Much of the economic landscape is beginning to look like something out of "Alice And The Looking Glass" A bizarre and unrecognizable land, a land that is distorted and papered over by ream after ream of paper. This paper has been rolling off the printing presses of central banks all across the world in an attempt to mask reality.
We must remember that this influx of monetary stimulus has created the illusion of more pent up demand then exist or can be substantiated. This results in an elevated baseline for comparing year on year growth, in short we have to move forward faster next year just to keep growing. For example, if we manufacture and sell twelve million automobiles this year up from ten million because of low interest rates and easy money, we now must sell the same number for the economy not to contract.
So the question is, what happens
after the momentum ends? After QE can no longer increase demand. After most or
all of the scared money has flowed into the investment "of the day," what
happens when it begins to flow out? It seems that we always think that
we will see "it coming," we always think we will have ample time to
react. The speed at which events can occur is often a surprise.
For a fun read glance at my post of November 18th; What Is Something Worth?