- towering public and private debts,
- faltering corporate investment and productivity,
- Washington-based regulatory and tax-barriers, and
- the end of an unsustainable central bank-fueled global credit, trade and investment boom
will usher in a prolonged era of global deflation and domestic recession.
- They are now at levels three times higher than the March 2009 bottom but the market’s current lofty valuation is an utterly artificial fiction of what I call “Bubble Finance.”
- The broad stock market is more overvalued than any time in history, including the peaks before 2008, 2000, and 1929
and they will soon be heading for a hefty correction in any circumstance after being fueled for seven years with free money and massive liquidity injections by the central bank.
- What makes it so wicked is that the casino gamblers have been rescued by the Fed so many times since 1987 that they have no clue that the nation’s monetary central planners are out of dry powder.
- When the stampede for the exits gets underway this time, and there are no monetary firemen at the ready, sheer bedlam will quickly ensue on Wall Street.
- Likewise, there will be no possibility of a fiscal rescue, either. That’s because during 90 months of the weakest recovery in history, Washington has whiffed entirely on the fiscal front. Not a single thing has been done about the structural deficit and the fast-approaching insolvency of the nation’s massive social insurance system. Indeed, when the $150-billion-per-year disability trust fund ran out of cash, the cowardly men and women of Capitol Hill merely authorized a raid on the soon to be insolvent OASI trust fund for retirees and their dependents.
- It can be said with certainty, in fact, that under current bipartisan policy and realistic economic forecasts that at least $15 trillion will be added to the nation’s current $20 trillion of public debt during the next 10 years.
- The Federal debt ratio will approach 150% of GDP during the next decade.
- That means, in turn, that when interest rates eventually normalize – as they must if the monetary system of the world is to survive – debt service will soar to $1.5 trillion per year which happens to represent more than 6% of a prospective nominal GDP that has only grown at 3% annually for most of this century. Another description for that unsustainable equation would be a fiscal doomsday machine.
…I believe that the markets will crash sooner rather than later. In fact, I have my sights set on one date next month in particular as the catalyst for a correction and crash.