There has been much ongoing debate over the past 10 years about whether or not central bank monetary policies (led by the US Fed) have really solved problems in the long term or not. Most everyone agrees that without the central bank intervention that took place, the world was probably facing some very hard times and even a deep depression.
The debate that has endured is about whether or not the policies used to stave off a potential deep depression and even possible collapse of the entire system have really solved anything going forward from here. The question hanging over markets all these years since the QE and low interest rate policies were implemented is: What happens when the monetary stimulus ends?
This is still hotly debated and we are all still watching closely to see how that question will be answered. In this recent article on MarketWatch, Sven Henrich lays out his case for the argument that all the central bank stimulus has just propped up markets and created the false impression of growth rather than real GDP growth. Now that world markets are showing signs of fatigue, this argument will likely pick up momentum if things keep going south during 2019. Below are a few excerpts from the article.
-----------------------------------------------------------------------------------------------------------------------"For years critics of U.S. central-bank policy have been dismissed as Negative Nellies, but the ugly truth is staring us in the face: Stock-market advances remain a game of artificial liquidity and central-bank jawboning, not organic growth. And now the jig is up.
As I’ve been saying for a long time: There is zero evidence that markets can make or sustain new highs without some sort of intervention on the side of central banks. None. Zero. Zilch.
And don’t think this is hyperbole on my part. I will, of course, present evidence.
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My added comments: It is important to watch this situation closely because markets have moved into bear market status recently. If this trend continues and we start to see signs of more severe problems in both markets and the actual main street economy as well, the huge blame game is likely to ramp up and who the public blames for the problem will be very important in terms of how the problem is addressed. Of course there will be huge political ramifications as to who is blamed as well.
If all we are seeing is normal market corrections off of all time highs, perhaps this issue goes away at least for awhile longer. But if the storm gets worse, we must pay close attention to it.
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