At the beginning of this new week, again we saw a minor bear market in the NYSE. The DOW Jones only fluctuated roughly 100 index points within the span of the day, comparing the openings of the past few weeks it seems more stable. Is the market really “stable”? Was this past few weeks a minor liquidation of bad assets, that resulted in a crash in the markets, or is there a more serious underlying issue?
Considering the Fed is going to decide on whether to finally give some sort of “tightening” to the markets, might be the major role in this seemingly speculative stability. The question is whether or not the 0.25% interest rate hike, if allowed, will actually do anything at all? As stated earlier this will not do any significant change, it might cause a speculative bubble at the most. This is because, now that interest rates have gone up a tiny bit, it will show traders that maybe there is still some value to the dollar after all. Considering the interest rate will only be a 0.25% rise, it will not be significant in its aims at contracting the expansions the Fed made in the rounds of QE.
But the underlying issue still remains on what is currently happening to the markets, its like a wheel falling off of your car, all the nuts and bolts are missing ,besides one last very loose one, and you decide to tighten it by cranking the tire iron a couple times. Will that honestly achieve any hopeful results?
The fact is that the monetary printing of the federal reserve has gone on for far too long, and is now in a stage where all of it’s assets are pyramided so tremendously that it can only end in a bust. It can only truly collapse, and it will be a bad collapse. This is because the United States has been leveraging loans continually, for free, for over 6 years straight, yet we have not seen any significant growth! Considering the PPI has not had any significant change over the past 5 years, compared with stagnate new order capital goods shows us that people are not spending money on capital goods. Also, not creating more capital goods where prices should be falling. In a healthy economy prices should fall! This is because over time technology will produce more of a given product, causing the supply to shift rightward, which will correlate to a fall in prices. The fact that the index has not had any significant fluctuations over the past 5 years, keeping supply constant and increasing the demand for capital goods, shows that the rise in asset prices has not gone to any real production, rather just an over-valuation of the asset prices.
If you look at the GDP we see a steadily rise, yet that is only the asset prices rising. Asset prices rising, without any increase in capital, means there is an asset bubble. This asset bubble, as stated before, comes from the strictly easy money policy of the Fed. Can the rate hike help? At best it will prolong the economic disaster for a while longer, and people will be duped yet again by the “omnipotent” cartel we refer to as the Federal Reserve.
Also, strangely enough, we will be tuning in to watch the Republican debate on September 16th. This debate will go along the same lines as every other debate, where politicians are capable of dodging questions, and not giving clear decisive responses. I doubt the actual cause of the stock market turbulence will even be brought up, as the politicians do their best to lie to the American public as to which one of them is better for the “job”. Obviously, for sound economic theory, I must support Rand Paul. The nationalists, like Trump, will continually blame the natural division of labor that brings us all the amazing things we use today, and it will be interesting to watch. This week will be a big week for the United States’ Political Economy.