QE is like a Drug and Stock Markets are Addicted

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QE addicted markets are starting to show signs of weakness as global liquidity slows...

The main problem with QE is that once you start, it's very difficult to ever really stop.

Sure, it sounds great on the surface...

Prop up markets and companies and businesses so that we can avoid the "bust" portion of the "boom and bust" market cycles.

Keep people employed, keep stock markets humming along, and overall keep confidence levels high as there is an invisible hand supporting us.

So what if it is all fake and isn't sustainable in the long run, it works for now, am I right?!

The problem with is that you can never really take it away...

Like a junkie, markets and people become so addicted to it that any time it is stopped they get very very sick.

We are already seeing the early signs of that playing out right now.

Check out the S&P 500 as it relates to global liquidity (stimulus):

(Source: https://twitter.com/Schuldensuehner/status/1276779295839379457)

As you can see the liquidity has slowed and is stopping, and what has that done to the stock market?

The stock market is starting to roll over without fresh drugs (liquidity) being pumped into its veins.

The good news?

The good news for asset prices is that we have seen time and time again that governments will not wait long before they act.

Once market prices fall something close to 20% from their recent highs, they will come up with a fresh round of stimulus.

Overall, this is a bad thing and unsustainable, but in the short term, for asset prices, it's quite nice.

I suspect that as markets start to tumble, and the coronavirus and unemployment numbers start to matter again, we will get fresh stimulus within the next month.

That will be good for stock prices and very likely good for bitcoin as well.

The bad news is that this is only exacerbating the inherent problems of money printing and will eventually hurt anyone that has been responsibly saving their money over the years.

That is where PlanB (Plan Bitcoin) comes in.

If you have at least some of your wealth stored in bitcoin you don't have much to fear should central banks eventually lose control over the money supply and the markets.

It sounds like it could win either way. It goes up as a risk asset along with stocks and it can work as a store of value should central banks lose control.

Stay informed my friends.

-Doc

Posted Using LeoFinance



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1 comments
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As my economics guru Max Keiser said "you can't taper a ponzi scheme". QE is a con game for sure, with trickle up economy in place. The crash is inevitable after that kind of stimulus, as liquidity dries up again or as hyperinflation arrives. See you in the bread lines...unless plan b works as expected lol.

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