108 Consecutive Months Of Global Central Bank Easing Comes To An End, Money Supply Starting To Be Incinerated

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Brandon Smith: New Fed Chairman Will Trigger A Historic Stock Market Crash In 2018

There are a few major issues that come into play in terms of interest rate hikes and the balance sheet, including the fact that corporate debt is now at levels far beyond that held just before the crash of 2008. We are also witnessing the highest consumer debt levels in history, while personal savings have plunged.
Treasury yields are also spiking to 10 year highs, decoupling from stocks and suggesting that balance sheet reductions might be contributing to a flight from equities.
Stock buybacks, fueled by low interest rates, have helped pump up stocks for years. However, most companies are prohibited from buybacks right before they report their earnings.  Not to mention, the amount of debt companies have accumulated is reducing their ability to purchase stocks. Without buybacks, we have seen what happens – complete market mayhem. If this is what takes place in a month of reduced buybacks, what will happen when interest rates are raised high enough to make borrowing capital from the Fed prohibitive (ie, too expensive)?
What does all this translate into? The reality that there is NO MECHANISM within our economy that is buoyant enough to keep markets afloat when the Fed backs away. Nearly everyone is in massive debt, there is no one left to buy at the level needed except the Fed.
We are only standing at the beginning of this apparent new trend in equities, but it will be interesting to see what the reaction will be within the system as the Fed continues hiking rates and reducing the balance sheet. Will the beginning of every month in 2018 be met with a brand new storm of selling and panic? It’s hard to say. However, the math certainly does not support a bull market through the rest of this year.
In the meantime, it is likely that blind faith in positive returns will spark intermittent buying events in the short term, and unaware investors (and algorithms) will see this as vindication that buying will always be the answer.But, these buying events so far seem to be met with even more severe downturns. It will not take very many Fed meetings to discern whether or not the central bank will continue to back up stocks. To me, it appears that the decision to pull the plug has already been made.

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4 thoughts on “108 Consecutive Months Of Global Central Bank Easing Comes To An End, Money Supply Starting To Be Incinerated

  1. Yet the idiot Amerikan public was told this “all ended” a few years ago.
    Amazing how easy it is to sell lies to a well-fluoridated public who’s vast reading library contains dog-eared back-issues of Soap Opera Digest and People magazines.

  2. So will THEY tighten up da money supply and crash the Economy for the 2018 elections?
    .
    Look up Paul Kanjorski/550 Billion/15 September 2008!

  3. Nup they will never pull the plug. 3 years from mid 2016 is a big number, nitwit libertarians won’t save us and neither will the big man in the sky when they’re done nuking all of us. Just hoping it’s a one trick pony

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