Our global economy is now being held together by Central Planning. Who does the planning? It is our Central Banks and their proxies. In the USA we have a central bank called the FED. This entity has computers and algorithms which can manipulate our stock, bond, and derivative markets with the click of a computer key. As I write they are manipulating the markets UP even as sentiment is negative (down).
The general sentiment for our stock market has been 70% negative for weeks even as our Central Planners ignore this reality and pump UP our markets. Japan does this in spades as their Central Bank trades the markets daily and suppresses interest rates to maintain prices at fixed levels. This diabolical behavior has been happening for years in Japan. It is now also happening in many other markets (globally).
In the USA we have high inflation (over 9%) so our FED now must deal with this problem by hiking up interest rates (the so-called Fed Funds rate). As this rate goes up and up it affects most other rates (like the mortgage rates). As I write the average mortgage rate is 7% and this is an increase of 60% in the last six months. All this Central Planning will bring our markets to a CRISIS situation by the end of 2022 IMO.
Few seem to understand what has happened since the last financial crisis of 2008 - 10. Since this period our Central Planners (the Central Banks) has dropped interest rates to near zero and pumped up stock prices by over 400%. Real estate prices were also pumped up by nearly 100% during this period. My home price is now double what I paid for it in 2013 (just 9 years prior). Real estate is now in a huge bubble.
But all this is coming to a halt in 2022 and 2023. Our Central Planners now want to RESET the markets with new policies once the CRISIS has created a serious recession. So far the recession (which will turn into a depression) is reaching a crunch level. I expect a recognized recession to be obvious by the END of 2022. Then in 2023 we will continue this recession...which will eventually turn into a depression.
We live with digital money which has NO stability. When the markets finally decline to recession levels, DEBT will become the problem. Our markets have depended upon growing debt and low interest rates and all this is reversing as I write. I expect that a CRISIS situation will emerge by the END of 2022. Once our DEBT is exposed as unpayable, then our politicians will panic and make the problem WORSE.
I expect this to happen in 2023. The coming election in the USA is in 22 days. If this election reverses the sentiment within our Congress (which is likely) then new policies will be adopted. These new policies will likely focus on our problems and once this happens the PROBLEM will get MUCH worse. So far our DEBT and deficit problems have NOT been addressed. This could change big time after the election.
The Biden administration is HOPING for a win in November. If this happens, then my scenario could be invalid. My sense is that the Biden administration will lose the election, however, and this means a reverse in policies going forward (after this election). The sentiment is mostly negative for the Biden administration so winning this election in 22 days could be difficult. But anything could happen as the mood in America is volatile.
Our economy is now dependent upon this election on November 8. Will the democrats win and hold the HOUSE and SENATE? They currently have control over both bodies. But if the republicans win and control both bodies, then events could change quickly. The mood among the people is for change IMO. But both the democrats and the republicans are not supported with conviction. This makes everything UNCERTAIN.
American's are wavering from day to day on most issues of politics and economics. The next 22 days will be crucial for determining what will happen. As I write the economy is tanking, the sentiment of investors is tanking, and the general mood of the voters reveal concern and uncertainty. My sense is that BIG changes are looming on the horizon. Watch the election on November 8 and witness the RESULT! I will do the same!
I am: Donald B. Swenson, Economist/Philosopher, donaldswenson.blogspot.com. Also, http://kingdomecon.wordpress.com.
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