Warning: Another Crash is Coming… and It's Going to be Bad Dear Money & Crisis Reader, Stock markets are exploding higher right now. As I write this, the S&P 500 has just broken back over 3,000. The market is now up over 35% from its late March lows. Why is this happening? After all, the U.S. economy is clearly in a depression. Nearly 40 million Americans have lost their jobs. Many economic metrics are showing their largest declines in history. This is happening because central banks have just printed $4 trillion and funneled it into the financial system. To put that number into perspective, it is nearly as large as the GDP of Japan – the third largest economy in the world. And central banks have done this in a mere 12 weeks! Taken together, this is an even larger monetary intervention than the one central banks employed during the Great Financial Crisis of 2008. Just compare the jump in the Fed's balance sheet over the last month to the one that occurred in 2008 (red circles in the chart below). The difference is truly incredible! However, printing money is a very different thing from creating jobs or economic growth. And while stocks might be moving into "la la land" based on the Fed's easy money, I am increasingly concerned that the U.S. is facing a prolonged economic collapse or the Great Depression 2.0. Put another way… thanks to the Fed, stocks are having a sugar high right now. But the reality is that going forward, the markets have a VERY difficult economic environment to stomach. If you don't believe me, consider what Warren Buffett is doing today compared to what he did during 2008. |
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