The big picture is that the skyrocketing debt is creating a very serious problem. It just keeps surging to record levels at an unprecedented rate, cautions Mary Anne and Pamela Aden, editors of The Aden Forecast.
Most worrisome, this is happening during good economic times. Normally, this type of debt growth has only happened during times of crises, like in 2008 during the subprime bubble.
The Federal debt has soared and it’s higher than it was in 2008. Based on the Congressional Budget Office, it’s projected to keep skyrocketing in the years ahead. This is the big picture and it’s downright scary.
More from Mary Anne and Pamela Aden: The Aden Forecast on the "Big Picture"
The world’s leading investment experts agree. Paul Tudor Jones, for instance, says the current situation reminds him of the late 1990s, prior to the financial crisis. He notes that we’re in the craziest monetary fiscal mix in history. It’s so explosive it defies imagination and it’ll end badly.
George Soros warns of potential economic doom and Ray Dalio says to buy gold, which he feels will be a top asset to own in the years ahead. Even James Grant is saying the Fed has become the lender of first resort.
Why all the doom and gloom? Basically, with the deficits so large, the Fed is creating more fiat money to monetize the debt. As a result, the Fed’s balance sheet has increased over 500% in the past decade, and it’s going higher.
Currently, the Fed keeps pouring huge amounts of money into the banking system via the repo market, every day. This has been to keep the banks liquid and the economy going, but the amounts involved are mind boggling.
According to the New York Fed, and reported by Wall Street on Parade, since September 17 the Fed has funneled a cumulative shocking total of $6.6 trillion to some of Wall Streets “primary dealers” via repo loans. To put this into perspective, the bail out total between 2007-10 came to $19.55 trillion.
So during the past five months, the Fed has already pumped about one third of the amount spent during the financial crisis — and remember, this is during good economic times. This is truly unbelievable and it strongly reinforces our view that something is very wrong, just under the surface.
Plus, the Fed recently announced that it’ll keep these repo operations going until at least April. And some are now saying the Fed won’t avert the next crisis, they will cause it.
See also: Taxable Bonds: An Income Strategy
The main reason why is because the Fed is essentially the cause of the bubble in everything. All that money that’s been pouring into the financial system has essentially driven stocks higher, to unprecedented levels.
The bottom line is, it has formed the third stock market bubble in 150 years. How will this end? We don’t know yet. But if we look at the two previous cases in 1929 and 2000, this situation will likely be similar and it won’t end well.
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