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By now we all know the reasons as to why the markets have been tanking across the world.
We have China on one hand, which we spoke about earlier this week… their Central bank stated that Commercial banks must pay close attention to the liquidity situation, strengthen their analysis and forecasts of factors affecting liquidity… and must prudently manage liquidity risks that have resulted from rapid credit expansion.
That was enough to turn our exchanges on their heads and send record highs plummeting back to reality.
But that wasn’t the only reason for the murder on the street…
The big one is that the Fed announced that they’ll be tapering off the quantitative easing, which led me to write the article, “Hi My Name is The U.S Economy And I’m An Addict”.
Because once all that funny money goes away, the economy is not going to know what to do except fall and fall hard. We had a taste of this last week and somewhat this week.
But today we had some interesting and convenient news regarding our “recovering economy” or whatever the politicians try to spin it as…
Today, the markets have come back strong.
Because there was a “surprisingly” sharp downward revision to first-quarter U.S. economic growth and this essentially eased concerns that the Federal Reserve may soon begin to withdraw stimulus.
What does that mean?
It means that investors aren’t worried anymore that Ben Bernanke’s needle o’ heroin isn’t going anywhere. They’re betting that it stays in place and pumps us once again so we get that much needed hit.
U.S. gross domestic product grew at only a 1.8% annual rate in the first quarter, the Commerce Department said in its final estimate, down from the prior estimate of a 2.4% pace.
Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston said, “Despite all the rhetoric and fear about tapering, this will keep the Fed firmly planted in stimulus, which is a positive for the market. This is another example of bad news being good news.”
Folks, this is good news for investors and bad news for the economic heart of the country. QE is not good by any stretch of the imagination. It’s a self-inflicted disease.
And the only way to ease ourselves off it is to get back to reality. Let the free markets reign… some companies will fall, others will prevail. But the key is to get back to some level of normalcy, where we’re not hyper-inflated with worthless U.S dollars and depending on the government to support our economy.
Author: Tim Fields