At the beginning of June 2020, the total US
market capitalization was around 150% of the nominal US GDP. This level is close to
the top 160% in February 2020. And it is a big surprise to almost all laypeople
and professionals considering the pandemic and sudden drop in employment and GDP.
One clear explanation is that the
Federal Reserve money may go only into the stock market because the real economic
segment did not ask for such a tremendous amount of credits since 2008. The Fed's monies found their liquid
way to the stock market - the only working mechanism of formal profit. The
whole ocean of liquid assets brings some profit as the stock market grows. The
Fed's money is credit money, however, which the debtors have to pay back at some
point. When this time comes, the stocks have to be sold and ... Well, is
it actually possible to sell stocks for 6-10 trillion dollars? When someone
starts to sell the first portion of, say, one trillion, the stock market falls.
This market fall will be enhanced by the worldwide spreading COVID-19 pandemic wave, growing problems in the real economy (the
USA and global), the LBM protests also conquering the US and other western
societies, and the US presidential elections in November. All in all, this looks
like a perfect storm approaching. All the stresses cumulate and create
conditions most expected by financial marauders - the whole bulk of extra Fed money will disappear (as a soap bubble) and the first who start to sell stocks will
get the largest part of cash. The bank will get extra money from the Feds - too
large to fall. The poor small investors will
lose everything. As always.
And as always, the marauders are the largest investors and
banks (Long live to BlackRock!)
I am in cash and worry about the risks for the banks where the electric signals representing my money reside.
I am in cash and worry about the risks for the banks where the electric signals representing my money reside.
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