spanish baking system is insolvent beyond belief.
Wealthy Spaniards know this, which is why they’re fleeing the country in droves. The ECB cannot solve this problem. The whole OMT proposition is a lie. Ditto for QE and whatever else the Fed comes up with: it’s just polishing the brass on the Titanic.
So, if you have any interest in preserving what you’ve worked hard to create, you need to use this time of euphoria to prepare for what’s coming. We all know it’s coming. It’s just a matter of when.
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