The whole market is basically in a bubble the fed created. They did everything they could to avoid complete devastation of the economy in 2002 and they did everything they could to avoid complete devastation in 2008.
The problem is they have just kept kicking the can down the road.
The inflation numbers and consumer sentiment speak for themselves.
Even with all the debt the fed bought, with all the loans they’ve given out which will never be repaid, with increased access to credit for consumers, with people flipping investment properties more often than penny stocks, with people milking everything they can out of everything they have (uber for the car, REITs etc), with people having gotten used to working two jobs, with people using debt to take on more debt…the can can not be kicked further down the road this time.
They maxed out on everything they could possibly do to keep kicking the can.
But we are still hitting the inevitable point where this just can’t keep going. The solutions to the problems that the fed used are exactly what caused the inflation to begin with.
This isn’t just a USA problem. Other countries had to adapt and basically make the same mistakes in order to stay competitive with the artificially inflated US economy.
So, globally, everything is now inflated well beyond a rational level.
But the end result is going to be that people will run out of disposable income (already there based on consumer sentiment) and people are going to max out on credit (already there if you factor in that people are spending more on the cost of living than they actually earn).
This was never a sustainable model and the fed knew it. They have literally put the whole world up on a giant pedestal just so that it would have further to fall when the rug was pulled.
There is no way that these people didn’t on some level know what they were doing.
I don’t know if it was malice, shortsightedness or both. But I see no reason not to believe that it wasn’t malice. I am starting to suspect this might have been the biggest Ponzi scheme ever.
Why? Because the fed still hasn’t closed out any of their positions throughout this whole thing.
Either way, I think rate hikes are here to stay. There is no other way out of this. The cost of living has to go down which means rates have to go up even if it causes a recession or another great depression. After about 20 years of living in an artificial bubble this thing has to be popped.
I think that’s what drunk me was trying to say the other night. I apologize to any autists who had to read my full retard drunken posting.
This is the more coherent version of what I was trying to say.
My biggest worry though isn’t the financial aspect. My biggest worry is that politicians need to keep winning elections.
In order to win elections they will have to either find a scapegoat for the problems or create a bigger problem that they can then use to wash their hands of what is happening now.
When this exact situation happened in Germany it gave rise to Hitler who presented the Jews as the reason the economy was failing instead of the government admitting to decades of poor government decisions. We all know what happened with that and it most likely (I hope) won’t be repeated on that scale and that obviously.
This is a conflict of interest between the governments of the world and the citizens they govern because this could provide the motivation for a new world war.
If the world goes to war they can stay elected and blame shift everything to Russia or China or whoever pulls the trigger first. Even if they’re doing things like economic sanctions to try to provoke their enemies to pulling the trigger so that they can blame them for retaliation later. Sound familiar?
Either way, war or no war, the markets are going down and I really believe that we haven’t reached the bottom yet.