Those that watched their stocks steadily increase in value for years are now seeing all of that “wealth” disappear at a staggering pace. The only way you actually make money in the stock market is if you get out in time, and many Americans are discovering that all or most of their gains have already been wiped out. At this point, the Dow Jones Industrial Average has dipped below where it was at the end of the 2013 calendar year. That means that nearly two years of gains have already been obliterated. On Friday, the Dow was down another 272 points, and it is now down more than 2200 points from the peak of the market back in May. For months, I have been detailing how things were setting up for this kind of financial crash in
, and now events are playing out just as I warned. But this is just the beginning – what is coming next is going to shock the world.
Deflation Stalks World Economy
Despite what the Federal Reserve would have you believe, inflation is not a good situation. It does, however, have many advantages over deflation.
Those two polar extremes appear to be hitting Main Street at the same time.
Earlier this week, as the markets uncoupled again, the talking heads were quick to explain this was a retest of the previous week's lows so it was a good time to start buying the market again. Even today, after two days of China's market being closed entirely which allowed some additional gains, the Wall Street boosters are still trying to revive interest from the common household in the stock markets.
But then the specter of a global deflation started stirring in the shadows.
What is deflation? Deflation just isn't the opposite of inflation, deflation occurs when output (productivity) and commerce (trade) slip jointly. The last time there was anything close to global deflation was in the early 1930s.
Inflation can be accomplished either of two ways. As the central bankers of the world re-proved, inflation can occur when existing fiats are overprinted and thus the cost of items is artificially raised, giving the illusion of prosperity. Inflation can also occur from demand exceeding supply which results in increased price as suppliers scramble to fill the void. This type of inflation is good because it generates more real wealth for society to share and is not artificially contrived by government insiders.
Since the current problem is deflation, even with devalued fiats, an honest marketplace would have been screaming like Don Ameche in "Trading Places" to his agent on the orange stock trading floor "Get back in there and Sell, Sell, S-E-L-L!!!" But then again, like the fake movie market, today's stunning over-valuation would not have happened without the massive intrusion of central banks around the globe over the past seven years.
Companies listed on the exchanges have aided and abetted the central banker corruption with massive amounts of stock buybacks--on credit.
Thus we are reminded over and over by the Wall Street pushers, the U.S. economy is moving along nicely and that the rest of the world's collective problems are not going to affect Wall Street. It is as the lesson of 2007's Lehman Brothers catastrophe never happened.
What pushers of Wall Street would have you believe is the 16,000 level for the DJIA or the 1850 for the S&P 500 are blinking green buy lights.
The Wall Street accounting doesn't compute well with Generally Accepted Accounting Principles.
By GAAP reported figures to the SEC officials, the year-over-year earnings on net income for the largest 500 U.S.-based companies came in at $97.32 per share for June 2015. In June of 2014 the same companies reported for the same previous time frame net income of $103.12 per share. Where's the growth?
The buy-buy-buy mantra from the stock pushers is almost as criminal as the heroin pushers' mantra of buy-buy-buy. Unless you willingly close your eyes to fact, there is no way this chasm is reconcilable. It is almost as bad as the global warming crowd's love affair with demonstrably false doctored temperature data. If the news was all that bad, there'd have been no need to alter it or ignore non-conforming readings.
The world's financial centers are at a critical tipping point. The unrestricted printing press runs by the central bankers have created a bubble that contains far more poisonous material than the derivatives swaps trade ever imagined before it burst in 2007 in the housing sector.
The Chinese devaluation of the yuan is the current epicenter of the global deflation. But every area that was swollen by China trade is now susceptible to a severe shaking.
Two points of interest that will confirm this susceptibility are America and Brazil. The governments' central banks in both places have exploded their balance sheets. Yet the consumers in both countries are not joining the "buy, buy, buy" mentality hoped for. Instead both countries masses are not expanding their purchasing opportunities but are trying to gain some control of their overflowing debt.
That is why the dumbfounded, halting explanations for the lack of spending when energy prices fell earlier this year. The government flacks failed to recognize there is a point where even the uneducated know they cannot spend more than they can repay.
Both countries' fates are tied very closely to the Chinese trade. The devaluation by China is a hammer blow to the knees of the Brazil and America government planners. While America's government talks excitedly about the lowering trade deficit, they are missing the fact trade around the globe is slowing because the answers to this problem strike at the heart of a reckless movement to push climate change ahead of economic consideration. With sound economic trade, none of government's hoped for solutions will work.
Despite what the addicts of Wall Street proclaim, bear-human encounters inside America are climbing rapidly this year and Wall Street is not immune.
"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson
Please note: There will be no Rant published on Monday, Sept. 7. The next Rant will be issued on Tuesday, Sept. 8. Enjoy Labor Day--Mike
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