Loading ...[From a ZH reader]—Predictions are doomed to fail if they are based on any kind of normative relationship to fundamentals. The one thing that is being ignored right now is the Federal Deficit. Rogan explains this in “This Time is Different”.
The real problem was the complete lack of regulation on the Subprime derivatives and the Feds total ignorance of how deep it was buried in so many parts of the system. Now is no different, it’s merely been moved again, renamed again, and it’s still being ignored, But it’s way bigger now. 2 to 3 times the size and new features have been added, like auto debt, college debt and retirement underfunding. In other words. This time IS Different. The next real adjustment, the one they can’t stop with QE4-7 is a planet killer.
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He is right that the Fed has boxed itself in, but that started when Ben Bernanke decided to save the system and provide trillions in excess liquidity. His hope was to restore
lending, which didn’t happen right away and led to a substantial increase in the fed’s balance sheet. Now the fed is stuck with it. They’re boxed into it. If they sell it off it will create erratic volatility. If they raise rates to try and normalize those they’ll have the same result. It’s not a bull trap, it’s a fed trap.
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Here’s my prediction, and just for the record I called the subprime tank in Dec 2006, what is obvious is the debt wont heal itself. Bernanke was wrong to save the banks, just as Greenspan was wrong to save the markets. Both actions led to a much greater problem and it’s the same problem we started with. Keynesian theory is wrong. If you try to control a massive system you will eventually lose control of it.
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The only thing at this point the fed serves is as a firefighter. It may last for awhile longer, until someone or something calls out the obvious, like the blog that led to the 2008 panic. People suggest it was Lehman Bros that got everyone’s attention, but it wasn’t the trigger. The trigger was something big,BUT MUCH SMALLER that started the domino effect.
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The only example in history that we have to draw an outcome from that is anything like relative to this mess is the collapse of Rome. Some people are reserving cash, some gold and silver, but the survivors of this one. will need to have invested in a bow and arrow and an axe. Good hunting!