Monetizing the Markets, the Next Stage? Gold Implications
Christopher Laird, October 23rd, 2009
Page 1
Around 2005, I wrote an article that predicted that when the US housing bubble broke, there would be a stock/financial crash - and this:
"When markets collapse, the US Fed and other central banks will end up having to buy up the markets, and basically monetize them...in the $trillions"
I don't remember the exact quote but that is what I said. Well, here we are. The Fed has spent $3-4 trillion directly, and another roughly $19 trillion buying/guaranteeing bad assets and giving mortgage bonds and such support. The ECB also did roughly $4-6 trillion of market bailouts/backstopping. Japan and other central banks have done similar amounts.
Even Saudi Arabia and China have been putting a floor under their stock markets over the last year.
It happened - Monetization
What I predicted effectively has already happened. Central banks have monetized the markets to the tune of tens of $trillions worth. When I first wrote that, I thought to myself, ‘how will they actually do it? Surely, they cannot monetized $ten or twenty trillions?' Well, they have, and they are.
(Monetizing markets means central banks buy up troubled assets, stocks, etc with public money, putting a floor under them- another term they use for this is ‘quantitative easing'. One major way they all do this is to buy stock futures.)
Then, what really got the Chinese upset this year was when the US started ‘quantitative easing' which put simply is them buying up everything with printed money, and putting a floor under any markets deemed in trouble. The US had to back off from this- this Summer- after China had been complaining very loudly about this for the last year.
It's estimated that half of all stimulus money and bailout money the banks got was not re lent by the collapsing financial institutions like banks, but was either held to repair their capital liquidity, and the other half plowed right back into the equity markets. They speculated and are speculating with all that money - with the full knowing of the Fed, the BOJ, the ECB, China's central bank, Bank Rossi -Russia - you name the central bank, they are all doing it, and massively.
Monetizing markets is exactly, exactly, what has been done.
It has been said that the US bought half of their own bonds in Q2 2009, and that sent the Chinese into a rage...and the US backed off...supposedly anyway.
The economy is not supporting the markets
Evidently, a decision was made in late 2008, and probably 2007 too, to monetize the markets worldwide on a massive scale. The results show too in the stock indexes.
Why is it that, when the US is LOSING 500,000 jobs a month markets rally 60%? And with US unemployment publicly about 10%, but actually roughly double that, since if they computed the unemployment figure the same way before Clinton was president, US unemployment would be over 17% now? (ShadowStats)
Why is it with these massive job losses, and corporate profits getting squeezed hard at this juncture, that the US and other world stock markets boomed 60% over the last 6 or 7 months?
It's not the public doing it
It's said that there are 3 to 6 $trillions in US money market/various funds mostly sitting on the sidelines, IE many average US investors stayed mostly out of the stock markets. Also it's stated that many investors are not going back into the stock markets, this would be worldwide, nor will they return en masse either. So, why did markets rally 60%? They were monetized, that's why. A floor was put under them.
