The Crash Of The “Everything Bubble” Started In 2018 – Here’s What Comes Next In 2019

Friday, January 11, 2019
By Paul Martin

Brandon Smith
Alt-Market.com
Friday, 11 January 2019

In 2018, a very significant economic change occurred which sealed the fate of the U.S. economy as well as numerous other economies around the globe. This change was the reversal of central bank policy. The era of stimulus and artificial support of various markets, including stocks, is beginning to fade away as the Federal Reserve pursues policy tightening, including higher interest rates and larger cuts to its balance sheet.

I warned of this change under new Chairman Jerome Powell at the beginning of 2018 in my article ‘New Fed Chairman Will Trigger Stock Market Crash In 2018’. The crash had a false start in February/March, as stocks were saved by massive corporate buybacks through the 2nd and 3rd quarters. However, as interest rates edged higher and Trump’s tax cut cash ran thin, corporate stock buybacks began to dwindle in the final quarter of the year.

As I predicted in September in my article ‘The Everything Bubble: When Will It Finally Crash?’, the crash accelerated in December, as the Fed raised interest rates to their neutral rate of inflation and increased balance sheet cuts to $50 billion per month. In 2019, this crash will continue as the fed resumes cuts once again in mid-January.

It is important to note that when we speak of a crash in alternative economic circles, we are not only talking about stock markets. Mainstream economists often claim that stocks are a predictive indicator for the future health of the wider economy. This is incorrect. Stocks are actually a trailing indicator; they tend to crash well after all other fundamentals have started to decline.

Housing markets have been plunging in terms of sales as well as value. The Fed’s interest rate hikes are translating to much higher mortgage rates in the wake of overly inflated prices and weaker consumer wages. Corporate buyers in real estate, which have been propping up the housing market for years, are now unable to continue life support. Corporate debt across the board is at all-time highs not seen since the crash of 2008, and with higher interest rates, borrowing cheap capital is no longer an option.

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