Loading ...One fallacy that has gained popularity over the last decade is the zealot belief that the Fed disappears risk from markets. That by expanding and moderating the money supply by just the right amount, and at just the right time, markets can grow within a pleasant setting of near nonexistent volatility. Some even trust that when there is a major stock market crash, the Fed, having the courage to act, will soften the landing and quickly put things back upon a path of righteous growth.
Believers in the all-powerful controls of the Fed have a 30 year track record they can point to with conviction.
You see, the conditions that made the Greenspan put possible are the opposite of the conditions that exist today. Rates are low and are moving higher. The world is oversaturated with debt. Policies of mass money debasement have bubbled stocks and treasuries out to extremes well beyond what was honestly fathomable.
Yes, the doom and gloom of an epic stock and bond market meltdown are approaching. At the moment, Fed Chair Powell’s even determined to bring it on. We applaud his efforts.
Yet when push comes to shove, and the Fed lowers the federal funds rate, expect the unexpected to happen. The Greenspan put – the market savior – will be mowed over like a ground squirrel beneath a tractor rotary tiller. The market carnage left in its wake will be grotesque and unrecognizable.
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