{"id":44107,"date":"2019-02-27T16:10:38","date_gmt":"2019-02-27T21:10:38","guid":{"rendered":"https:\/\/olduvai.ca\/?p=44107"},"modified":"2019-02-27T16:10:42","modified_gmt":"2019-02-27T21:10:42","slug":"the-doomsday-scenario-for-the-stock-and-housing-bubbles%ef%bb%bf","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=44107","title":{"rendered":"The Doomsday Scenario for the Stock and Housing Bubbles\ufeff"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"http:\/\/charleshughsmith.blogspot.com\/2019\/02\/the-doomsday-scenario-for-stock-and.html\">The Doomsday Scenario for the Stock and Housing Bubbles<\/a><\/h3>\n\n\n\n<p><em>It was always folly to believe that inflating asset bubbles could solve the structural problems of a post-industrial economy.<\/em><\/p>\n\n\n\n<p><strong>The Doomsday Scenario for the stock and housing bubbles is simple: the Fed&#8217;s magic fails.<\/strong>\u00a0When dropping interest rates to zero and flooding the financial sector with loose money fail to ignite the economy and reflate the deflating bubbles, punters will realize the Fed&#8217;s magic only worked the first three times: three bubbles and the game is over.<\/p>\n\n\n\n<p><strong>So what happens when punters realize there won&#8217;t be a fourth bubble? They sell.<\/strong>\u00a0Bids disappear because who&#8217;s dumb enough to bet (with Japan and Europe as lessons) that more liquidity and negative interest rates will magically work when zero interest rates didn&#8217;t move the needle?Who&#8217;s foolish enough to catch the falling knife (i.e. buying plummeting assets on the way down) on the unsupported assumption that the next dose of Fed magic will reverse a bidless market?<\/p>\n\n\n\n<p><strong>And should the Fed start buying stocks, mortgages, housing and bonds to prop up those bidless markets, what&#8217;s the message it will be sending? Desperation.<\/strong>If the only buyer is the money-printing central bank, that&#8217;s pretty good evidence that your economy and markets are in free-fall.<\/p>\n\n\n\n<p><strong>The loss of faith in central bank magic will be gradual at first, as magical thinking dies hard.<\/strong>\u00a0It&#8217;s oh so comforting to believe the central bank will rescue every overleveraged mal-investment and bail out every high-risk speculation, but the funny thing about the Fed&#8217;s magic is\u00a0<em>it only works in liquidity crises&#8211;in every other condition, it only makes matters worse.<\/em><\/p>\n\n\n\n<p>&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Doomsday Scenario for the Stock and Housing Bubbles It was always folly to believe that inflating asset bubbles could solve the structural problems of a post-industrial economy. The Doomsday Scenario for the stock and housing bubbles is simple: the Fed&#8217;s magic fails.\u00a0When dropping interest rates to zero and flooding the financial sector with loose [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[127,7170,1583,587],"class_list":["post-44107","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charles-hugh-smith","tag-doomsday","tag-housing","tag-of-two-minds"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=44107"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44107\/revisions"}],"predecessor-version":[{"id":44108,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/44107\/revisions\/44108"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=44107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=44107"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=44107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}