Are Central Banks Really Cornered?
I think that this question is one that bears some exploration as it seems the bears are out in full force these days expecting that all hell will break loose at some point in the next year or two and in some cases starting right now. They may have a point but the question is "When".
I would rather look at "IF" it will happen.
When you have the power of all the central banks of the western world working together in synch, that is a lot of clout. One can become a buyer when one is selling and vice versa and so prices can to a degree be controlled. I will simply revisit the fact that Japan on its own has been doing just fine for a few decades.
Demographically yes, all things considered the boomers are entering the years where they are going to need primary care and not so much any goods and services. Quite simply they are going to start dying off in droves in the next ten years or so. Good time to own a funeral service or have some land that you can use as a nice cemetery. Kind of morbid but certainly the time is right. Perhaps coffin services or cheap funerals. You get the picture. I am part of this big group too although more at the tail end so my demise is likely 20-25 years away by averages. However the biggest group of them is around 64-68 at the moment. Average life span alone would say that they are headed to the grave. Some early and some later. Those that have been hard on their bodies (and most have) 69 seems to be the magic year to check out. Those that haven't maybe they make it to 80. I know it is sobering for most of the boomers. No one likes to think that they may not be here some day but that is reality. We all owe a death. They leave great surpluses in their wake that will be filled in some countries and won't be in others. The death of malls, supplies, recreational or travel needs and a few other areas like housing will likely decline for the foreseeable future. There simply is no demographic big enough to fill the void. Canada, Japan, and most of Europe will be at the mercy of immigration or their populations are due to fall dramatically. The US should be stable but won't grow for the foreseeable future. So stagflation is more the scenario.
What is likely to happen around this event is deflationary forces. There simply is no way to offset this. Government obligations, retirements, pensions, payouts, medical aid, retirement homes and the list goes on will be needed. Boomers will have to work well into their seventies as they don't have enough to retire in most cases. The hundreds of trillions owed will be a major problem although the Fed is sure it can keep printing to meet demand. I am not so sure about that. I see a lot of people being left in the cold.
The millenials are debt ridden so don't look to them to solve the problem. They can't support themselves let alone the boomers. The system numbers simply don't add up when you factor you need about 3-5 people working to be able to support one retiree. Europe has an immense problem this way. I mean enormous.
What might offset some of this is technological advances. I doubt that it will come in time to help most of the boomers but there should be some relief. We should have been doing this thirty years ago and most of these problems would not be so great now.
Will all markets then crash once the bond bubble is pricked?
Well I don't think so. Yes inflation is a factor but not one to be taken very seriously yet. There is no powerful signals yet that the inflation monster is out of the cage.
I don't think central banks are cornered. As long as there is faith in their currency printing it will continue indefinitely. Liquidity should still be strong in the face of this printing. I don't claim to know the total answer as I don't think anyone does but proof is in Japan that it can go on for a very long time so be careful in the sense that you don't miss out on some other advances in markets fearing the big and inevitable crash. One could have made a big case for this for the past eight years now but it simply hasn't happened. Keep the focus on gains and I will let you know if I see anything at all that is deflationary or inflationary that you should take seriously. So far that hasn't happened. Cheers!
I would rather look at "IF" it will happen.
When you have the power of all the central banks of the western world working together in synch, that is a lot of clout. One can become a buyer when one is selling and vice versa and so prices can to a degree be controlled. I will simply revisit the fact that Japan on its own has been doing just fine for a few decades.
Demographically yes, all things considered the boomers are entering the years where they are going to need primary care and not so much any goods and services. Quite simply they are going to start dying off in droves in the next ten years or so. Good time to own a funeral service or have some land that you can use as a nice cemetery. Kind of morbid but certainly the time is right. Perhaps coffin services or cheap funerals. You get the picture. I am part of this big group too although more at the tail end so my demise is likely 20-25 years away by averages. However the biggest group of them is around 64-68 at the moment. Average life span alone would say that they are headed to the grave. Some early and some later. Those that have been hard on their bodies (and most have) 69 seems to be the magic year to check out. Those that haven't maybe they make it to 80. I know it is sobering for most of the boomers. No one likes to think that they may not be here some day but that is reality. We all owe a death. They leave great surpluses in their wake that will be filled in some countries and won't be in others. The death of malls, supplies, recreational or travel needs and a few other areas like housing will likely decline for the foreseeable future. There simply is no demographic big enough to fill the void. Canada, Japan, and most of Europe will be at the mercy of immigration or their populations are due to fall dramatically. The US should be stable but won't grow for the foreseeable future. So stagflation is more the scenario.
What is likely to happen around this event is deflationary forces. There simply is no way to offset this. Government obligations, retirements, pensions, payouts, medical aid, retirement homes and the list goes on will be needed. Boomers will have to work well into their seventies as they don't have enough to retire in most cases. The hundreds of trillions owed will be a major problem although the Fed is sure it can keep printing to meet demand. I am not so sure about that. I see a lot of people being left in the cold.
The millenials are debt ridden so don't look to them to solve the problem. They can't support themselves let alone the boomers. The system numbers simply don't add up when you factor you need about 3-5 people working to be able to support one retiree. Europe has an immense problem this way. I mean enormous.
What might offset some of this is technological advances. I doubt that it will come in time to help most of the boomers but there should be some relief. We should have been doing this thirty years ago and most of these problems would not be so great now.
Will all markets then crash once the bond bubble is pricked?
Well I don't think so. Yes inflation is a factor but not one to be taken very seriously yet. There is no powerful signals yet that the inflation monster is out of the cage.
I don't think central banks are cornered. As long as there is faith in their currency printing it will continue indefinitely. Liquidity should still be strong in the face of this printing. I don't claim to know the total answer as I don't think anyone does but proof is in Japan that it can go on for a very long time so be careful in the sense that you don't miss out on some other advances in markets fearing the big and inevitable crash. One could have made a big case for this for the past eight years now but it simply hasn't happened. Keep the focus on gains and I will let you know if I see anything at all that is deflationary or inflationary that you should take seriously. So far that hasn't happened. Cheers!
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