Recently articles have surfaced exploring how the central banks and governments have controlled markets making a strong case that it was nothing more than a new model of nationalization. By this, I mean taking or transferring a major branch of industry or commerce from the private-sector to state ownership or control. The key word here is "ownership," because while the state may not choose to exercise control over various decisions a company makes the fact is the person or entity that owns the stocks can control perceived valuations by being the market maker that sets prices. This path to economic prosperity by stealth nationalization is filled with moral hazards.
|Japan Leads The Way In This Experiment|
|By Jumping Into ETF Market The BOJ Supports Stocks|
Years ago what became known as the Plunge Protection Team or PPT, a group given the job of swooping in and supporting the market and stabilizing them whenever a sell-off occurred, found that such a policy was a slippery slope and risked incurring huge losses if not successful. The answer in this flawed policy was to never let the market slip but put on a path ever upward until everyone doubting the strength of the market finally capitulates. Needless to say over the years this has greatly distorted stock prices and valuations bringing us new high after new record high.
|The BOJ Soaring Presence In Market Equals Fraud|
A while back I outlined in an article how central banks through a stealth move were slowly buying equities and corrupting true price discovery. An interesting twist is that because money can easily flow across borders not all this is taking place in only the country where the credit originates. While a person can interpret all this as proof the markets are indeed rigged it also signals that any fall in prices is merely a signal for central banks to double down and rush in to buy more. It is easy to see how this feeds into a self-fulfilling loop of speculation. This falsely accomplishes two things, it bolsters and supports current holdings while reinforcing the image markets are climbing higher because our economic future is getting brighter which is a narrative mainstream media is glad to provide.
|The Yen Is Very Vulnerable To A Fall As More Is Printed|
In simple terms, the whole world is on a path that mirrors the same unsuccessful path taken by Japan since its bubble economy popped decades ago. It is a path that avoids real reform and bails out the very people that caused many of our problems. We are not creating real productivity growth or real wealth but simply driving up the value of certain markets and assets. This benefits those who own or have assets but does little or even hurts the poor or those who have nothing. You could say this lessens or reduces the relationship of debt but in reality, this is only true if we see massive inflation causing wages and income to soar. It is important to remember this is indeed a "high stakes" game and a strong incentive for central banks to continue on this course is that pension funds around the world are in serious trouble and any fall in their assets would be a disaster.
As we continue down the path to nationalizing debt two enormous problems exist, the first is the economic growth lacks any real quality and the second even bigger issue is that under this policy eventually central banks will control or pretty much own everything at a distorted value they determine best suits their narrative or purpose. The good or bad news depending on how you look at it is that the plan may not work and it may come crashing down around those in charge of this great manipulation. All this is akin to a doctor telling a patient to double or triple his dosage when the medicine does not work. Policymakers across the world have entered uncharted waters that are full of peril.