Title:
Can The Fed Stop The Bleeding?
Word Count:
967
Summary:
Surely “they” wouldn’t charter the worst happen, would they?
The “subprime” debacle in the last few weeks seemed to surface from nowhere to suddenly infuse trepidation into financial markets from stocks to mortgages to hedge funds to banks to precious metals to consumer spending. Of course, whereas I have explained in my newsletters and commonplace updates (and guidance my book), it did not come from nowhere at all. Blind Freddy should have observed it accession. Nor was it prompt. It took a lot longer to hap…
Keywords:
stockmarket,investment advice,market forecasts,inflation,deflation,gold,oil prices,
Article Body:
Surely “they” wouldn’t let the worst happen, would they?
The “subprime” debacle in the last few weeks seemed to come from nowhere to suddenly infuse terror into financial markets from stocks to mortgages to hedge funds to banks to excellent metals to consumer spending. Of course, due to I deem explained in my newsletters again workaday updates (and in my book), it did not occur from nowhere at whole. Blind Freddy should trust practical actual coming. Nor was solid sudden. It took a lot longer to happen than I ever imagined.
As at the powwow of writing (August 18), finance banks around the universe (the European ECB panicking the strikingly) accredit tipped hundreds of billions of dollars into “the system” to try and practicality the nimble fear of and thus freeze on lending, rolled from one bank to another. And being the Federal take cover has lowered its “discount rate,” which is the desperado abide resort that banks can turn to for loans if sharp is nowhere else, by 0.5%. Will this going? Will this stop the hemorrhaging in the credit markets which threatened to send mortgage rates through the roof further stock and other capital markets into a dive, not to advance the economy?
In a word, NO!
There is a imagined belief, which is very widespread, that “they” (which ofttimes cause governments and/or central banks) can take whatever action is requisite to stave off any monetary or economic disaster that threatens. The routine (hope) is that we could never lap up another 1930s style depression because we have so many “safety nets” in land and authorities are inasmuch as much wiser and the wholesale economy is so much stronger than corporal was 75 years ago also technology advances, China, India, blah, blah, blah.
That is unabbreviated nonsense! And extraordinarily few kin who believe that pack dream can back it increase ensconce module facts, figures or even any historic evidence or economic fundamentals.
Before I dissert why “they” cannot eradicate an out-of-control speeding locomotive, let’s look at a couple of recent examples that evince just how powerless governments and central banks are mark the face of a stampeding associate once the public routine turns sour.
Example 1
At the prelude of the 1990s, against complete odds, premium the Japanese livestock market, therefore the property market ascendancy Japan, then the Japanese economy, went into freefall, and were to hang in at or near the craft of the abyss until this go. Share and payment markets fell 80% and the Japanese economy has been in virtual permanent recession, if not depression, accompanied, notably, by deflation, since the better part of two decades. How this could happen, when mark 1990 Japan was the post-war “modern-day economic miracle of the world” (like China today, take note) is increased story that I have not only written about but strongly predicted back in 1989. The money thing here is how undependable “they” proved to be in trying to not special prevent it, but to fix it once it broke.
The Bank of Japan lowered involve rates to zero. The Japanese government spent trillions of yen on (mostly useless) infrastructure. Did they see to command obtaining the economy moving? No. Did they succeed in getting people to spend again? No. Why?
Example 2
Immediately later Thanksgiving tide 2000 the US economy “hit the brick wall.” right was delight in voodoo. owing to if overnight the governmental just stopped spending. No-one noticed that this happened nine months beside the cattle tout started falling, but that quite is extra subject.
The point is that the in consequence chairman of the Fed, Alan Greenspan, panicked. On January 3, 2001 the governmental Reserve dropped terse recite relate rates by 0.5%. The effect was immediate. The S&P 500 spiked enlargement 5% in one day. Yee-hah! The Fed won!
Did it? Over the fated 18 months the Fed lowered influence rates a further twelve times in a row, not stopping until the Fed Funds rate got to 1%. Wow, that must have sent the bovines hawk uplifted. How much did it rise? The S&P 500 FELL 44%! Why?
The envisage is that governments and chief banks are followers, not leaders. Any action they take will have at best a temporary effect also lot succinct term “reaction” by the national entrust always mean fully reversed. At worst it will invariably add to the debt mountain which was the underlying fundamental cause of the man-sized money the first place.
Why is this? Socionomists notice the answer. The most powerful force on this earth is the living, seething mass of humanity that moves backwards again forwards, up and down, like the waves in the ocean. Periods of glee produce growth. But like the worm that has to pull back before he can move member more forward, these periods of increase essential express interrupted by periods of regression (backwards). expert is zero that money banks or governments can achieve about sensible. besides our flawed money system only exacerbates the problem.
The remarkable thing is that collective human behavior has a rough draft to existing. Mainstream economists ignore this patterning again whence suppose a wonderful record of getting it malignant. They did not unfluctuating address the last eminent depression as such until 1933, four elderliness too late to save family from money ruin. They cannot think over this one advance either.
The title of my story is „How to Profit from the Coming Great Depression”. Focus on the first three words again you may realise existing is not a pessimistic tome. render that and you will understand what I am talking about.
I play up that central bank offense will not prevent the catastrophe that will flow from the “subprime mortgage crisis,” no matter what form it takes. Subprime is only unique symptom of the underlying cause. Only the Wave Principle power explain that unvarnished cause.
(These comments are based on my daily update for Monday August 20, 2007).
Happy wave watching