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January 15, 2019 | Current Downturn Ours Courtesy of Extreme Monetary Intervention

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

 

While many commentators are calling on central banks to stop tightening and start increasing monetary slack once more as the global slowdown deepens, the fact is that current financial strife has been purchased by years of central bank slack that drove overcapacity and mal-investment through the global economy.  Economist Daniel Lacelle explains truth well in this clip.

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And as I pointed out last week here historically bear market bottoms are not reached until a few months after central bank loosening cycles have been ongoing for several quarters and have cut up to 5 percentage points off of policy rates.  So far today, the most influential central banks are still in a self-proclaimed tightening cycle with little over 2% of rate room to maneuver.  Years of debt largesse have painted world markets into this corner, rate cuts from here will be no magic elixir, but significantly lower prices will be a key part of the healing process needed.

 

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January 15th, 2019

Posted In: Juggling Dynamite

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