Monday was the day the world’s capital markets turned into a giant fiat money casino. Consider yourself forewarned. You might be able to trade your way to profits in this market on the tide of easy money being printed now by the Federal Reserve and the European Central Bank (ECB). But the financial markets are setting up for the mother of all collapses.
Prior to last Monday, I had imagined that the end of the super-cycle in fiat money would take years to unfold. I’m revising my forecast. The end may be approaching even faster than I expected. The piecemeal nationalization of certain industries…the transference of private sector liabilities to the public sector’s balance sheet…the abrogation of contract in the form of defaulted mortgages that are not foreclosed on…and the ever-rising debt-to-GDP ratios were all signs that governments everywhere were sucking the life out of the economy to preserve the status quo, while simultaneously turning dozens of firms and institutions into zombies with no real productive economic future.
But Monday was a day that sent a bit of a chill down my spine. Granted, the ECB’s €750 billion bailout package did wonders for various financial markets. And if you’re a speculator – and especially a high- yield bond hunter – why not get on the gravy train? If the ECB is going to print money to buy public and private sector debts to “ensure depth and liquidity” in certain markets, it’s not a trend you want to fight. For now.
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