Things have taken an unexpected turn.
The FED decided to tell everyone last week that they were only joking about raising interest rates after all ( much like they were only joking about keeping them at 0% and we're going to raise them any minute ).
It's party time again. No one seems to think they are perhaps "talking the market up" in the same way they have for the last ten years when the shoe was on the other foot.
None the less, this move has come out the blue ( 2 days after the Davos (biggest cunts in the world ) meeting ) and has startled quite a few people.
I keep an eye on Credit deflation and the reflation cycle to come
and I hope to go they are right that we'll see a collapse before the loons go all in with their money printing.
However, a number of people have started mentioning "crack up booms" since the FED changed tact and if you stand back and look at it, we could be on the edge of hyper inflation, i.e. no credit deflation. This is a terrifying prospect.
I suppose this is a bit of a contraion view to the credit deflation thread though there are plenty signs of this too. I saw on TOS someone was complaining they were only getting 0.5% more on their savings rate compared to 12 months ago....18 months ago you'd have bit their hands off.
Speaking to a few people in the UK things seem to have been going down hill, 2 car jackings in Brum for friends of friends and 1 threatened knee capping robbery in broad daylight.
Anyway, thoughts please on...
Reviewed by Will Kenton
Updated Apr 10, 2018
What is a Crack-Up Boom
A crack-up boom is the crash of the credit and monetary system due to continual credit expansion and price increases that cannot be sustained long-term. Often, banks will attempt to prevent a crack-up boom by halting credit expansion,
>>> TheCON: That's where we are at right now
which ends up backfiring and yielding the same results that the boom would have caused.
>>> TheCON: Which might be why the FED is backtracking.
Both scenarios result in an economic depression when the bubble finally bursts and the economic system crashes.
BREAKING DOWN Crack-Up Boom
When the economy is down, one way to give it a temporary revival is to feed extra money into the system — AKA economic stimulus.
>>> TheCON: QE.
Providing people with credit makes them feel richer and more inclined to spend their money,
>>> The CON: Those Audis aint going to buy themselves.
which in turn feeds more money into the system. When people spend money, they tend to want to continue this trend and continue to buy, despite the fact that their extra cash isn't coming from actual savings. The problem comes when the government continuously pours more and more money into the system and the actual economy beneath the false expansion cannot keep up.
Feeding money into the economy is a quick way to give it a short-term boost,
>>>The CON: Sounds familliar.
but this practice isn't sustainable over the long term. If credit expansion continues without limit, prices continue to rise until they reach the point at which the entire system collapses because it can no longer sustain itself. People can no longer afford the high prices, so credit must expand even more to accommodate these prices, which pushes them even higher.
What Type of Economy Can Be Hit by a Crack-Up Boom?
>>> The CON: So the FED are either doing the bankers talk and will continue tightening or go for Broke.
A crack-up boom is something that can only happen in an economy that relies on paper money rather than the gold standard,
>>> The CON: Pretty much everywhere then.
or electronic systems of monetary transaction rather than physical. In a gold standard economy, interest rates cap out at around 3 to 6%, since credit is based on actual saved money, instead of being adjustable depending on the circumstances. However, in a system that revolves around paper money, more cash can be printed at any time and introduced into the system. This affects the value of each dollar and affects the prices of market commodities. When the government introduces into the economy money that doesn't really exist (in the form of false credit), it's only a matter of time before the economy is damaged, even if the original intention was to boost it.
>>> The CON: Not even sure they intended to boost it, they wanted to save it. Maybe the $ and £ is so ****ed them have no choice buy to keep printing and take the hyper inflation. The elite will use it to buy everything and we all end up f**ked, slaves, poor, starving, soldiers.
>>> The CON:. Take your pick, it's a collapse followed by f**ked or straight to f**ked. I'm loading up on gold either way. All I wanted was a fair priced house, what I'm facing is Armageddon. If DB is right we'll all get a chance to save ourselves if we see the collapse, but from what I see they're just going to go for it.
Things to watch: What the ECB does. What the BOE does. Wasnt convinced by the January rate rise but if the FED are talking the market up then the BoE will raise soon, so will the ECB. If this happens then sit tight, if they back track...sell your money to anyone willing to buy it.