Thursday, August 27, 2015

Black Monday: No matter the spin, markets built on Fed policy instead of economy

In the past we have written about, and shown the charts of what has happened in the stock markets since 2008 after the Fed began their policies of near zero interest rates, and massive quantitative easing.  In fact, it was a case of simple analysis to realize that the rise and fall of the equity markets over the past seven years have been intrinsically tied to infusions of new money printing, where stocks always declined when the spigots were turned off by the central bank.

Which leads us to now to the day of reckoning, or what happens in every instance of monetary expansion.  Over the past three weeks, equity markets around the world have been accelerating downward based on a number of factors.  First, the ability of new debt to increase GDP has now gone beyond the point of diminishing returns and would require an ever expanding rate of money printing just to squeeze out a single dollar of nominal growth.  Thus beginning in China, then traversing over into Europe and the U.S. during a daily market cycle, market declines and bad economic data are showing the cracks in the global financial system which are in part the same fundamental flaws that led to the 2008 crash.

Read more on this article here...


Post a Comment