These are the most dangerous markets I have ever witnessed in my entire life, and I’ve been investing for over 25 years.
Global central bank balance sheets are up from $6 trillion in 2007 to $21 trillion today and they are still being expanded at the pace of $200 billion each and every month.
What’s happening is that the robo-traders, the algorithms, the frontrunners on Wall Street and around the world are just gaming the system, looking for the next increase in central bank credit to take their collateral to the ECB or to the Bank of Japan or to the Fed and buy more stocks and bonds.
That’s the game we’re playing today folks.
Even a hint that it might someday end sends the entire investment community scampering for the door; and that door is very, very narrow and can only fit a few people through it.
I am afraid when that bubble bursts, it will wipe out every asset — everything will collapse together — because everything is geared off of that so-called ‘risk free’ rate of return.
If your risk free rate of return has been warped down to 0% for 96 months, then everything — and I mean diamonds, sports cars, mutual funds, municipal bonds, fixed income, REITs, collateralized loan obligations, stocks, bonds, everything, even commodities — will collapse in tandem along with the bond bubble burst.
Now since there is no such thing as RISK FREE RATE OF RETURN, I suspect that the central banks are waiting until each country reaches the maximum sustainable debt level (The Fed has already stated that the level for the US is 24 trillion)and then change monetary policy and raise interest rates.
This will have a twofold impact.
They will milk all the citizens of their wealth by raised taxes and cause an economic meltdown of unprecedented proportions where they can buy assets at a discount. And, for why they would do this, I think the answer is “because they can”.
The biggest robbery of the 21st century in mankind’s history and 99.99% of the people are ABSOLUTELY CLUELESS.
Janet Yellen, Fed Chairman and the fountain of all economic knowledge, has personally assured us that eight years of excessive QE hasn’t raised the probability of a market reset. Also, the total outstanding debt of the U.S. is no concern to her, after all, the government can print and borrow as much as it wants… Frankly delusional.
The only way you can service the debt outstanding is by keeping interest rates near 0 percent. The problem is that once you do that for a protracted period of time, eventually the market is going to take those rates higher. So, you’re going to have no choice but to raise interest rates, and that’s when the real collapse comes.
So, it’s not possible that we can allow interest rates to normalize. We would have a debt implosion. So, the central bankers are caught.
My opinion? The Fed should sell their assets. They should drain their balance sheet, which is about $4.7 trillion by about a trillion dollars a year until they’re back down to where they were pre-crisis and then just go home, close shop. Period.
Brace yourselves, folks…. You’ve been warned.
By :Â Ziad K Abdelnour
Ziad is also the author of the best selling book Economic Warfare: Secrets of Wealth Creation in the Age of Welfare Politics (Wiley, 2011),
Mr. Ziad Abdelnour continues to be featured in hundreds of media channels and publications every year and is widely seen as one of the top business leaders by millions around the world.
He was also featured as one of the 500 Most Influential CEOs in the World.
