When the Federal Reserve announced plans to print money to artificially add demand to the markets, the S&P 500 rallied ~75%. Now that the EU is running the same play, should we expect a similar outcome?
While we shouldn’t expect another 75% rally, we should adjust our opinions to accept the raw fact that those who are selling Euros, Bonds, stocks, etc. are now standing in the pits with a buyer who in theory can print and borrow what it takes to maintain stability. So, rather than accepting a correction now, the EU has followed the US in the practice of borrowing from the future to bandaid the now.
When I spoke with Bill Fleckenstein a couple months ago he said Greece was different from the US because they didn’t have a printing press. Well they do now. Moreover, Greece has a new debt-master: the International Monetary Fund (whose $38 billion to Greece is their largest loan to any one country).
Can you say, “Kick the can?”
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