Financial Repression Is Now “In-Play”
By: Gordon T. Long
GoldSeek.com
Monday, 17 October 2016
A FALLING MARKET CANNOT BE ALLOWED – at any cost!
The Central Bankers have clearly painted themselves into a corner as a result of their self-inflicted, extended period of “cheap money”. Their policies have fostered malinvestment , excessive leverage and a speculative casino approach to investments. Investors forced to take on excess risk for yield and scalp speculative investment returns, must operate in an unstable financial environment ripe for a major correction. A correction because of the high degree of market correlation that likely would be instantaneously contagious across all global financial markets.
Any correction more than 10% must be stopped. As a result of the level of instability, even a 10% corrective consolidation could get quickly out of control, so any correction becomes a major risk. What the central bankers are acutely aware of is:
If Collateral Values were to fall with the excess financial leverage currently in place, it would create a domino effect of margin calls, counter-party risk and immediate withdrawals and flight to areas of perceived safety.
The already massively underfunded pension sector (which is now beginning to experience the onslaught of baby boomers retiring) would see their remaining assets impaired. This could lead to social and political pressures that would be simply unmanageable for our policy leaders.
A falling stock market is the surest way of alarming consumers and signalling that things are not as “OK” as the media mantra has continuously brain washed them into believing. In a 70% consumption economy, a worried consumer almost guarantees a further economic slowdown and a potential recession.
As our western society continues to consume more than it consumes, productivity is not increasing at the rate that justifies the developed nations standard of living as well as the current levels of equity markets. A possible corrective draw-down to the degree shown in this chart is simply “out of the question”! The central bankers acutely aware of this.
The Rest…HERE
