The Phaserl


Why Even Talk of Tightening Could Be Fatal

by Rick Ackerman, Rick

Repeat after us: There is zero chance the Fed is going to tighten…zero chance…zero chance…zero chance. We’ve made this point so often here that it is has practically become a mantra at Rick’s Picks. It has also been amplified, refracted and explicated – though not hotly debated – in our forum, where there are apparently few who expect any change in Fed policy. As how could there be? For even the slightest hint that easing is about to taper off, let alone end, would bring on the Second Great Depression faster than you can say “Hooverville!” The prospect of hard times might have superficial appeal, since the legacy of the 1930s with respect to art, architecture, cinema, public works, automobiles and other monuments to creativity and human endeavor is quite impressive. But the downside is that the illusion of prosperity would be gone, and with it much false wealth that could never withstand the discipline of unrigged markets. Also gone – overnight – would be the global banking system, buttressed as it is by a nearly quadrillion dollar edifice of hyper-leveraged derivatives. Subject that sum to even a few more basis points of vig and you’re talking about trillions of dollars that would have to be coughed up in real money. Fat chance.

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