Central Banks Are Now Taking “EMERGENCY MEASURES” To Stabilize the Debt/Credit Markets.
From Greg M
Currently the European Central Bank and the Federal Reserve are engaging in “emergency/unconventional” measures to stabilize the debt/credit markets. These actions came about AFTER an uncontrolled sell-off in the debt market which caused the 10-year yield to spike. The current actions of central banks are intended to get more cash back into the stock market… will it work is the question.
Over the last 6 months the US stock market has fallen, and just last week the SP500 fell 20% off its all-time high- the definition of which is a bear market.
Beginning the end of last week, the SP500 got slammed, falling very hard over several days as the 10-year yield made an uncontrolled spike all the way up to 3.5% from a previous 3.12%! A 38-basis point spike higher in 2 trading days is unprecedented.
Now that the actions of the ECB and the Federal Reserve have at least for the time being stabilized the debt market, many people have written to me as of late who now think that at least temporarily cash WILL make its way back into the stock market followed by a very large drop. Others think new record highs are just around the corner. Still others believe that the stock market is crashing now…
What these central banks are now engaging in has certainly caused bond yields to drop SUBSTANTIALLY! Almost miraculously! A 30-basis point drop in the 10-year yield occurred in just 1.5 trading days! This action has caused the debt markets to stabilize however, the cost is much higher inflation as they themselves continue to inflate, (which is their ultimate goal).
All these central banks are doing is exacerbating the current issue, a full-on debt crisis which we are in right now… and how are they attempting to “fix” this? By Adding more debt to the current crisis! Therefore, exacerbating the underlying problem, itself. They are not fixing anything; they are making it worse.
I believe that despite the current actions of central banks to stabilize the debt/credit markets, all this will do is just push off a meltdown in the debt markets- henceforth why central banks are resorting to some kind of emergency policy posture right now. With that, I still believe that the market capitalization of cryptos will balloon as the debt markets implode. I also believe that the price of gold, silver, and other commodities will skyrocket. As for the stock market… I still firmly believe that an implosion in the debt market will eventually occur despite any actions taken by central banks to push it off.. this will cause stock markets around the world to melt down.
My sense is that the recent equity sell-off is just the beginning of a much larger move down. The bounces have been super anemic the past few days. Very unusual after such a large move lower. Strong possibility that cash is being drained from the system rather than being infused. That's the other big tool in the Central Banks arsenal that should not be overlooked. Draining liquidity. That's what I am seeing. Draining liquidity causes EVERYTHING to sell off - including commodities -much like we saw Friday. A very fast way to contain inflation for sure - however at the cost of wrecking the entire economy. A very dangerous game since if overdone - can result in systemic LOCK. Best thing to do now is to get into cash and wait for the golden buying opportunity to arise. Will be very curious to see how energy opens up next week. Crude went down over seven bucks yesterday. A huge move. Either its the beginning of a much larger move lower OR (more likely in my opinion) a shake out prior to a long weekend as part of a campaign to eliminate weak hands - steal their positions - before a much larger move higher. This is typical action before the truly historic moves in a commodity. We shall see. Good Luck to all - wherever you think this crazy market is going!
they got the big dial on the computer set to communism. and no one can do better then anyone else. They get short of cash, and they crash the market, rob us, then pick up the pieces.