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Is the Soaring Stock Market Hiding a Darker Truth?
Usually, I just open the ones that happen to catch my eye. One was this recent headline from a MarketWatch.com bulletin that said, "Dow closes at highest level since December 2007."
My first thought was that the bulletin should have said: "Dow closes at highest level since December 2007 - despite faltering economy, stubborn unemployment, accelerating inflation and the highest level of uncertainty we've seen in decades."
I guess they couldn't fit all that into the subject line box.
My second thought was that Martin Hutchinson was right - again.
You see, for the last couple of years the administration in Washington and the so-called experts on Wall Street have repeatedly told us that inflation isn't a problem. They continue to insist that the bailout plans and easy-credit policies that were used to end the financial crisis have yet to ignite the rise in prices that you and I refer to as "inflation."
However, in the Aug. 21 Private Briefing, Martin completely dismissed this Pollyanna point of view. There is inflation, he said. In fact, it's staring us right in the face - as a soaring stock market.
According to Martin, the "Real Dow" should be much lower.
Another Stock Market Bubble
With so much economic uncertainty - read that to mean, so much "risk" - there's no way stocks should be zooming like this, Martin said. The fact that they are is proof of a cheap-money-fueled "asset bubble" - a form of inflation, he explained.
The Permanent Wealth Investor editor also predicted that U.S. stock prices would continue their advance - especially if the U.S. Federal Reserve appeared willing to add additional stimulus.
And as the MarketWatch.com bulletin illustrated, that's precisely what happened.
Here's the thing: Now that "QE Forever" has arrived, this inflationary surge is about to get much, much worse.
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Why is beyond me.
The bubble is so enormous right now that any serious bailout attempt would have to encompass the entire shootin' match or roughly $600 trillion to $1.5 quadrillion ($1,500,000,000,000,000) in order for it to work.
That's the total estimated amount of outstanding derivatives, credit default swaps and exotics outstanding at the moment according to various industry sources.
I say estimated because nobody actually knows for sure. Nearly five years into this crisis, the derivatives markets still remain almost entirely unregulated.
And, that's why the well-intentioned but completely misguided onesey-twosey's bailouts we've seen so far won't cut it despite the fact that they're already into the trillions of dollars.
I say this because, despite what most politicians and central bankers think, we are not staring at a series of independent bubbles blown into the wind, but a single, massive all-encompassing monster bubble that surrounds us all.
To put this into perspective, the total value of the United States' economy is approximately $15 trillion. The world's GDP is around $50 trillion while the total capitalization of world stock markets is only $100 trillion.
You can see the problem as easily as I can...there literally isn't enough money on the planet to bail us out, and I don't care who's got the keys to the printing presses.
How We Got Here is a Story in Itself
Bubbles this big don't form overnight.
What we've been handed is an overlapping bubble that's gotten progressively larger over time as our legislators, bankers and regulators have progressively "improved" the system over time.
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