Keynesian theory says that the economy is inherently unstable and that Government intervention brings stability. He believes that “Animal Spirits” guide the market. We have bull markets and bear markets, but I propose our current market is more of a lemming blindly racing to jump off a cliff. Traders on Wall St. have developed a grab what you can now/consequences be damned mentality. As the Fed throws QE infinity in the market, the Traders are losing confidence. The DOW appears to be going up, but it is only smoke and mirrors. Each subsequent QE is having less and less of an impact. The DOW growth is hollow. Traders attempt to grab more and more free money that is increasing becoming worth less and less. This allows Keynesians to point to the growth they appear to created. All the traders know that eventually it will all have to end. They are just trying to grab what they can while the can. The big bet is when does this money bubble burst. Watch the animal spirits. All it will take is one or two large firms dropping out of the market. Hell all they really need are rumors. They will turn tail and run as the whole thing spirals out of control.
The fed initially stated that the market will crash and crash hard. The purpose of the QE was to slow the crash so that it may be survivable. In all actuality they should have been fostering and encouraging changes in the market for people and markets to hold and save. Without encouraging austerity, QE only worked to kick the can down the road. This road is on a steep hill gaining speed, and the can is getting bigger as it gains momentum.
In my last post I said that Keynesian economics is dying, and I believe it is. However, it does not want to go down alone. It will grasp for anything to be destroyed with it. Right now it has its hands around the throat of freedom and liberty. People think that is a crazy or outlandish statement. unfortunately, it successful societies have come and gone throughout history, and true freedom and liberty have only existed for the last 236 years. Shadows rise and fall. We are not immune.