When Will The Stock Market Crash?

00_crashIf we were dealing with an honest normal market, it would go down sometimes for several years at a time. It would never crash like it did in 1929, 1987 or 2008. Even the bear markets of the 70s were partly due to government policy.

Crashes occur when government policy promotes high stock prices. Government policies come in all shapes and sizes. Following the great depression, derivative were mostly illegal. By the time the market crashed in 1987 derivatives had already become the tail that wags the dog. Stock prices lost their direct relationship to earnings. Even back then the practice of buying derivatives and then goosing the price of the underlying asset had  become popular. Today that practice is totally common place along with a multitude of new techniques for keeping stock prices moving higher independently of earnings.

The simplest technique is to simply not enforce laws if the result would cause any decline in stock prices. Today the practice of hyping a stock higher is so common no one notices. It is actually illegal still. Who cares if it makes the stock go up? Price manipulation to the upside is a government inspired, celebrated practice because it is compatible with the goals of all incumbents.

Friends of the Fed, trade risk free, provided they assist in raising stock prices,

Enough, Enough, Enough you say. Everybody already knows all of that.

The stock market may crash any day, but on any given day the odds are against it. But, it will crash and destroy the lives of everyone with stocks, IRAs, or a pension. That can’t be avoided. The damage that has been done is already to great.

There is one way a crash could be delayed for several more years. Privateer firms, friends of the Fed and many others have already made an exit. These firms normally prosper by scamming hedge funds, the public, short sellers especially, and anyone else who tries to profit by trading securities. These firms are having trouble making a go of it these days because all of the sheep have been sheered. There are no longer enough victims to go around.

Central banks have started buying outright. They have political agendas to carry ought. Investors can only buy stocks with the money they have earned. To central banks money is like grains of sand on the beach. They can have all the money they want just by deeming it into existence.

There are no central banks that will ever just say “the gig is up, sorry suckers, you lose. There is a realistic chance they will just absorb any supply that comes on the market for the foreseeable future. For central banks to buy enough stock in the Dow 30 components to have a controlling interest is completely feasible. They will do it as an alternative to giving up their jobs and admitting they have been dishonest.

If this happens, it will destroy the profitability of the world’s biggest corporations. Welfare for the rich causes the same behavior issues in the rich as regular welfare has on the poor. Corporate insiders are huge stockholders. Under honest conditions, stock prices reflect the success of corporations in generating profits for shareholders. If the Federal Reserve is driving the price of their stock up independently of profits and losses, who needs to work for a living? Heck, with all the free money the Federal Reserve is giving away it makes sense for the corporations to buy their own stock and goose the price. Folks get offended at high CEO salaries but they shouldn’t. Those are private contracts and the salaries are paltry compared to the masses made from the Fed, simply giving then their profit.

Central banks owning stock outright will completely destroy the real profits of the worlds largest businesses because it takes away incentives to produce efficiently.

If central banks continue the buy up supply route, expect stock prices to get real sluggish and drop over a number of years.

A crash is still the most likely resolution because the public is becoming more suspicious every day. Suffering is becoming more widespread. Without suffering, government policy appears good and no one worries. Cause common folk a little inconvenience and they get un-trusting very rapidly. With just a little more misery Americans might think deep enough to recognize Quantitative Easing and other asset enhancement initiatives as the welfare programs they indeed are. When even a small fraction of Americans knock of the scam, there is no way the Fed will be able to continue its political agenda. Then the market will crash.

As obvious as it is to just a few, the majority in the country still have no idea how much the corruption is costing them personally.

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About Fantasy Free Economics

James Quillian independent scholar,free market economist,and teacher of natural law. Who is James Quillian? Certainly I am nobody special, Just a tireless academic and deep thinker. Besides that, I have broken the code with respect to economics and political science. Credentials? Nothing you would be impressed with. I am not a household name. It is hard to become famous writing that virtually no one in the country is genuinely not in touch with reality. But, if I did not do that, there would be no point in my broking the broken the code. If you read the blog, it is easy to see that there are just a few charts, no math and no quantitative analysis. That is not by accident. Given what I know, those items are completely useless. I do turn out to be highly adept at applying natural law. Natural law has predominance over any principles the social science comes up. By virtue of understanding natural law, I can debunk, in just a few sentences , any theory that calls for intervention by a government. My taking the time to understand the ins and outs of Keynes General Theory is about like expecting a chemistry student to completely grasp all that the alchemists of the middle ages thought they understood in efforts to turn base metals into goal. Keynesian theory clearly calls for complete objectivity. Government can only make political decisions. Keynesian techniques call for economic decisions. So, why go any further with that? Fantasy Free Economics is in a sense a lot like technical analysis. Technical analysis began with the premise that it was impossible to gain enough information studying fundamentals to gain a trading advantage. Study the behavior of investors instead. Unlike technical analysis, I don't use technical charts. What I understand are the incentives of different people and entities active in the economics arena. For example, there is no such thing as an incentive to serve with life in the aggregate. In the aggregate, only self interest applies. It is routinely assumed otherwise. That is highly unappealing. But, I am sorry. That is the way it is. I can accept that because I am genuinely in touch with reality. Step one in using Fantasy Free Economics is for me to understand just how little I really know. A highly credentialed economist may know 100 times what I do based on the standard dogma. Compare the knowledge each of us has compared to all there is to know and we both look like we know nothing at all. There is always more than we don't know than what we do know. I am humble enough to present myself on that basis. Why? That is the way it is. I am not bad at math. I have taught math. What I understand is when to use it and when to rely on something else. Math is useless in natural law so I don't use it. While others look at numbers, I am busy understanding the forces in nature that makes their numbers what they are. That gives me a clear advantage.
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