E Everything Is Going A Lot Lower; Bonds Are Next

Stocks, bonds, and real estate all benefited from cheap and easy credit. The 'reflation' effort was the primary reason that asset prices rose so dramatically from their post-crash lows ten years ago.

In other words, all asset prices were - and still are - severely and artificially overblown. Another credit collapse is likely in the cards. Nothing will be spared.

We are back at the precipice again. This time, instead of worthless auto loans and mortgages, the cascade over the edge will likely be initiated by corporate bankruptcies.

A restriction of economic activity (regardless of how appropriate) because of concerns associated with COVID-19 may be the sound that triggers the avalanche.

The risk to the system is there, and companies with borderline cash flow can quickly shutter their doors.

The Fed has already fired several shots at the specter of economic collapse, but they are almost out of bullets. A different weapon of choice will not likely have much effect, either.

Whatever action the Fed takes might make things worse, though. Remember, the Federal Reserve caused the Great Depression of the 1930s.

We are past the point where the Federal Reserve can stop a system-wide implosion once the ball starts rolling. It appears that is what is happening now.

(also see The Federal Reserve And Long-Term Debt - Warning!)

 

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Kelsey Williams is the author of two books: Inflation, What it is, What It Isn't, And Who's Responsible For It and  more

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