When the Federal Reserve decided to lift interest rates, they made a colossal error. You don’t raise interest rates when a global financial crisis has already started. That is absolutely suicidal…Surely the “experts” at the Federal Reserve can see what is happening:
- Junk bonds have already crashed, just like they did in 2008.
- The price of oil has crashed, just like it did in 2008.
- Commodity prices have crashed, just like they did in 2008.
- More hedge funds have already failed in 2015 than at any point since 2008.
- More than half of all major global stock market indexes are already down at least 10 percent for the year so far.
You don’t raise interest rates in that kind of an environment. You would have to be utterly insane to do so [yet] the Federal Reserve [did so]. It has thrown fuel onto a global financial inferno that is already raging, and things could spiral out of control very rapidly.
By Michael Snyder (economiccollapse.com)
IMO this crisis is going to get even worse as we head into 2016.
Egon von Greyerz, the founder of Matterhorn Asset Management,…predicts that:
“We will have one disaster after another, first in the junk bond market, then in emerging markets and, after that, the subprime markets. Subprime car loans and student loans I see as another massive problem area. It is going to be one thing after another that will unravel. Since 2008, when the world almost went under, we have printed or increased credit by 50% or by $70 trillion, and the world economy is still struggling to survive. I think the real change in confidence will come down when markets come down. . . . I think things will come down very quickly.”
and I think that he is right on target.
The global financial system is more interconnected today than ever before, and when one financial institution fails, it inevitably affects dozens of others, and the failures that we have already seen are already spreading a wave of fear and panic that may be difficult to stop…
Charles Hugh Smith believes that the ridiculous monetary policies of the Federal Reserve have played a primary role in setting the stage for this new crisis, and that now this giant financial “Death Star” that they have created “is about to blow up” saying:
“By slashing rates to zero, the Fed ruthlessly eliminating safe returns for savers, pension funds, insurers and the millions of people with 401K retirement nesteggs. In effect, the Fed-Farce has pushed everyone into risk assets–and then played another Dark Side mind-trick by masking the true dangers of these risky assets.
As oil-sector debt blows up, as junk bonds blow up, and emerging markets blow up, we are finally starting to see the real costs of going over to the Dark Side of endless credit expansion and throwing the gasoline of near-zero interest rates on the speculative fires of financialization.
The Fed’s hubris has led it to the Dark Side, and now its Death Star of impaired debt, phantom collateral, speculative frenzy and bogus mind-tricks is about to blow up.”
Personally, instead of saying that it “is about to blow up”, I would have said that it is already blowing up – unfolding right in front of our eyes. The only question is how bad it is going to become.
Everyone that warned of financial disaster in the second half of 2015 has been proven right, but this is just the beginning. Now that the Federal Reserve has thrown gasoline onto the fire, our problems are only going to accelerate as we head into 2016 so, for the upcoming year, let us hope for the best, but let us also prepare for the worst.
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The original article was written by Michael Snyder (economiccollapse.com) and is presented here by the editorial team of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – sign up in top right corner) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]