Stock Market Day Of Reckoning Is Near — Ron Paul Says

Ron Paul believes that despite "record high" stock prices, the market is on the verge of a collapse because stocks and bonds are inflated and once that bubble bursts . . .

Ron Paul believes the Federal Reserve is to blame:

"I don't think there's any way to know what the [timeline] is, but after 35 years of a gigantic bull market in bonds, [the Fed] cannot reverse history and they cannot print money forever . . . investors will "lose confidence" in the Fed, and when they do, the market could witness a "very big crash."

So there it is, another prediction of a crash.

 

Federal reserves are keeping rates on hold for now. Their actions in not increasing rates this June will have to face recession within six months. America's economy is in trouble. How will the collapsing economy affect the household cost of living, spending power, employment and tax revenues?

What now?

 

Honestly, it is hard for me to find something to disagree with Ron Paul about. I just wish his son was not a complete wolf in sheep's clothing.

 

Explain how not raising rates will cause a recession, but if they had raised rates it would prevent it.. in 6 months. You have it reversed. When the Fed raises rates, it raises the rate for companies to borrow money, it raises the price of buying homes and durable goods, which slows the economy. If they raise rates too much, or too quickly it can greatly slow down the economy. Keep rates the same, at a very low rate ensures that companies can borrow the money they need for growth at a low rate.

The risk of keeping rates low is that all that growth by companies will lead to increased hirings, increased wages, and ultimately inflation.

Low rates - risks inflation
raising rates - risks slowing down the economy

Generally the only game the Fed plays is against inflation. All else being equal they want rates as low as possible ( which they are now) and then they just keep an eye on inflation, or things that lead to inflation. The low cost of oil (which trickles throughout the economy) has allowed us to keep interest rates very low without inflation.

 

There is not even an inkling that investors are losing faith in the Fed. US Treasury bonds are gobbled up.. and at very low interest rates. Also the amount of money we print.. is similar to the deficit and debt that it shouldn´t be talked about as an absolute number, it should be talked about as a % of GDP. Yes, we can keep printing money, and we can print even more next year and the year after that. Our currency is the de-facto currency for like 75% of the world´s economy.... everyone uses for it´s security.. which means we can get away with printing more than any other country can.. It is good to be king.

 

He could well be proved right but Ron Paul isn't someone I'd necessarily be basing my portfolio on. He's another voice that needs to be heard at the moment with an underlying political bias behind it. That said, the world of free money can't go on forever and at some point, some one is going for the effects of the end of the party.

 

I dunno, whenever it came to economics, he seemed to know what he was talking about.

 

Great post JR.
I always like listening to Mr. Ichan.