The Fed Will Ignite The Next ‘Financial Crisis’
The comments above & below is an edited and abridged synopsis of an article by Lance Roberts
There is a general consensus that the markets have entered into a permanently high plateau, coupled with an overwhelming sense of complacency: Debt doesn’t matter as long as interest rates are low.
But rising debt levels have a negative economic consequence. Today it requires $3.83 to create a Reagan-era $1.00 of economic growth. Debt-levered economic cycles are a function of the ability to draw forward future consumption. But there is a finite limit to the ‘positive’ effect of a debt-driven economic cycle; eventually, the bill must be paid.
This particular debt-levered economy has been supported by the ongoing, and seemingly never-ending, monetary stimulus being injected by central banks.
Roberts discusses: Broke, more broke and levered up; pensions are broke; all levered up; and the Fed has lit the fuse.
“The next bear market will not be like the last,” says Roberts in closing. “It will be worse, because it will be spread across the entire financial ecosystem. Pensions, welfare, markets, debt, real estate and savings. I could be wrong. Hopefully, I am. But isn’t it worth having a plan in place just in case I’m not?”