President Trump: The NEW one and only politics thread

This isn't a mystery.

The Federal Reserve embarked on unlimited debt monetization. Take a look at the balance sheets of the three biggest central banks in the world and you have your explanation.

They told the casino they created there is no risk. Everyone is a winner. Government? Borrow away -- it's free. Zombie company that burns through cash and lose money? We'll buy your debt. Company that has laid off 90 percent of your workforce and is swimming in debt that was handed right over to shareholders to boost your stock price? The Fed will conjure dollars out of thin air and keep the credit flowing so you don't have to face the consequences of all the borrowing.

This is a confidence game. There is a Fed put under risk assets and that creates euphoric buying in the stock market. It has zero to do with the actual economy, earnings or anything fundamental.

The fact that people are waking up to it now is the crazy thing. This was the story of the last 7 or 8 years. It's just that during that period, people created all these ridiculous narratives to try to rationalize the fact that earnings were flat, the economy was stagnant, yet the earnings multiples on stocks were expanding as the Fed was price fixing the debt markets to blow a credit-induced bubble. Now, it's impossible to spin any yarns.

This is the story of every stock market bubble. Margin and leverage. And they enabled so much leverage that permeates every aspect of our economy now, that it's the mother of allbubbles.

What you need to realize now, watching what is going on, is that Fed has expanded that balance sheet by $2 trillion over the last 60 days. The relatively quaint days of their QE debt monetizationscheme that blew the bubble to where it had gotten, are a thing of the past. To keep propping up their creation, it now takes exponentially greater amounts of debt being fed in.

Now they are buying muni bonds and corporate debt, including uncollateralized junk. That is in addition to our govenment borrowing trillions upon trillions to debt spend and the Fed monetizing the debt almost outright. Now, there are no limits the way there used to be. Powell reiterated it today. They will destroy the dollar as much as they can to make sure that nothing defaults or fails. Companies that are already in over their heads in debt will just be able to borrow more and more, and the Fed will buy whatever the market wants no part of.

As long as the algorithms (there are no real people in these markets) see that Fed put there, they will keep pushing equity valuations higher and higher. The stock market isn't a discounting mechanism in this environment. Earnings, the economy, etc. have nothing to do with it. There is no actual price discovery. Prices are essentially being dictated by a central planning authority that is telling us it is engineering prosperity.

Until whatever the next trigger is that pops the bubble is, and when confidence in their ability to prop up a fantasy ends, there is going to be a panic and those same algos will all sell at once and there is going to be no liquidity in the markets. At some point, they are not going to be able to reestablish the confidence the way they are trying to now, because there is not going to be enough of the dollar left to devalue, and then we will get the massive delveraging that is an inevitability. There is a price to pay for what they have done.

The unfortunate part is that the actual damage they have done to the country is going to dog us for a very long time. Trillions of dollars of growth have been pulled forward from the future, and it has been allocated as ineficiently as possible. You are watching survival of the unfittest.