World inflation into stock markets, and economic Armageddon
By Chris Laird
This should be ‘New Economic Paradigm – sort of, inflation into stock markets’ but that seems too long. Pushing inflation into stock markets is nothing new really. When money starts devaluing, stocks rise.
So we have the worst offenders by order (roughly)
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The other markets are also all following along like Korea, Taiwan etc.
Now some people might think that me putting the US as low as I did at number 4 would be ridiculous, but what I am considering is that the US sent ten $trillion over to the EU and ECB to salvage the Euro since 2008, yes its that much, I have been tracking this, in things like currency swaps. In a currency swap the US Treasury/Fed exchanges dollars for Euros so in effect the EU banks could buy USD as their currency was collapsing to meet the USD demand. Otherwise the Euro would have collapsed possibly. Yes that’s about all there is to that. Of course this information is not being reported. But I estimate the US Fed (this is an educated guess) is holding roughly ten $trillion USD ‘worth’ of Euros, or rather divide by 1.30 to get a number – maybe 8 Trillion Euros in secret accounts between the US fed and the ECB. Yes.
If the US did that, then the US is definitely rather low on the totem pole of crisis currencies. I don’t suppose the US is going to advertise to the world that it has 8 trillion Euros in reserves. Again this is supposition. But it does kind of look like it.
The Yen started it
The Yen is sort of one of the original carry trade currencies starting around 1990. That was when their real estate and stock markets both crashed roughly. They cut interest rates drastically and over a few years the rates dropped to about 2pct. So Japan started this huge carry trade.
Then, by design, this easy Japanese Yen could be borrowed by their banks and invested in Japanese stocks and real estate. But things went much farther than that. That money over two decades now has gone into every market in the world. Wherever there was arbitrage (cheapness) of Japanese money to be borrowed it was by everyone in the world. A world stock and real estate boom followed.
The US had its own Tech boom during this period which really was – um real. IE real economic gain and innovation. With personal computers, the internet and databases. Even though the rest of the world caught up quickly with the US in those areas, the US still is a major tech innovator.
But then the US had the tech crash, well anything can be turned into a bubble. OF course. And then the US copied Japan in 2001, just like Japan did in 1991 roughly with looooow interest rates.
We keep seeing a pattern here. Low central bank interest rates every time there is trouble….
But then… the US started this 1 pct. interest rate environment and started the housing bubble in 2002. That ran until 2006 and then collapsed. I predicted it would crash in 2006 in 2005. That it was done. Whatever.
So, the Fed dealt with the housing collapse, and they sent $trillions into backing up the banks who were insolvent from bad loans.
Interest rates again were lowered, this time to .25%. Then we get QE1,2,3
A world stock rally ensues
That my friends, is where I wanted to discuss. We are now in the world stock bull of world COORDINATED QE intended to inflate the stock markets even though, the world economies are in the process of collapse!
Think on what I just said for a moment before u read on. They are inflating the world financial markets of all types to combat the deflation from literally collapsing economies, such as the collapsing exports from Asia, the Housing crises all over and so on.
This is world QE from the US, Japan, China, and the ECB has succeeded in linking up all the world stock and financial markets of all types into one huge synchronized bubble! According to my very rough calculations, this is a minimum of a $100 trillion dollar worth bubble of all financial instruments. We already know the real assets have been busted out. The real estate assets are deflating but the stocks and bonds and so on are inflating – but see now the EU bonds are being busted out, debt busted and sold off for nothing. And the EU assets are being seized. Hmmmm. Who is next here? I am not explaining everything here. It’s just a general piece.
What I see happening here, is the rest of the world will have all its assets pushed into one huge bubble and then have it all busted out in stock crashes etc., and bond crashes, and all the assets of these countries, the US, the EU, Japan, even China will be auctioned off for pennies on the dollar. Not to mention that WW3 will happen soon after. My God.
Something like Gold, Silver, rarer commodities will be seen as havens. But at some point all the currencies of the affected countries will also inflate into nothing. And then their economies will halt. If all these markets are synchronized, as is my observation now, then it will require a total restart of the world economy and money system. And don’t expect gold and silver for example to be some simple overall solution. It’s going to get complicated with FX restrictions.
Editor in Chief
There is more to say, and we at PrudentSquirrel track gold, and currencies and commodities, with a generally weekly in depth newsletter and you can stop by and have a look at www.PrudentSquirrel.com
Anyway, we forecast gold to range from $1500 to $2000 for 2012 back in Winter 2011, and have been right. We also caught the last gold price collapse from near $1800 last year by two days warning subscribers. We also predicted the USD rally April 25, 2011 by about one or two weeks’ notice, and no one I know of did that. We also predicted in Summer 2011 the great general commodity crash.
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