Posted on 10/31/2014 5:52:01 PM PDT by blam
Gold Core
October 31, 2014
Stocks globally surged, while gold fell sharply today despite renewed hopes that the Bank of Japan’s vastly increasing money printing will fill some of the gaps left by the apparent end of Federal Reserve bond buying.
The BOJ decided to increase the pace at which it expands base money to a whopping 80 trillion yen ($726 billion) per year. Previously, the BOJ targeted an annual increase of 60 to 70 trillion yen.
The BOJ sailed into deeper uncharted monetary territory with the announcement that they would triple annual purchases of exchange-traded funds (ETFs) and Japanese real-estate investment trusts (REITS) to 3 trillion yen and 90 billion yen respectively.
The Nikkei surged 5% in minutes to a seven year high after the Bank of Japan decision, while gold fell.
These unprecedented monetary events remind us of the old English mapmakers who used to write on uncharted territories on their maps - “Here be Dragons”.
The BOJ claimed the action was due to concerns that a decline in oil prices would weigh on consumer prices and delay a shift in sentiment away from deflation.
BOJ Governor Haruhiko Kuroda portrayed the decision as a preemptive strike to the ‘lost decade’ economy, rather than an admission that his plan to reflate the long moribund economy has so far failed.
The prime reason for the extraordinary monetary policies is likely that the Japanese economy remains very weak and risks tipping over into a depression. Bankruptcies more than doubled to 214 in the first nine months of 2014 compared with the same period a year ago. Japan has introduced quantitative easing to stimulate the economy and to spur inflation. But it may backfire and lead to stagflation and in a worst case scenario a German ‘Weimar’ style hyperinflation.
(snip)
(Excerpt) Read more at marketoracle.co.uk ...
One factor in the strong US stock markets’ performance these last few years, is the fact the US is relatively safer and stronger, than other economies.
Just like a Ponzi scheme, they keep piling on. Every paycheck, the 401-k & 403-b portion goes into stocks, 66% of it on average. Who wins in a Ponzi scheme? The initial gamblers. Who gets caught holding the bag? The last gamblers.
Not true. China and India economies have grown 3 to 5 times faster than US economy in the last decade. Indian economy is still doing very well.
If US economy is so good why did the US markets crash in 2008, 2000. 1987, 1974, 1929?
Print money, short gold ETFs, central banks buy gold. Repeat.
China’s economy is all based on US debt and fake stimulus spending on empty cities.
I don’t know but “going Weimar” doesn’t sound good.
They are still selling us many goods worth tens of Billions of dollars every year and our trade balance is all in their favor. If we don’t buy their goods, our inflation will jump so we can not stop buying cheap goods from China.
And we owe them Trillions in debt on which we must pay interest for eternity since we have no budget surpluses as far as the eye can see to pay off the principal.
It is true China is overbuilt. But they did not borrow money to build. They just used their excess reserves.
The instantaneous response is *one* thing, the LT result/effect is probably something different.
Although I, myself, am completely neutral on gold/silver (as investments or as SHTF googahs) And I own plenty.
You/we have to admit, the central banks of the world have successfully repealed all known laws of economics, yes?
And that shirt is so soiled and stained that it stinks.
Mostly from overvaluation. The economy grew but the market grew faster. Some of those cases, e.g. 1987, were short market corrections. Your analysis is basically sound but you have left off a couple of factors. The main one is the Fed itself creating bubbles with loose money that inevitably pop. That was a factor in all of those crashes. The second is that in some cases the US was the only show in town (e.g. 1974 and on). The reason was not from strength although our economy was strong in 60's to early 70's and strong again during 80's. But because we have the ability to manipulate markets and keep people coming back before each of those crashes. It was certainly no accident that Japan had such a lousy couple of decades after they challenged our hegemony in the 80's. China knows this and is going to challenge us militarily when push comes to shove.
Up above you mentioned that foreigners have to pay not only high US equity prices but high US dollar prices. That's just part of the greater fool theory of buying stocks here. Not only do those foreigners think that a greater fool will buy their US stocks, but that greater fools will bid up the US dollar. Of course that just makes each of our corrections or crashes that much worse.
Only if they know when it's "game up" and decide to sell. When a selloff happens, it's going to be a huge payday for the gov, because of capital gains taxes.
It is beginning to seem that it will take a crisis beyond the gov's power to manipulate around it to cause a crash.
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