In response to the self-inflicted economic depression the US and the world have subjected themselves to due to the Covid-19 panic. The US and world central banks have embarked on an unprecedented amount of money printing and fiscal deficit spending. The issue is that the money is being created out of thin air.
This has had the effect of taking asset markets to all time or near all time highs. This has certainly benefited the investing and wealthy classes of society but has not generally been effective in helping the average person.
The problem is that now that we have decided to enter the roach motel of quantitative easing or money printing (as I prefer to call it), if we stop printing we will see the asset price collapse that the QE was designed to keep from happening in the first place.
Like the roach motel advertisement; once roaches check in they never can check out.Once you start printing you can never stop or you get an economic collapse.
Great article from Acting Man website on this:
It started out with Jay Powell planting a happy little money tree in 2019 to keep the repo market from suffering a terminal seizure. This essentially led to a restoration of the status quo ante “QT” (the mythical beast known as “quantitative tightening” that was briefly glimpsed in 2018/19). Thus the roach motel theory of QE was confirmed: once a central bank resorts to QE, a return to “standard monetary policy” becomes impossible. You can check in, but you can never leave.
It is easy to see why. Any attempt to seriously reduce outstanding central bank credit will bring about the very situation QE was intended to prevent, i.e., falling asset prices and an economic bust. Seemingly no-one in officialdom ever stops to ask why that should be so. What happened to “self-sustaining recoveries” and “achieving escape velocity”? Could it be the economy is neither a perpetuum mobile nor a space ship?
This is why asset prices can keep going up even as economic fundementals get worse. I also refer to it as Project Zimbabwe. (credit to Harris Kupperman)
Embrace the suck and know you can’t change it. How can you profit should be the question.
I think real assets will flourish in this environment; gold, bitcoin, uranium, oil, etc.. and the companies that produce them.
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