It was the best of times, it was the worst of times, it was the age of QE, it was the age of fiscal foolishness, it was the epoch of the Fed Put, it was the epoch of Greater Fool Theory, it was the season of golden light, and it was the season of fiat darkness.
IT’S ALL ABOUT LIQUIDITY.
Central banks created currency units and levitated stock and bond markets since the financial crisis over a decade ago.
1)
Central bank balance sheets exceed $20 trillion. They created (from nothing) trillions of fiat dollars, euros, yen, Swiss francs, and pounds.
2)
Digital currency units purchased bonds which forced interest rates down to near zero. Trillions of dollars in sovereign debt “pay” negative interest. This is central bank nonsense.
3)
Other currency units purchased stocks and sent them skyward.
4)
Global debt increased to over $250 trillion, a stratospheric ascent.
5)
Fiscal and monetary sanity collapsed.
Central banks pretend to have a plan but privately they buy gold.
6)
And now we have “not QE.”
The direct beneficiaries of QE, “not QE,” bond monetization, and massive debt creation are the financial markets, stocks and bonds. Those paper and debt-based assets are primarily owned by the upper 10% and particularly the upper 1%.
Central banks take care of their own.
The lower 90% accumulated debt—larger mortgages, student loans, car loans, and credit card debt. The upper 10% increased their net worth during the last ten years while the lower 90% fell deeper into debt.
“The size, speed, and breadth of the latest debt wave should concern us all.”
“History shows that large debt surges often coincide with financial crises in developing countries, at great cost to the population.”
THE TWO MARKETS – S&P 500 INDEX AND SILVER:
The S&P 500 Index represents large stocks that rallied based on QE, massive debt, stock buybacks, greed and monetary euphoria. Think paper assets.
Silver is a metal, a real asset, necessary for electronics, cruise missiles, solar panels and hundreds of other uses. Prior to the century long “age of paper,” when the U.S. descended into the deceit of central banking, silver had been money in hundreds of cultures for several thousand years.
Central bankers can’t “print” silver, but they can “print” digital currency units. Consequently, silver gets little respect and no support from the political and financial elite. Silver prices inevitably rise as governments and central banks devalue the dollar. They rise and fall with confidence in the financial economy, fear, investor desire for real assets, and mining supply.
Fifty years ago, silver prices (1969) were about $1.80. In late 2019 silver sells for less than $18.00,
nearly ten times higher
.
But the S&P 500 Index in 1969 was about 100 and today it exceeds 3,200,
about 32 times higher
.
Central bank “printing” supports the S&P more than silver prices.
Examine the log-scale graph of the S&P for about 50 years. Note the exponential price rise, the bubble in year 2000, collapse in 2008-09, and the astounding (unsustainable) rise during the past decade.
In 2009 the S&P fell below 670. Today it is five times higher after a 28% rise in the past 12 months.
On the monthly, weekly and daily charts (below) the S&P 500 Index is over-bought, too high and ready to fall
. However, it has been over-bought before and rallied further. Central bank injected liquidity has amazing power to levitate stocks, despite weaker earnings, high P/E multiples, ugly news, excessive leverage, and circling “black swans.” It will fall, perhaps soon. The trend remains up, but is stretched thin.