Friday, September 09, 2016

Mish Shedlock*:
The Stock Market Bubble Will Pop & 
The Mood Will Get Extremely Ugly
"The Federal Reserve fueled a housing bubble. Social mood already embraced the notion 'housing always goes up' and along comes the Fed holding interest rates way too low all the way. Conventional wisdom and Greenspan apologists say the Fed was not to blame. They are wrong. While it’s true the Fed cannot change social mood, the Fed actually reinforced social mood. At some point, the pool of greater fools is guaranteed to run out. It happened with the Fed-sponsored dotcom bubble and it happened again with the housing bubble .. Social mood is 'already' extremely ugly. The powers that be do not see it for the simple reason they are not affected by it. The rise of anti-establishment candidates and parties such as Donald Trump in the US, AfD in Germany, Beppe Grilllo in Italy, and Marine le Pen in France is proof enough of rising social anger. The only thing masking already ugly social mood is a high and rising stock market. It’s not only high, it’s in bubble territory. Bubbles pop, by definition. Perhaps the bubble orderly deflates, like Japan, as opposed to a 1929-style crash. That’s my prediction actually. But it won’t matter. If anything, an orderly asset devaluation over 7-10 years would be worse. Perceived wealth will vanish .. Sponsoring asset bubbles in hopes of trickle-down spending will do nothing but increase the anger. There is not a damn thing central banks can do about this. Central banks created the problem. Let me phrase that more accurately: Central banks and their bubble blowing tactics are the problem."
- Mish Shedlock*
LINK HERE to the commentary

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