Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

The Great Central Bank Dream Crashes Into The Wall

Published 08/02/2013, 03:48 AM
Updated 07/09/2023, 06:31 AM
The markets moved up sharply today, with the S&P 500 briefly touching 1,700. This is classic start of the month buying abetted by the ECB and Fed not doing anything, which in this environment of ongoing monetization is equated with helping the markets (in contrast even indicating that tapering of QE might occur is considered “tightening” - this is the insane world we invest in today).

The bigger story is the changes to GDP calculations that the Feds implemented. The single dumbest change pertained to counting “future pension benefits promised by governments and private companies are counted as income.” In plain English, this means that the Government now counts pension promises as cash in the bank.

In this fantasy world, if I promise to pay you $1 million a year after retirement, that promise is not equated as income and economic growth. It doesn’t matter if I don’t actually meet my promise, the promise is worth the same as cash in the bank.

Ironically, the ones touting this as a success are politicians who break every promise they ever make. This is what happens when a country is run by those with no business experience or industrial background.

The bigger story is Japan, where the Central Bank dream of doing “enough” is crashing into the wall. Japan has announced a $1.4 trillion QE effort, an amount equal to 21% of its GDP. To put this into perspective, this is the single largest QE in history, the kind of QE Bernanke and his pals could only dream of announcing.

Instead of resulting in economic growth or high employment all this has done is raise the costs of living. Industrial production and household spending both recently plunged, while inflation has risen to a 14 month high.

And thus does 100 years of bad economic theory as well as the hope of Central Banks fixing the global economy go crashing into the wall.

The Great Crisis, the one to which 2008 was just a warm up, is approaching. The time to prepare for it is BEFORE the US stock market bubble bursts.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.