There are four reasons why Central Banksters should have normalized policy a long time ago: First, because they are papering over a trade imbalance with cheap debt. The theme of this blog. Second because they gave politicians a free ride to do nothing aside from attending circle jerks and posing for pictures. Third because they need dry powder for the next economic downturn. Fourth, because they need to clue in speculators when it's time to leave the casino...Ah yes, I knew we forgot something...
Despite record global stimulus, there have been three major volatility shocks in the past year, including the last one aka. Brexit. These were warning calls to stoned morons that Central Banks can't save them from self-implosion. However, these events were somewhat misconstrued as buying opportunities.
Each time, Central Banks added more stimulus, yet all they accomplished was the over-commitment of capital from investors at the end of the cycle. Why that's good, I can't say.
The net effect was a vacation from reality attended by mass delusion on an unprecedented scale. They didn't just buy more time, they bought more rope. It's CasinoNomics by Harvard. You wouldn't understand it...
Immoral Hazard Visualized:
Throwing money away at the casino, assuming a greater fool will arrive, only to realize the greater fool has arrived...
ALL IN gamblers will not be buyers on the next trip down...
ALL IN gamblers will not be buyers on the next trip down...
Liquidity aka. Price / Volume:
Case in point, Canada, where GDP has been falling for two years now. At first stocks fell right on cue, as they did in 2008. But then we see this latest rally out there in fantasy land where Globalization ends amid "holy fuck!"...
"Because we deserve this fake rally"
It always comes back to Bernanke and Yellen at Woodstock.
A vacation from reality for Generation Entitlement...
