The Loss of Momentum in the Markets All Too Apparent Now
By Bob Chapman
August 17 2011
Facing the music of the S&P downgrade, the loss of purchasing power, currencies falling against gold and silver, nobody will admit defeat and purge the system, correction now, rally into the election, what worth our safety, banks yet to recover, Fed knows monetization of the debt keeps the game going, nightmares of inflation of depression.
Since April the market as measured by the Standard & Poor’s stock index is off about 18% and momentum has fallen 40%. The recent catalyst for lower prices has been the drop in the debt rating by S&P of US Treasuries. In addition the economy is showing a pronounced slow down, as are many other countries. There is liquidity at major banks and corporations, but it has yet to be employed into the economy. Consumer spending is falling, as are savings and the use of credit has jumped again. Monetary surplus normally is put to work not only in the economy, but also in financial sectors, such as the stock market. This absent normal reaction presently is not present. If the banks and corporations won’t lend or invest then it is the function of the Federal Reserve to do so. That means QE 3 is needed not only to provide funds for purchases of Treasury, Agency and toxic debt, but also to spark and maintain a growing economy.