As yours truly, David Stockman and Mohamed El-Erian continue to warn their followers that a big stock market decline and a severe recession are coming down the pipeline.
David Stockman:
- “The worldwide central bank money printing spree of the last two decades has generated massive excess capacity and mal-investment all around the planet.”
- “What is coming, therefore, is not their father’s inflationary spiral, but an unprecedented and epochal global deflation.”
- “So the central banks just keep printing, thereby inflating the asset bubbles worldwide. What ultimately stops today’s new style central bank credit cycle, therefore, is bursting financial bubbles. That has already happened twice this century. A third proof of the case looks to be just around the corner.”
Mohamed El-Erian:
- Financial markets have grown addicted to central bank easing, and that addiction could cause a heap of trouble when central banks tighten the credit spigot.
- “It reminds me a little bit of 2007 and 2008,” when investors tried to discern when the turn would come away from easy credit conditions, El-Erian said. “I’m not so confident that I will see the turn coming, and turns tend to happen quite quickly.”
I couldn’t agree more. The only remaining question is…….are the US Equity markets currently going through a 9 month distribution or consolidation period? If distribution, the time to pay the piper may be soon at hand.
