Americans are going to have their wallets rocked in 2016: 7.5 year global business cycle trumps central bank money printing.
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Americans are already in the process of having their wallets devoured by shadow inflation and a system that is gutting the middle class like a turkey being stuffed for the oven. We’ve been in recovery according to various money oracles since 2009 but all we got was a drop in the homeownership rate, stagnant incomes, and a middle class that is now a minority. The central banking experiment has simply funneled more money into the non-productive financier class. Regular working families continue on a downward spiral of working poverty and living on the edge of a paycheck to paycheck existence. While central banks feel they are successful all they have done is fueled the flames of low wage capitalism and predatory crony welfare for the connected. What is interesting is that despite all of this intervention into what is suppose to be a “free market” the business cycle is rearing its ugly head. The 7.5 year business cycle is here and it is going to rock your bank account.
7.5 year business cycle
There are various theories regarding the business cycle. Markets are a reflection of wants and desires of people. After the Great Recession, people were tentative when it came to spending money. But once the memory of the past goes away, people relax and start spending. Eventually the recession is forgotten and spending habits reemerge. Companies try to anticipate this new demand and in many cases start over producing with wild optimism. Suddenly, there is a disconnect between demand and supply and things correct. You can see this in China where commodities are taking a major hit since China is slowing down.
The market cycle has been working like clockwork since human psychology is slow to change even in the face of massive technological innovation and unprecedented central bank intervention. Take a look at this chart:
Global stock markets are now in an official bear market (they are down 20 percent from their high in May 2015). All of this digital printed money has created “wealth” for those that are connected but ultimately it is hard to fool the true market especially when consumers are getting slammed.
Do you really think central planning can figure out the true desires of 7.4 billion people living on the planet today? Or what about the more than 320 million people living in the United States alone? Of course not. This is foolish since the desires of people have such a wide variance that a top down prescription is not going to work. What is even more troubling is that recent top down policy has helped in sucking up what little wealth the working and middle class had and pushing it all the way up to the few.
The 7.5 year business cycle is interesting. It is also very common. This is why it is interesting to see central banks so aggressive in trying to stop the market. In essence, they are trying to stop the market from doing what it does. The end result is that it has made people poorer. Stock markets have wiped out a good amount of paper wealth recently:
Global stocks have now wiped out $15 trillion in wealth in a matter of a few months. But look at how much was gained since 2011. This correction was bound to happen and reflects the irrational exuberance that has hit over the last few years thanks to central banking digital money printing.
Most Americans have been spending via debt. The Fed has inflated its balance sheet to nearly $4.5 trillion by taking up toxic assets from banks around the country. This allow banks to lend once again to cash strapped Americans. So people went out and bought cars (on debt), went to college (on debt), and purchased homes (on debt). Even credit card debt has soared. But all this means is that you are spending your future earnings on today’s consumption. That is what led us into the Great Recession last time and the only people exiting in good shape where the banks because the Fed looks out for them first. The rest of the country is going to be eating out of the austerity bowl once again. After looking at the chart above, do you really think that central banks have the power to curb the business cycle?