Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years.
Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.
Whole groups of enterprises involved in mining and energy are about to be destroyed. And the commodity-heavy nations of Canada, Australia and Brazil are in for a very rough ride.
Whether the central banks can keep all of their carefully-propped equity and bond markets elevated throughout the next part of the cycle remains to be seen. We know they will try very hard. They certainly are increasingly willing to use any all tools at their disposal to keep the status quo going for as long as possible.
Whether it’s the People’s Bank of China stepping in to the market to buy 10% stakes in major Chinese corporations in a matter of weeks, the Bank Of Japan becoming the majority owner of key ETFs in the Japanese markets, or the Swiss National Bank purchasing $100 billion of various global equities, we see the same desperation. Equity prices are being propped, jammed and extended higher and higher without regard to risk or repurcussions.
It makes us wonder: Why haven’t humans ever thought to print their way to prosperity before?
Well, that’s the problem. They have.
And it has always ended up disastrously. History shows that the closest thing that economics has to an inviolable law is: There’s no such thing as a free lunch.
Sadly, all of our decision-makers are trying their hardest to ignore that truth.
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