An NDE (Near Death Experience), according to those who have been there, gives one a good feeling and one can see a brilliant light at the end of a tunnel…..
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It is unfortunately the case that central bankers have ventured into unexplored territory where no one has ever been, and there is no light at the end of the tunnel. Interest rates have been at record-breaking lows since 2008, and central banks have been buying up bonds and even stocks in amounts that a hedge fund manager would envy. Central bank balances have reached record highs. The BoJ holds 37% of government debt securities outstanding according to a Deutsche Bank chart with the BoE second at 37% and Sweden in third place with 33%. The Fed comes in at 20% with the Eurozone a mere 17%. This does not include stocks. The madness is most apparent in Japan where Kuroda has acquired about 75% to 80% of the Japanese ETF market for about 16 trillion Yen. Even the SNB (Swiss National Bank) has $80 billion of US equities on its balance.
Just how central banks are going to start cutting down their balances in order to return to normalcy without causing panic does not seem to be a problem for the Fed chairwoman Janet Yellen. At a recent press conference she just rattled off a series of figures as if markets would take everything in their stride.
Then there is the manipulation of the gold market, which has been widely documented and mentioned in this Newsletter. The Russians, Chinese and Indians will be hauling in all the gold that they can at bargain prices, laughing all the way to the vault, and one wonders why Congress is investigating the Trump administration for collusion with Russia instead of examining why the Fed and its hit men are keeping the gold price low and letting the “bad guys” pile up the yellow metal, which Yellen does not seem to held in high esteem.
This Newsletter has argued that a stock market correction at the least if not a crash is long overdue. However, it may be that central banks have conspired to buy every dip in the market in order to stabilize stock prices. In this way capitalism is leading straight to socialism in that the central banks will keep on buying stocks and becoming the owners of more and more companies. The results so far have been disappointing. US growth is the lowest of any recovery on record; Japan is becoming senile; Europe is buoyed up by Mr Draghi, who will do “whatever it takes”. The central banks may be producing a global zombie economy by fiat. This argument will be treated further in another Newsletter.