Given the popularity of my previous article We’ve Broken All the Trendlines (Glenn Beck featured it on his show 3/15/11), I thought I’d present a follow up regarding the implications of those charts.
When the Financial Crisis took total hold of the financial markets in 2008 (the early warning signs occurred in 2007), the Feds tried to regain control of the system via three tactics:
1) Suspending accounting standards for financial institutions
2) Pumping money directly into the system (to everyone from McDonalds to Hedge Funds)
3) Announcing an indirect money pump, Quantitative Easing, through which it allowed the primary dealer banks to flip their Treasuries for cash.
The primary goal of all three of these was to shore up the large insolvent banks. However, the Feds presented these efforts as intending to save the financial system/ US economy (which, incidentally had been wrecked by those same insolvent banks).
These efforts worked partially for a while. The system stopped imploding and most assets began rallying again (especially stocks). However, it was clear that these policies were at best, nothing more than a band-aid on the primary issues plaguing the financial system (too much debt, unchecked leverage, and a lack of trust induced by fraudulent accounting practices) and at worst nothing more than a giant “funnel taxpayer money to the banks” scheme.
Anyone with a working brain can see this. Wall Street bonuses have returned to pre-Crisis levels while unemployment, food stamp usage, and the like EXPLODED higher. In simple terms, the only ones who have seen a recovery are the bankers. Everyone else has seen their situation worsen (not to mention their children and grandchildren who are now on the hook for TRILLIONS more in debt).
Which brings us to today and the charts I showed in my earlier article. The liquidity induced rally of the last three years is now beginning to break down. This time in 2010, the Fed was pumping between $40-50 billion per month into the system to keep things afloat. Today it’s $100+ billion.
And yet, stocks are still beginning to break down.
Sometime, and I cannot say when exactly, the markets will say “enough” to the Fed’s money pumps. By “enough” I mean that additional liquidity will no longer have any effect on the markets. This will likely occur simultaneously with a US Dollar collapse or some kind of debt default in the US.
When this happens, the REAL Crisis will hit. Those who think that 2008 was the REAL DEAL are mistaken. The US is heading towards a situation similar to that which occurred in Greece last year.
The Multi-Trillion Dollar question is: IS it happening now?
PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
PPS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.
You can access this Report at the link above.