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Sunday, May 9, 2021

The Bulls are Getting Exhausted—The Bears are Coming

In November 2016, Paul Krugman said in an article that now that Trump is the president, he expected the stocks to plunge. He offered a bleak prognosis for the future: “If the question is when markets will recover, a first-pass answer is never.” Krugman’s analysis of stock prices was obviously effected by his low opinion of Trump and the conservatives, but when I read his article, I thought that it would be a good thing if the stock prices in major economies were to crash and remain at a low level for at least two years. 

I have been rooting for a crash in the world markets since 2016. Like Krugman, I felt that a big crash would happen within a two or three months of Trump taking power, but my reason for rooting for a crash was different from his: I wanted to see the worldwide leftist establishment being decimated after being starved of funds. 

The left that has been dominating the world since 2010 is not an ideological or revolutionary left like the left in the twentieth century. It is a financial and industrial left. This left cannot be defeated through elections or through counterrevolutionary actions. There is only one way to defeat it: An economic crash which will starve the beast. Since 2010, the share markets have lost their connection with real economic activity. The stock prices are being driven by the low interest and high deficit regime which the central banks in most major countries (chiefly the USA) are following. If there is slightest rise in the interest rates, the markets will crash. 

In November 2016, I was convinced that Trump’s first priority would be to ask the FED to raise interest rates and manage the deficit—these actions, I believed, would suck the liquidity out of the global markets leading to a sharp fall. Trump made a strategic blunder when he continued with the low interest and high deficit regime. He could have taken the breath out of the left by crashing the worldwide markets. But he kept cheering the markets and tried to take credit for every rise. He allowed his political enemies in the leftist financial-industrial complex to make a lot of money at the cost of the middle class savers (his traditional supporters). 

But a big crash is now coming. The bulls have been running amok since 2009: for twelve years. Now bull fatigue is clearly visible. When the crash comes all the gains that the markets have made since 2009 will be wiped out in a flash. The bears will be merciless on the downside. The rule of the markets is that the duration of the bear market is approximately the same as the duration of the bull market. We can expect the coming bear market to last for around twelve years. In the lexicon of the likes of Krugman a bear market of twelve years will mean—forever. But this might free us from the financial and industrial left.

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