Market Crash 2018-2020
August 2018 Update:
So far, 2018 has been reminiscent of 2017 in so far as we’ve seen the Fed and other key central banks do surprise intrusions to keep the party going and support a common view the U.S. economy is at risk of overheating (which is why interest rates have to rise, don’t ya know). These surprise intrusions have had an impact on the Greedometer 12 sequence, on stock, bond, and commodity markets, consumer confidence, and the economy.
All Greedometer® sequences have been stopped (at different levels of maturity) by new and increasingly desperate central bank actions -and threats of actions. However, when a sequence has been stopped, a new one loads with less risk-on holiday time than was seen before the launch of the previous sequence. This is key! The time between Greedometer sequences has obeyed an exponential decay function as follows (from 1999 to now). This clearly shows that monetary policy is reaching the end of its efficacy.
Isn’t it interesting that the velocity of M2 money in the U.S. has slowed during the same timeframe to new all time lows (granted it has climbed a little over the past year)? Monetary policy becomes less effective as velocity of money slows. So central banks have needed to take more desperate and more frequent actions.
The Greedometers show that central banks have been keeping bubbles from imploding (or imploding worse) for the past 19 years. Central banks can only keep doing this as long as their tools remain viable, and as long as their institutional leaders remain credible. As of 2018 monetary policy ammunition is all but used up –and is becoming less effective. So global central banks are all trying to back away from their QE programs as gracefully as possible. All that’s left is a global helicopter money drop –and that was threatened in January 2017 by the Fed’s Brainard. Imagine the wave of global food & fuel inflation if a coordinated helicopter money drop were to occur. The bottom 60% of income earners in the U.S. would get crushed. The same in every other western economy. The bottom 90% would get crushed in India and China.
So 2018-2020 may finally see a Greedometer sequence not stopped by central banks –because they can’t. A stock market crash would burn itself out via market and economic forces. This has not happened since 1929-1930.