Monday, October 17, 2016

The Federal Reserve’s Legacy: 
Asset Bubbles & Lost Confidence
Jim Rickards* essay highlights when central bank policies fail, central bankers try more of the same in the "vain hope that quantity will make up for the lack of quality in their ideas" .. since the financial crisis, central bankers have created over $15 Trillion in new money - "These money printing and bond purchase programs have been called QE1, QE2 and QE3 in the U.S., Euro-QE in Europe and QQE (quantitative and qualitative easing) in Japan. All of these programs and exotic variations such as 'Operation Twist' have failed to achieve self-sustaining growth anywhere near former trends, and have failed to achieve the 2% inflation targets of those central banks." .. instead it has caused asset bubbles .. eventually - "At some point, probably sooner than later, the reality of central bank impotence and looming recession will sink in and stock valuations will collapse. The drop will be violent, perhaps 30% or more in a few months. You don’t want to be over-allocated to stocks when that happens. This analysis applies to more than just stocks. It applies to a long list of risky assets including residential real estate, commercial real estate, emerging markets securities, junk bonds and more. It only takes a crash in one market to spread contagion to all of the others. The inability of central banks to deal with crisis and the complete loss of confidence by investors in the efficacy of central bank policy."
LINK HERE to the essay

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