Why This Market Needs to Crash—And Likely Will
All the efforts to extend today’s sky-high asset prices are drawing to a close, and the ending will be ugly. As prices correct, dazed investors will lose trillions of market value, likely quite swiftly.
But how was it supposed to end differently? The entire premise of what the Federal Reserve has been attempting to do is completely preposterous. They have ignored (or have been ignorant of) the risks of everything from moral hazard, to historical precedent, to the role of incentives on human behaviour, to common sense.
And just as happened in 2008, the accumulating instabilities within the system will reach a tipping point where they can no longer be suppressed. Deflation will escape from the box the central banks have been desperate to keep it in, and will quickly make up for lost time. A lot of wealth will be destroyed very quickly.
The sooner this happens, the better. Crash now while there’s still chance of picking up the pieces and making something useful from them. The longer we fend off the inevitable correction, the more destructive it will be and the more difficult it will be to recover from.
Why risk taking the overdrafts to such extreme levels that the future is ruined for generations? Or ends in the sort of global warfare that can result from economically wounded nations lashing out instead of holding themselves to proper account?
The boomer generation has a lot to answer for in this story, from their inability to lead boldly to their selfish pushing-off of the repercussions of their own poor decisions onto future generations. More simply put: We not only need a market crash, but deserve one.
So, with that somber realization in mind, what to do? The best advice is to position yourself for crisis before crisis arrives.