http://albertpeia.com/managinghyperinflationarybubbles.htm
‘As we’ve noted in
recent articles, the US Federal Reserve has blown another bubble in stocks and
facilitating the exact same risk-taking behavior that brought about the 2008.
The Fed realizing
that it’s done this, which is why it’s now trying to manage down expectations
of future stimulus (see the multiple suggestions from Fed officials that the
Fed might reduce QE before hitting its unemployment target).
The Fed is not the
only Central Bank to have shifted tone.
Chinese
authorities took a step to ease potential inflationary pressures Tuesday by
using a key mechanism for the first time in eight months.
The move by the
central bank to withdraw cash from the banking system is a reversal after
months of pumping cash in. That cash flood was meant to reduce borrowing costs
for businesses as the economy slowed last year—but recent data has shown growth
picking up, along with the main determinants of inflation: housing and food
prices.
The People’s
Bank of China used a liquidity-draining tool in the interbank market that
enables the central bank to borrow money from commercial lenders. It withdrew
30 billion yuan ($4.81 billion) by offering 28-day repurchase agreements,
alternatively known as repos. The PBOC hadn’t offered repos since June.
“The central bank is trying to
send a message that it will not tolerate too-easy liquidity conditions,”
Dariusz Kowalczyk, a senior economist at Crédit Agricole, ACA.FR +0.99% wrote
in a research note.
http://online.wsj.com/article/SB10001424127887323495104578313541983212134.html
Investors are
ignoring this story for the most part. This doesn’t bode well for the economy
as China was the alleged growth story that pulled the world out of recession in
2009. China did this via a massive stimulus program equal to nearly 20% of GDP
(not to mention a massive expansion of its banking system).
So if China is
curbing its stimulus, the rest of the world will soon feel the impact.
Another Central Bank
that has failed to engage in more monetary stimulus is the Central Bank of
Japan. Despite, recently re-elected Prime Minister Shinzo Abe has been talking
down the Yen and urging the Bank of Japan to act aggressively to raise the
stock market and Japanese economy, the Bank of Japan didn’t announce any new QE
or stimulus in its latest meeting.
The significance of
this is tremendous. Besides the Fed, the Bank of Japan is one of the most
profligate money printers in the globe. For the Bank of Japan to NOT announce
any new QE despite extreme pressure from Japan’s prime minister is yet another
warning that something major has changed in the financial system.
This will end very
badly. The Fed and other Central banks have set the stage for another Crash.
And this time around its hands will be tied as it has used up all of its tools
just creating this bubble.
THIS is the reason Central Banks are
beginning to shift their tones. They realize they’ve blown another bubble and
that we’re likely headed for another Crash. And this time around the Fed will
be totally out of ammo to stop it. Unlike 2008 which was just a warm-up, this
will be the REAL CRISIS featuring full-scale systemic failure.
So if you have not
already taken steps to prepare for systemic failure, you NEED to do so NOW.
We’re literally at most a few months, and very likely just a few weeks from the
economy taking a massive downturn, potentially taking down the financial system
with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars
into financial system right now trying to stop this from happening.
I’ve already alerted
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safely…’
Best Regards,
Graham Summers