It’s no mystery anymore. What matters to low-popularity politicians in charge of government and seeking reelection is a #bullish #stockmarket until after the election date.
From #Japan to the #US, from the #UK to #Germany, what do all of them have in common? The government in charge is dealing with one of the lowest levels of popularity on record while their respective local stock markets broke all-time high records. It’s no mystery anymore that #stocks are being used in modern politics as a yardstick to measure the health of the economy. This might have even been true in the past, but now that everyone has figured out the QE “hack” and the trick of “politically adjusting” official data to make things look rosy to dumb and color-blind algorithms is no secret anymore, #stocks have lost their reliability as an indicator of a country’s economic strength. Things have reached such an unbelievable extreme nowadays that 3 out of 4 of the countries I mentioned above are already in recession, even according to their respective (politically) adjusted official data.
October 2022, March 2023, and October 2023. What do these 3 periods have in common? Simple answer: in these 3 times, the mother of all bubbles (#MOAB) was about to implode.
What rescued #stocks in those previous occasions?
October 2022: Global central banks came to #BOJ’s rescue with a tsunami of liquidity swaps and the $JPY quickly strengthened from ~151 to ~128, allowing the #BOJ to print a ton of fresh $JPY liquidity that served as an adrenaline boost to global #stocks.
March 2023: It was easy, the #FED #BTFP
October 2023: This time, the playbook used in 2022 wasn’t so effective, so Jerome Burns played the “phantom pivot” bonus card. He was aware all the investors out there would have started to dream about another infinite QE and jumped back into #stocks with the idea of front-running the next wave of leverage, bringing the whole market to new highs.
October 2022, March 2023, October 2023… wait, is there a pattern here? Yes, and what comes next is March 2024!
Alright, #Bulls, let’s brainstorm a bit on what our central planner can come up with this time to rescue the whole system from a historical implosion once again.
- Tweaking the #FED discount window? Well, considering that when they came up with the #BTFP, they already broke several pillars of a healthy financial system. Why not break what’s still left? Basically, the #FED would have to come up with a way to remove “discount” from the “discount-window” so, like the #BTFP, (insolvent) banks will be able to borrow more than what their assets are truly worth and dodge the crisis bullet again.
- #BOJ money printing going bananas 🍌? Considering how serious #Japan’s inflation problem is becoming, the fact that #Japan’s economy is already in recession (because little if none of all those $JPY printed stays home to boost the local economy as they should) and now the $JPY consolidation at a very high 150 rate vs $USD, another wave of out-of-control money printing might save foreign #stocks bubbles, and perhaps the #nikkei, but will #Japanese people be able to pay for it through what’s going to be a very steep #inflation tax?
- What about a BBLF, an acronym for “Biden Banks Losses Forgiveness” Programme? Well, after all, the US administration is forgiving so many hundreds of billions of student loans already, creating an incentive for all those who still have student loans to pay not to do so and making a fool of those who instead paid what they borrowed, so why not forgive hundreds of billions of bank losses, postponing the bill to the taxpayer after November elections?
- Rate Cuts? We already saw in March 2020 (cough cough, another March) that rate cuts are totally ineffective in the era of QE. As a matter of fact, #stocks only recovered after it was clear the #FED was going to monetize the trillions of stimmies about to be printed by the US government. What about today? Nothing has changed and any rate cut will be completely useless no matter the level of inflation risk the #FED has to factor in this time around (which is pretty high).
What’s clear from the Game Theory type of exercise we went through is that this time any sort of market rescue will have to really bend the boundaries of extremes already beyond anything that could have been imagined years ago in countries that call themselves “capitalists”.
However, quoting from the great RJRCapital, #stocks at all-time highs while the rest of the population doesn’t see, or barely sees, the benefits of it in their day-to-day life is what leads to social unrest. Trust me, politicians can live with a #stockmarketcrash, but social unrest is something that can put at risk even the strongest dictatorship in the world, so imagine if any politician seeking reelection would risk triggering that.
This time around the blanket is becoming very short. It’s hard to think about what can be done to save #stocks again, but rest assured they will try all they can because the elections are coming late this year.
