Will The Fed Continue To Move The Market Higher With “Covert” QE?
By: Avi Gilburt
GoldSeek.com
Wednesday, 15 March 2017
As many are celebrating the 8th birthday of the stock market rally which began in March of 2009, there is a common belief that this birthday will usher in a market crash.
The common belief has been that government action has “caused” this 8-year rally, but a closer look at the timing of such government action may dispel the notion that this rally was government driven.
In one of my articles on Seeking Alpha, I provided real world examples of how the central banks have been unable to control or manipulate the FOREX markets, despite their throwing “bazookas” at those markets.
The first example I gave included the US Dollar multi-year 41% rally in the face of all the QE programs thrown at it by the Fed, which “should have” caused the dollar to crash based upon the common market expectations. The second example was the recent 14% YUAN devaluation relative to the USD despite the Chinese government spending 1 trillion US Dollars (a quarter of their FX reserves) over the past 3 years in an attempt to prop up the Yuan.
How one can look at these real-world situations and still believe in the omnipotence of central banks in being able to control a market just makes me scratch my head.
But, I did get several comments to this article which went along the lines of the following comment:
“Avi, can you really deny that the epic run since ’09 was made possible by the relentless purchase of assets by central banks? If they wouldn’t have done anything, you think the market would have done what it did anyway? If so, that’s beyond insane.”
You see, common assumptions are not always based upon realities. Let’s consider when the government started throwing one program after another at the market to “save” the market, and create the epic run, as noted in the comment. And, then maybe, just maybe, you may not think I am insane.
I have linked below to a chart put together by Elliott Wave International, which I found in Bob Prechter’s new book, The Socionomic Theory of Finance. I personally owe a tremendous debt of gratitude to Bob for opening my mind and my eyes as to the true realities of market dynamics.
One would imagine that when the government began its bailouts and liquidity injections, the market should have bottomed and begun rising again. In fact, this is the commonly held belief about how we bottomed in 2009. Yes, the almighty Plunge Protection Team certainly must have saved the market. Right?
The Rest…HERE
