Markets Are Expecting The Federal Reserve To Save Them – It's Not Going To Happen – Alt-Market.us (alt-market.us)

This article was written by Brandon Smith and originally published at Birch Gold Group

 I have said it many times and I’ll probably say it again: 

Stock markets are a trailing indicator of economic health, not a leading indicator. Rising stock prices are not a signal of future economic stability and when stocks fall it’s usually after years of declines in other sectors of the financial system. Collapsing stocks are not the “cause” of an economic crisis, they are just a delayed symptom of a crisis that was always there.

Anyone who started investing after the crash of 2008 probably has zero concept of how markets are supposed to behave and what they represent to the rest of the economy. They have never seen stocks move freely without central bank interference and they have only witnessed brief glimpses of true price discovery.

With each new leg down in markets one can now predict every couple of months or so with relative certainty that investor sentiment will turn to assumptions that the Federal Reserve is going to leap in with new stimulus measures. This is not supposed to be normal, but they can’t really help it, they were trained over the past 14 years to expect QE like clockwork whenever markets took a dip of 10% or more. The problem is that conditions have changed dramatically in terms of credit conditions and price environment and it was all those trillions of QE dollars that ultimately created this mess.

Many alternative economists, myself included, saw this threat coming miles away and years ahead of time. In my article ‘The Economic End Game Continues’, published in 2017, I outlined the inevitable outcome of the global QE bonanza:

“The changing of the Fed chair is absolutely meaningless as far as policy is concerned. Jerome Powell will continue the same exact initiatives as Yellen; stimulus will be removed, rates will be hiked and the balance sheet will be reduced, leaving the massive market bubble the Fed originally created vulnerable to implosion.

An observant person…might have noticed that central banks around the world seem to be acting in a coordinated fashion to remove stimulus support from markets and raise interest rates, cutting off supply lines of easy money that have long been a crutch for our crippled economy.”