Sunday, August 30, 2015

Is Everyone Positioning for "The Blame Game?"

It's too early to tell if all this recent market volatility is the start of a global crisis along the lines that Jim Rickards and others believe will eventually happen. Many are forecasting that a major crisis will start up this fall in the September-October time frame. Many predictions like this have not panned out previously, so all we can do is follow events and see what happens.

One thing that is a little unsettling has been happening though. If you just follow the news accounts, you can see that everyone is seemingly positioning to try and blame someone else if things go bad. Below I have written a brief paragraph that illustrates this using links to various recent news articles. 

This is truly a strange financial world we live in. For years we have had global "QE" which is credited with preventing a global depression. But recently the St. Louis Fed said "QE" did not achieve its objectives. Now we are supposed to worry about "QT" in China. In its last annual report the BIS said we have reached a state where "the unthinkable" is becoming viewed as normal and routine (see page 3). If all this eventually blows up into a huge global crisis (bubbles start popping), the finger pointing is going to be endless. The US will blame ChinaChina and the BRICS will blame the US Fed. The IMF will probably blame both the Fed and China while being blamed themselves for not giving any early warningThe BIS and the IMF will probably say "we told you so" because of all the systemic risk warnings they have issued (even though never forecasting an actual major crisis).  

If it does blow up, someone is going to have to try and fix the mess. Who will the public trust at that point with everyone blaming everyone else? Jim Rickards feels the IMF will emerge as the entity to solve the crisis using the SDR as new global reserve currency. Will the public buy into that if they think the central banks and global institutions failed them once again? Can the blame successfully be directed elsewhere like China for example? (Watch Donald Trump say China 234 times in this video --- Here he blames China for the recent stock drop). Not to be outdone, notes the blame game and then joins in by blaming Donald Trump for the market plunge.

In the US we are seeing a huge surge of political support for Donald Trump, mostly because many people are fed up with those running things now in both major parties. Just imagine how fed up they will be (and how many millions more of them will join in) if we get another major crisis and we have everyone trying to blame someone else. I hope all this does not happen because it could get very ugly if it does. There is a real possibility that everyone could lose, at least until some kind of new stable financial and monetary system emerged. 

It's a good idea to try and be prepared for anything just in case starting with the September-October time frame coming up since so many people are expecting something then. Here, we just admit we don't know and will follow events to see what actually happens.
My added comments:

It's natural for people to try and deflect blame for things that go wrong. The fact that these various parties have already been positioning to point the finger of blame somewhere else does not guarantee we will have a major crisis. But it's not a good sign either. If everyone felt sure things will be fine, we would not be seeing this.

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