The great Keynesian lunacy is finally beginning to end.
Generally since 1999, and especially since 2008, the financial world has been dominated by Keynesian lunacy. Collectively, Central Banks have cut interest rates over 500 times and printed more than $12 trillion combating a brief 9-12 month period of deflation.
The pinnacle of this madness hit the US in 2012 when the Fed announced an ongoing QE 3 and QE 4 programs. However, globally, we hit peak Keynesian insanity in Japan in April 2013 when the Bank of Japan announced a $1.4 trillion QE program. For clarity’s sake, this represented a single QE program equal to 28% of Japan’s GDP.
The results speak for themselves. Japan saw about an uptick in economic growth for two quarters before the whole thing fell apart. Household spending is down 6% year over year in July 2014. Japan’s economy shrank at an annualized rate of nearly 7% in the second quarter of 2014.
The rest of the world hasn’t fared much better. This is, hands down, the weakest recovery on record since the Great Depression. By the Fed’s own admission unemployment is only lower 0.13% better thanks to its insane policies. The negative consequences have been horrific: with interest rates at 0% those depending on interest income (retirees and others) have been screwed while the wealthy elite have been able to leverage up to increase their wealth dramatically.
In a nutshell, we’ve found that global Central Bank’s Keynesian policies:
1) Failed to create sustainable economic growth
2) Increased wealth disparity and concentrated wealth and assets in the hands of the few
3) Wasted trillions of dollars in capital
With the Fed looking to end QE completely in October the Keynesian lunacy is finally beginning to end… for now. Between this and the ECB’s decision to cut interest rates to negative, the US Dollar has now rallied for 9 weeks straight.
A strong dollar has historically been stock negative. Which is why the massive stock market bubble is looking more and more precarious:
Buckle up. Big trouble is brewing.
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Best Regards
Phoenix Capital Research