When the crisis hits, the public will be like deer in headlights. They will have no idea what hit but it will be terrifying. Government policy of elevating stock prices artificially can only continue until the economy has been destroyed. We are very close to that point now.
The Federal Reserve Open Market Committee makes political decisions. Trying to evaluate them in terms of actually doing things to address real economic issues is a waste of time. QE has no historical precedent. QE is not supported by any academic theory, experiments or empirical evidence.
The Federal reserve is completely independent in every respect other than having to please those in politics who appoint members to their positions. Every member is on the committee out of personal interest. Any notion that the Federal Reserve is in place to aid rank and file Americans is completely false.
The job of the Federal Reserve is to generate wealth and income for the investor class. Hopes are the economy will right itself eventually and economic growth will pick up again. That won’t happen, Fed policy causes the nation’s resources to be allocated so inefficiently that growth starting from here is not possible.
Looking at the economy, investors, corporate insiders, media and the whole lot, it appears now as if a correction is thought to be unavoidable. But that’s not that bad as long as the correction is limited to less than ten percent. That way the “smart people” can say nothing abnormal has happened. After the correction has occurred it will be time to dive back in, of course. Starting about know, it makes sense that the Federal Reserve along with its friends who trade risk free will make an attempt at a controlled correction. For a temporary time span, I am thinking the attempts to inch higher each and every day will give way to a new initiative devoted to letting the market sell off peacefully and less than ten percent.
The Fed has been able to keep interest rates near zero for the longest time. This would not be possible if there was any demand for money. Still, they must feel brilliant and empowered. Of course, they feel like the masters of the universe but they are not. Fed members are lucky because every event so far has gone their way.
Chances are, a correction can be managed in the beginning but from this point any decline in asset prices has a huge potential for snowballing. Without the rich being able to draw on the new wealth the Fed gives them, GDP may very well drop in the red.
The fact that planning has replaced the free market system for determining stock values, any true correction will have to be abrupt. The controlled correction attempt may not work even though they are confident it will.