Central Bankers Fighting An Unprecedented Global Slowdown
The mainstream news sources seem determined to ignore the extent of the
global slowdown in trade. Whether exports, imports, industrial production or
whatever your preferred metric, the facts are undeniable. Nevertheless, the
mainstream media chooses to refuse to cover it. It begs an obvious question
of - why?
What needs to be understood about the global economic slowdown is that it
stems from economic activity in the two engines of world activity which are
now stalled. China and America ("Chimerica") are slowing rapidly as
a result of an inability to fundamentally sustain their current credit
expansion rates. Desperate attempts by both countries have been unsuccessful
in altering the downward trajectory which is steadily gaining momentum.
A Potential Global Recession - Act Now Or Perish
The Central Bankers of the world are acutely aware of this fact and know
how devastating a global recession would be in the current highly indebted
and over leveraged financial environment. Though Central Bankers programs
have been unsuccessful they have fully understood since the year beginning
market drawdown that they must act - and fast!
The US Economic Output Composite Index illustrates how the time had come
in Q1 2016 relative to previous intervention programs.
Call to Action - Failed Central Bank Policy Dictated "More of the
Same!"
The Central Bankers reacted and reacted forcefully beginning in Q1. They
have taken "liquidity pumping" at $180B / month to levels more than
double those during QE3 with more promised to soon come from the BOE, ECB and
BOJ.
Global Central Bankers - Clearly a Coordinated Global Response
The Bernanke "Enrich-thy-Neighbor" Doctrine is now in full bloom
as the central banks in a coordinated sequential manner are implementing
further policies to dramatically increase global liquidity.
ILLUSTRATION: BERNANKE'S " ENRICH-THY-NEIGHBOR" DOCTRINE IN
"FULL BLOOM"
A Potential Market Collapse - Act Now Or Persih
As former Federal
Reserve Governor Kevin Warsh said on CNBC, the Fed is not "Data
Dependedent" but rather "Market Dependent"! Central Bankers
are reacting to the market for fear of an errosion in collateral values
underpinning massive excess financial leverage. They had to act or crumbling
collateral values associated with a "Rehypothecation" implosion
would quickly engulf the markets.The markets have been signalling major
technical reversals are ahead since early 2016. The Central Bankers had
little choice in their mind but to undertake the programs they did.
"Head & Shoulders"
OUR "M' TOP
We have laid out our expectations of an "M" top since near the
market bottom in early 2009. As shown below we have completed our
"M" top and one of two courses will now be followed. The market
will begin a protracted secular Bear Market OR the Central Banks will flood
the world with liquidity thereby artificially lifting the markets.
The following chart illustrates that the Central Banks' globally
coordinated liquidity pumping policy to stop the markets from following is
presently working.
This would suggest that our "M" top will now "morph into a
'fractal'" of the Megaphone pattern we have seen since the Dotcom Bubble
burst in 2000. This will final leg will be the Minsky Melt-up we have also
suspected still lies ahead.
It Won't Work - 7 Years of Unintended Consequences are Coming Home to
"Roost"!
The Central Banker actions will temporarily work but the Credit Cycle has
turned which will quickly make their efforts futile.
Expect a resulting Currency Crisis to dominate the financial markets in
2017.
