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Guest Post: Boom and Bust - The Evolution Of Markets Through Monetary Policy
Via Nicholas Bucheleres of NJB Deflator blog,
Over the past two decades, the United States has seen prosperous levels of income and asset price growth. With real GDP climbing steadily and the Dow Jones having more than tripled since the mid-90s, most would say that the US merely hit a road bump in 2007. And that road bump just happened to be an extremely over-leveraged financial sector that was so desperate to reap profits that they traded peoples’ lives on the sketchy asset-backed securities (ABS) derivatives market. But you can’t blame a dog for chewing through the sofa, blame the person who let the dog inside the house: the US Federal Reserve. The outcome of the next round of monetary policy will be similar to those in recent history: we will continue to set higher highs in equity markets, but asset prices and the nominal economy will continue to outpace the real economy until we see structural reforms addressed over liquidity provision. It does not appear that will be the case for a while, though. Consumer confidence is so low around the world that unless further easing is pursued, the bottom very well could fall out of the global economy. Until then, there is no ceiling to money printing and central bank financial engineering.
Welcome to the 21st century.
The outcome of the next round of monetary policy will be similar to those in recent history mentioned in this paper...
Perceived inflation will go through the roof. We’re talking about near 0% interest rates around the developed world (near-term rates in Germany hit 0% in the auction at the end of May and are expected to go negative). Oh yeah, and massive inflation. I think gold will have no trouble hitting $3,000/oz in the medium-term and I see copper tripling over the next decade. This is, of course, until we hit the next bubble sometime around 2018 and start over again. The trend remains: since the stock market crash of 1987, through the dotcom bubble, and into the real-estate & stock market bubbles of 2007, each euphoric high and ensuing crash have been more extreme than the last. These extremes are fueled by the easing that is meant to cure us. The policy that we are facing within the coming months/years will, as the trend dictates, trump them all, and so inevitably will its hangover.
From the beginning of boom and bust finance to a Fed-led evolution in crisis reaction, and from monetary transmission mechanisms to why the middle class is struggling, the following thesis provides much food for thought
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people should tell these guys pimp'n financial material to get customers... we don't read. unless you're martin armstrong; ans done time.
we like videos and pod-casts.
with good production values; bow-ties, pony tails, jokes about girl friends; hard to understand accents (southern counts); etc.
Modern Money Mechanics & fractional reserve banking models of economic growth essentially consist of using the levers of monetary policy to try and create (and often re-inflate old, whored out) bubbles, whether housing or dot.coms, in a bid to show phantom wealth, so as to buy more time to allow for more extend and pretend can kicking of the Greatest Ponzi Ever.
Inflating bubbles and getting as many entities and individuals to chase them. That's the modus operandi.
And then, Poof! - it's gone!
Musical chairs, except with vast sums of fiat, and rules massively rigged by the house.
Last ones out are rotten eggs, bitchez!
How could any rational person NOT HAVE faith in an equity "market," as just one example, that literally hangs on the latest utterances & expressions of The Bernank, rather than fundamental economics? (/sarc)
Paul Krugman's Switch on the Housing Bubble Ben Bernanke's Wonderful Forecasting Skills Circa 2005-2007The bankers are always one step ahead of the next crisis,,,,,
Here's a quote from someone on CNBC today
"Most people die with less then 10,000 dollars in the bank
That my friends is a system designed for YOU to fail not succeed
Keep up with the bankers or die trying
What is really sad is that I was happy to see just the mention of 2018. I don't really see how this can keep going like it is until then, but at least there apparently will be a 2018
There's not end to the derivative hole...
Nationalised lender Bankia (BKIA.MC) is expected to post first-half losses of more than 4 billion euros (3 billion pounds) on Friday, highlighting the need for capital from a European rescue of Spanish banks that is unlikely to arrive before the end of September. https://miningstockvaluator.com/news.php?id=28
This needs a editorr.
Nice overview and summary, though.
Personally, I oppose all of this government intervention, but to choose not to trade as a way to 'teach them a lesson' and avoid profitable opportunities seems foolish.
Stopped reading at "I do not think that the Federal Reserve is a menacing entity within the US financial system"
Yellow matter custard dripping from a dead dog's eye
Crabalocker fishwife pornographic priestess
Boy you been a naughty girl, you let your knickers down
I am the eggman, they are the eggmen
I am the walrus bitchez
We are on the road to big deflation.
http://bullandbearmash.com/chart/standard-poors-500-weekly-august-24-2012/
Primary wave 3 down is pending.
All this to prop up the stock market....sad
Check out the same chart for housing. Almost the exact opposite of the S&P500 with increases in monetary base.
http://confoundedinterest.wordpress.com/2012/08/29/a-tale-of-2-assets-housing-and-the-stock-market-with-monetary-base-increase/
and the Dow Jones having more than tripled since the mid-90s,
Yeah, and the chart has it down 10% from 2007; if we compared to an earlier date, could we make it seem even better?
By the way, what are "prosperous levels of income?"
I stopped reading when I saw this: While I am very greateful that the Federal Reserve prevented the US from falling into a deflationary spiral that would have surely ended in all out depression, we must address what the quantitative easing actually did and where the money went. Just another idiot trying to count the number of fairies dancing on the head of a pin. Fuck you need bread crumbs to follow this pinhead's logic. A boatload of bullshit, IMO. Prices HAVE TO FALL as has been written a million times on this site. The only thing that ZH managed to accomplish by posting this crap was to piss me off.
Here's the article in a nutshell:
"We are all hiking together in a sleet storm. Thank God the Fed has steered us so that we are hiking with our backs towards the sleet. Unfortunately, this means we are hiking away from home instead of towards it. But, it is too painful to walk with our faces towards the sleet, so we will keep walking further and further away from home, hoping that a miracle will happen and the sun will come out and we can turn around and hike home with the sun and a smile on our faces. How this will end I do not know."
Know what? I know how it ends. It ends with each hiker slowly and individually and independently realizing that consistently choosing the easy way to make the situation worse rather than the hard way to make it better does not equal leadership, and quietly walking away from the group and finding their own way home, sleet be damned. We are all responsible for the advice we choose to follow, because causality does not have a competence multiplier.