We have reached a point where people are so tired of the current economic model that they're willing to support anyone promising to do away with the status quo and make life great again. It's hard to find fault, because the current model is obviously rotten and is overwhelmingly biased towards the incumbent wealthy. But, with Trump now elected as President, things may change quite rapidly in terms of monetary policy, fiscal spending, and ultimately in terms of growth and inflation. Or so we're told…
Until now, we have watched interest rates collapse and central bank assets soar. But such policy, mixed with fiscal tightening, has been relatively ineffective in terms of boosting growth to pre-crisis levels. Most of the positive effects have been lost in the translation from higher asset prices to higher growth, as the link between the financial economy and the real economy is clearly misunderstood by central banks. Explaining why central banks lost that link, what they can do to boost growth and how Trumpian fiscal spending may fare is my goal today.
The daily chart shows the pain the bulls have been in, with the spike and retreat a quite dramatic one over the past 10 days. The problem evident now is that this decline has barely been arrested by the main 2016 support area down to $1,200, and it would appear that unless something special happens, this will give way too.
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8 mins. to read
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