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<\/p>\nAuthored by MN Gordon via EconomicPrism.com<\/p>\n
The launch angle of the U.S. stock market over the past decade has been steep and relentless.\u00a0 The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent.\u00a0 New highs continue to be reached practically every day.<\/p>\n
Over this stretch, many investors have been conditioned to believe the stock market only goes up.\u00a0 That blindly pumping money into an S&P 500 ETF is the key to investment riches.\u00a0 In good time, this conditioning will be recalibrated with a rude awakening.\u00a0 You can count on it.<\/p>\n
<\/p>\n
In the interim, the bull market may continue a bit longer\u2026or it may not.\u00a0 But, to be clear, after a 370 percent run-up, buying the S&P 500 represents a speculation on price.\u00a0 A gamble that the launch angle furthers its steep trajectory.\u00a0 Here\u2019s why\u2026<\/p>\n
Over the past decade, the U.S. economy, as measured by nominal gross domestic product (GDP), has increased about 50 percent.\u00a0 This plots a GDP launch angle that is underwhelming when compared to the S&P 500.\u00a0 Corporate earnings have fallen far short of share prices.<\/p>\n
Hence, the bull market in stocks is not a function of a booming economy.\u00a0 Rather, it\u2019s a function of Fed madness.\u00a0 And its existence becomes ever more perilous with each passing day.<\/p>\n
Central planners at the Fed \u2013 like other major central banks \u2013 have taken monetary policy to a state of madness. \u00a0Zero interest rate policy, negative interest rate policy, quantitative easing, operation twist, quantitative tightening, reserve management, repo market intervention, not-QE, mass-asset purchases, and more.<\/p>\n
These schemes have fostered massive growth in public and private debt with nothing but lackluster economic growth to show.\u00a0 What\u2019s more, these schemes have produced massive asset bubbles that have skyrocketed wealth inequality and inflamed countless variants of new populism.<\/p>\n
Yet the clever fellows at the Fed are blind to the fact that they\u2019re most responsible for fabricating this monster.\u00a0 And now they want to rectify the ghastly deformities of their creation\u2026<\/p>\n
Earlier this week, for example, Minneapolis Fed President Neel Kashkari\u00a0remarked\u00a0that:<\/p>\n
\u201cMonetary policy can play the kind of redistributing role once thought to be the preserve of elected officials.\u201d<\/p>\n
How exactly Mickey Mousing with credit markets could attain this objective is unclear.\u00a0 But, like yield curve control (YCC), Kashkari wants to give it a go.\u00a0 These sorts of amorphous meddling operations is how he answers his higher calling.<\/p>\n
You see, Kashkari\u2019s a man with\u00a0crazy eyes.\u00a0 But he\u2019s also a man with even crazier ideas.\u00a0 He\u2019s an extreme economic interventionist \u2013 and a crackpot.\u00a0 Though he wears his burdens on his sleeve.<\/p>\n
If you recall, as federal bailout chief, Kashkari functioned as the highly visible hand of the market.\u00a0 When the sky was falling in early-2009, he awoke each morning, put on his pants one leg at a time, drank his coffee, and rapidly funneled Treasury Secretary Hank Paulson\u2019s $700 billion of TARP funds to the government\u2019s preferred financial institutions.<\/p>\n
Incidentally, the experience had an ill effect on Kaskkari\u2019s mental health.\u00a0 Soon after, he became a hermit, took to a cabin in the Sierra Nevada Mountains \u2013 near Donner Pass \u2013 and pursued his other life\u2019s purpose of\u00a0chopping wood.\u00a0 We thought we\u2019d seen the last of him.<\/p>\n
But sadly, it\u2019s impossible for true believers to amiably exit the trappings of public life for good.\u00a0 After a failed California gubernatorial campaign in 2014, losing to retread Governor Jerry Moonbeam Brown, Kashkari resurfaced as Minneapolis Fed President in 2016.<\/p>\n
We suppose this appointed position was his reward for the abuse heaped upon him from grandstanding Representatives \u2013\u00a0absolute losers\u00a0like Barney Frank and Maxine Waters \u2013 while handing out vast quantities of taxpayer dollars to Wall Street banks.\u00a0 Of course, for real public servants like Kashkari, appointed positions are the\u00a0cr\u00e8me de la cr\u00e8me.<\/p>\n
Strangely, lightning strikes twice for this guy.\u00a0 Next year, roughly a month from today, Kashkari will be a voting member of the Federal Open Market Committee.\u00a0 For the second time in 11 years, destiny will place him at the precise location where he can exact maximum destruction upon financial markets during a colossal crisis.<\/p>\n
As the economy stalls out in 2020, U.S. deficits are going to jump to over $2 trillion a year \u2013 and will stay there. \u00a0So, too, the national debt will run up towards $40 trillion over the next decade.\u00a0 The Fed, through YCC or some other wild scheme, will take on the dirty deed of monetizing this debt.\u00a0 They\u2019ll create money from nothing and loan it to the Treasury.<\/p>\n
Then, if Kashkari has his way, the Treasury will send out checks backed by the Fed\u2019s funny money to\u00a0William Jennings Bryan\u2019s\u00a0\u201cstruggling masses.\u201d \u00a0All the while, the Fed will be oblivious to the fact that these are the same people who\u2019ve been hollowed out by the Fed\u2019s own policies of wealth inequality.\u00a0 This is their solution to the ghastly monster of their making.<\/p>\n
Still, the Fed and Kashkari are only the source of but some of the crazy ideas being burped about.\u00a0 Moreover, an election year always provides a startling preview of the madness coming to Washington \u2013 regardless of who wins.\u00a0 The styling may be different.\u00a0 But the results are the same: bigger government, bigger deficits, and greater government control and encroachments upon individual freedom and liberty.<\/p>\n
Right now, Presidential candidates are tripping over themselves to see who can make greater and crazier promises to coat the landscape in gravy for voters to sup off of.\u00a0 You know what we\u2019re talking about\u2026<\/p>\n
Economic patriotism.\u00a0 Universal basic income.\u00a0 Modern monetary theory.\u00a0 Trade wars.\u00a0 Green new deal.\u00a0 Quantitative easing for the people.\u00a0 Generous spending packages.\u00a0 Free school.\u00a0 Free drugs.\u00a0 Canceling debt.\u00a0 Wealth taxes.\u00a0 Taxes on unrealized capital gains.\u00a0 Outright currency destruction.\u00a0 And much, much more.<\/p>\n
The planners and schemers are queuing up these ridiculous plans for just the right moment.\u00a0 That is, when the economy slows, credit market\u2019s freeze, the stock market crashes, the sky falls, and all hell breaks loose.\u00a0 Like TARP, or the Patriot Act, they\u2019ll roll them out at the precise moment of maximum panic.<\/p>\n
Alas, the monster will rampage in wild and unexpected ways.<\/p>\n","protected":false},"excerpt":{"rendered":"
Authored by MN Gordon via EconomicPrism.com The launch angle of the U.S. stock market over the past decade has been steep and relentless.\u00a0 The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent.\u00a0 New highs continue to be reached practically every day. Over this stretch, many investors […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-541","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/541","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=541"}],"version-history":[{"count":1,"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/541\/revisions"}],"predecessor-version":[{"id":542,"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/541\/revisions\/542"}],"wp:attachment":[{"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pbmv.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}