Disconnect: Soaring Markets/Troubled EconomiesStephen Lendman Central banks run todays world. Major ones matter most. Money printing madness controls everything. Love doesnt make the world go round. Liquidity-driven markets reflect the power of bankers to do it. Theyre more powerful than standing armies. They can levitate markets. They can enrich themselves at the same time. They can do it while economies crater. The power of massive liquidity infusions combined with market manipulation generates huge profits. What cant go on forever, wont. Whats going on now defies reason. Disconnect barely explains it. US equity markets hit record highs. So did Germanys DAX. Japans Nikkei reached a five and a half year high. One recent headline read Central banks pop champagne corks as stock markets soar. Another said Which European Market Will Hit a Record High Next? Turkeys BIST-100 topped 91,000 for the first time. Switzerlands SMI has a ways to go. Its headed in the right direction. Swedens OMX Stockholm 30 and the OMX Nordic are closer. Londons FTSE 100 looks poised for a record high. It could do so in weeks. Who said defying gravitys impossible? Markets are doing it with ease. On the one hand, he says rich elites are stealing everything for themselves. At the same time, he cites three of the biggest bubbles in history. The bond market, stock market and the US dollar are levitating. (S)omething is going to go. This is possibly one of the riskiest years in Western civilization. Combined with police state enforcement and imperial wars, its menacing. Australian economist Steve Keens Debtwatch web site analyses the collapse of the global debt bubble. He calls Americas stock market a giant one. Its debt-fueled. Margin debt levels match 2000 and late 2007 highs, he says. Nothing can accelerate forever. At some point the acceleration stops, and when it does the market breaks. He believes troubles coming in one or two years. He thinks Americas stock market will burst the way Japans did in the early 1990s. The key Nikkei Index peaked near 39,000. It did so on 1989s last trading day. It fell 63% in less than three years. Rolling recessions and recoveries followed. It didnt bottom until February 2009. It closed at 7,163. On May 17, it closed at 15,138. According to Keen: I think were (heading for) a long slow bleed, much longer and slower than the Japanese stock market crash. The dynamics are similar. In 500 years time, he added, people will look back and see this as the biggest debt-financed bubble in human history and ask, why didnt we realize it? Bruce Kasting worked on Wall Street for 25 years. Hes no longer there. His blog site discusses financial issues. He calls Bernankes policy reckless endangerment. He claims he can cease QE with no ill consequences. Its never been done before. Not by the Fed. Not by any Central Bank. To think that such a daunting task can be accomplished without negative consequences is foolish, said Kasting. PIMCOs Bill Gross sees bubbles everywhere. It doesnt mean theyll pop immediately. Speculators assume Fed policy will remain accommodative over the long-term and under the assumption that the US economy is doing better than most economies. Lots of money is chasing lots of risk, says Gross. Central banks are blowing bubbles. When that stops, there will be repercussions. Not just in the bond market but in the stock market as well and a developing one in the hous(ing) market. Gross warned that the multi-decade US bond bull market ended. Higher interest rates will eventually follow. A 1% rise means over $100 billion in more interest. Its negative for economic growth. Most developed countries have debt to GDP ratios above 100%. Theyre manageable with record low interest rates. Higher ones risk default in troubled economies. European PIIGS countries are most vulnerable (Portugal, Italy, Ireland, Greece and Spain). Marc Faber warns that something will break very badly. In the 40 years Ive been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality. Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up. Graham Summers warns Its official: Stocks are in a bubble. Its worse than anything hes seen in his career. Stocks rallied every Tuesday for 17 straight weeks. Traders are now conditioned to play for this move. Its POMO day. The Fed pumps markets with liquidity. Doing so drives stocks higher. The market is beyond overstretched. We have not had a 5% correction in six months. Stocks have gone almost straight up for 89 days (we havent had a 3+day correction in that long). This is an all time record. The last time stocks rallied without a 3+ day correction was in the buildup to the Crash of 1987. Copper is great at predicting economic growth. Its trending lower. Stocks are poor predictors. Major divergences between them will be resolved sharply. Rampant insider selling continues. Stocks are disconnected from reality. Theyre totally out of control. Most days hit record highs. Its unprecedented. At this point, no long term investor in their right mind should be buying. This is especially true given that the SP 500 is now not only totally disconnected from economic reality, but is disconnected from every other asset class. Stocks diverged from bonds, gold, copper and oil. Theyre last to react. This bubble will end as all bubbles do: in disaster. Main street conditions are worse than during the Great Depression. Europes as disconnected as America. More on that below. Paul Craig Roberts calls offshoring US jobs a greater threat than terrorism. Its been ongoing for years. Its most felt when jobs are scarce. Good ones are fast disappearing. Politicians remain in denial. Millions more jobs remain vulnerable. Displaced employees left unemployed or in lower paid work have a reduced presence in the consumer market. Outsourcing jobs erodes US economic strength. China, India, Brazil and other developing countries gain at Americas expense. Instead of using the nations resources for economic growth, Washington prioritizes militarism, permanent wars, and corporate giants interests at the expense of ordinary people. Its madness. Its self-destructive. It sacrifices long-term economic health for short and intermediate term gains. WW III already started. So far, its unlike WW I and II. Its international, unconventional, asymmetric, disruptive, anti-democratic, lawless, low to higher intensity, political, psychological and financial. Financial schemes involve: On May 16, the Global Europe Anticipation Bulletin (GEAB) headlined Systemic crisis 2013: with record exchange highs, the planets imminent plunge into recession. Prevailing calm is deceptive. It often precedes the storm. (S)everal signals show that a reversal in the economic situation is imminent. Economies never recovered from 2008. Conditions continue to deteriorate. Europes in recession. More on that below. Chinas growth is slowing. It exports are declining. Australias export dependent economy makes it a good indicator. Its struggling. Consumers are also marking time. US wholesale and retail sales are on the decline. Most US benchmark indices are swinging into the red. Major banks know a storm looms. Theyre using all the means at their disposal (legal and illegal) to shelter themselves. BRICS countries are some of the worlds fastest growing. They have their own strategy. Theyre gradually moving away from the dollar. Theyre building a (multipolar) world system where they would have greater representation. Theyre doing so at the expense of America and other Western countries. Americas economy is troubled. Four years of QE havent worked. Pushing on a string defines Fed policy. Money sits on bank balance sheets as excess reserves. Credit expansions anemic. Manufacturings contracting. Fiscal tightening exacerbates things. Europes in recession. Southern Europes in Depression. Eurozone economic data are negative. In Q I, Italy contracted 0.5% from the previous quarter. Seven straight quarterly declines reflect its troubled economy. Its been so longterm. From 2000 2010, it expanded an anemic 2.5%. The current trend is negative. Protracted decline appears likely. Its not alone. ECB policy hasnt worked. Mario Montis no more effective than Bernanke. Markets are disconnected from economic reality. The Eurozones in recession. Nine of its 17 countries have negative growth. They include Italy, France, Greece, Spain, Cyprus, Portugal, Belgium, Finland and the Netherlands. So do EU members Hungary and the Czech Republic. Expect more to follow. Slovenias deeply troubled. It looks like the next Cyprus. Britain teeters on recession. So does Germany. Monetary madness achieved little. Force-fed austerity is self-defeating. Confiscating bank deposits is the new normal. Its a diabolical plot. Its consolidating financial power. Its price is economic decline. Equities are the last asset class to react. When it does, watch out. Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.His new book is titled How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War.Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.http://www.progressiveradionetwork.com/the-progressive-news-hour/ linkwithin_text=Related Articles: 